Prior to the creation of a medium of exchange, primitive commercial transactions were conducted using bartering. A cumbersome and inefficient method, the barter system gave way to the creation of money.

Early forms of money included shells, stones, and precious metals.

Over time, more sophisticated media were introduced, including paper as a unit of value. Paper money, issued by governments and banks, was later supplemented with checks and credit$/$debit cards.

During the $1990$s a new medium of exchange emerged in conjunction with the increased popularity of the Internet. Electronic cash, or e$-$cash, was created by a number of companies to facilitate Internet transactions. Although each offering of e$-$cash was somewhat different, the basic idea included consumers depositing money by various means into an account and, when purchasing online, they would use their "cyberdollars" to pay for their purchases. No checks or credit cards would be needed.

PayPal, which was started in $1998,$ is used by online auctions, including eBay $($which owns PayPal$),$ as a means of paying for transactions. Consumers in over $55$ countries, including Australia, China, Germany, and South Korea can bid on items and, if successful, use funds from their PayPal account to settle the transactions. Other companies such as Bid Pay, $99$Bill, and AliPay offer similar services to global customers. In China, $99$Bill sells prepaid payment cards that can use for on$-$line payments, including fees to play video games on the Internet.

E$-$cash offers a number of advantages to both consumers and Internet merchants. It allows consumers without credit cards to easily make purchases, it can reduce transaction expenses for merchants, and it makes "micropayments" possible. Consumers who do not have credit cards can deposit money with an e$-$cash distributor and make their purchases without the time delay of sending a payment and waiting for their checks to clear. Merchants accepting e$-$cash payments are usually charged a lower processing fee than the fee charged by credit card companies. Perhaps one of the biggest advantages of e$-$cash is that this system makes micropurchases $(1/10$ cent to $$1)$ more feasible. Such transactions are important for certain services offered on the Internet, such as purchasing information. As the Internet has become a truly global medium of communication and commerce, e$-$cash has the potential to facilitate transactions across national boundaries and differing currencies. While credit cards are still the most popular method of payment online, many consumers in less$-$developed countries have not been able to acquire them, making Internet purchases difficult. While the concept of electronic cash offers many benefits to both consumers and merchants, many startup e$-$cash companies have either gone bankrupt or shifted the focus of their business.

Discussion Questions:

$1.$ Why hasn't e$-$cash become a more popular form of payment for Internet purchases?

$2.$ How might e$-$cash help to develop entrepreneurial activities in less$-$developed countries?

$3.$ Do you think e$-$cash will ever become a universal currency?