What is electronic money comprised of?
This money is in a bank account and moves via the network to make payments. No longer is money backed by a real item, but by the effort and production, we all undertake.
Money is a way to buy and sell things and a way to measure their worth. It has been made out of shells, cocoa beans, bird feathers, metals, coins, and banknotes, among other things. Today, money is like data that moves through computer networks and can go all the way around the world in a few seconds.
This last type is what we call "electronic money." It is exchanged through channels like the Internet or private telecommunications networks, based on the instructions of those who make an electronic payment or transaction. This money is almost in a bank account, from which it moves through the network to pay other accounts. No longer is money backed by a physical object. Instead, it is backed by the work and production we all do to get it.
To make electronic money and use it possible, the right infrastructure had to be set up. This included computer systems, Internet connections, and an electronic network that lets stores or ATMs send information about transactions to bank branches. For electronic money to work, there needs to be a well-developed infrastructure for communication and security. This is made possible by the development of technology infrastructure.
New developments make transactions safer, faster, and more efficient. They also suggest that shortly, transactions will be made not only from ATMs, point-of-sale terminals, or computers but also from portable devices like cellular phones. The latter is already possible, but only in some of them with very advanced technology. Because of this, it's harder to do and takes longer in countries with a low level of development. This is also why only a small number of people in Mexico can use this method of payment.
Credit cards, debit cards, and prepaid cards are the most common ways to pay electronically. These are used to send payment instructions, which are orders to move money from your card to the account of the person selling you the product or service. You can also make direct debits, which means you give someone permission to charge your bank card for a service, like paying your electricity bill, regularly. Each month, the money is taken out of your account and put into the account of the electricity company.
When you use a credit card, you buy things first and then pay the bank back on the date you agreed to. It works like a bank loan that you get and pay back after a few days. On the other hand, when you use a debit card, you pay with money from your bank account. When the bank registers the payment you made with your debit card, the money is taken out of your account right away. With a prepaid card, you pay for the service before you use it. For example, you buy phone credit and then use it. Most of the time, people use prepaid cards to pay small amounts or shop at a single store.
As the number of transactions that use electronic payment methods grows, their effects will continue to grow shortly. We are sure that electronic money and ways to pay still have a long way to go in their development.