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Electronic purse

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Definitions Edit

An electronic purse is

[a] stored value device that can be used to make purchases from more than one vendor.[1]
[a] mechanism that allows end users to pay electronically for goods and services. The function of the electronic purse is to maintain a pool of value that is decremented as transactions are performed.[2]

Overview Edit

An electronic purse is "designed to facilitate small-value face-to-face retail payments by offering a substitute for banknotes and coins. They are intended to complement rather than substitute for traditional retail payment instruments such as cheques and credit and debit cards."[3]

"Electronic purses differ from other cashless payment instruments in that they are supplied in advance with generally accepted purchasing power. They can be loaded at bank counters, through Automated Teller Machines (ATMs) or through specifically equipped telephones, against a debit entry in a credit institution account, or against banknotes and coins. The embedded purchasing power is drawn down at the point of sale by an electronic device that can suitably adjust the information on the card. . . . Their potential to reduce significantly the use of notes and coins is even greater than that of other debit instruments since they are the first cashless instrument which would be used for very small amounts. Their potential to replace other cashless instruments will depend: 1) on the level of fees and other costs levied by the issuer on those who use or accept these new instruments; 2) on the technical possibility, and the issuer's willingness, to remunerate the purchasing power embedded in electronic purses; and 3) on solutions adopted to compensate users in case of the loss, theft or malfunction of the card. "[4]

"For electronic purses to become a success, a distinct business case must exist for cardholders, for shopkeepers and for issuers. Electronic purses can have various advantages for cardholders. The most important aspect relates to convenience as there would be less need to carry loose change for low-value transactions. An additional advantage might be that, compared with notes and coins, the risk of robbery might diminish if the use of the electronic purses included a security feature such as a PIN code. Furthermore, prepaid cards would have the advantage that non-cash payment transactions could be made without necessarily being linked to a bank account. On the other hand, there are disadvantages as well: first, transaction costs may apply, and second, the electronic purse has to be supplied with value in advance, which may give rise to a transfer of float income from consumers to card issuers."[5]

References Edit

  1. Internet Banking: Comptroller's Handbook, at 70.
  2. Government Smart Card Handbook, App. A, at A-3.
  3. Survey of Developments in Electronic Money and Internet and Mobile Payments, at 2, ¶2.1.2.
  4. Report to the EMI Council on Prepaid Cards, at ¶16.
  5. Id. ¶21.

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