Electronic money: Toward a virtual wallet

The authors in this special issue on electronic money paint a world from which even those uses of paper currency can be eliminated. A smart card, loaded with electronic money at an automatic teller machine or, eventually, on a home computer, could be used for that coffee and bagel. Technology also exists for "electronic wallets" that can exchange money with each other, making it possible to split a restaurant check electronically or hit up a friend for a few dollars. How will this be implemented? A host of technologies have been developed. Some are still theoretical, some in testing, and some in commercial use. Some involve electronic forms of "cash," others use debit accounts, others are credit-card based. The biggest caution to the full-scale adoption of electronic money is security. There’s a significant chance that unauthorized persons will access financial information over the Internet and use it for fraud, and undetectable counterfeiting is also a real concern. So before electronic money becomes pervasive, security must be tight, yet the stuff be simple to use, with transaction details mostly transparent to the user. Security concerns are also slowing down implementation of electronic banking over the Internet. As banking moves to the Internet, stock trading is not far behind. The first-ever Web-based initial public offering was conducted a year ago, by Spring Street Brewing Co. of New York City, and since then 30 companies have followed its lead. Traditional stock markets are moving to the Internet as well. Perhaps the most active segment of the electronic money category in the past year has been smartcards. All the same, while electronic transactions may simplify commerce for the user, they raise regulatory, law enforcement, and economic issues. Today, in the United States, where US Comptroller Eugene Ludwig cautions against premature regulation, the government has not begun to regulate electronic money, but is certainly keeping a close eye on the evolving industry.