E-money explained: use cases and why fraudsters like it
In the past two decades, electronic money (e-money) has fully integrated into the global e-commerce and payment processing industries. What was initially viewed with scepticism is now a part of every consumer’s life. Nevertheless, not everyone is fully aware and acquainted with this revolutionary phenomenon.
What is e-money?
The beginning of the e-money phenomenon dates back to the 1990s and the dot-com bubble. This period is known for innovation and rapid growth of internet usage, meaning that everyone was starting to understand the internet, its benefits, and its possibilities. Both the internet and e-money have been rapidly developing and growing ever since.
Nowadays, according to the European Central Bank, e-money is defined as an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than e-money issuers. In addition, e-money works as a pre-paid payment tool not necessarily involving banks in transactions, but can always be converted into fiat currencies (i.e. EUR).
In other and simpler words, e-money is a pre-paid monetary value that is stored on various digital or physical, but connected digitally, platforms (i.e. PayPal, Skrill, or gift cards), with which consumers are able to pay and make transactions. For example, credit cards and cryptocurrencies could not be called e-money because they do not comply with the pre-paid and fiat currency exchangeability factors, respectively.
“E-money is a pre-paid monetary value that is stored on various digital or physical, but connected digitally, platforms, with which consumers are able to pay and make transactions.”
Where is e-money used?
Currently, almost all e-commerce platforms allow e-money as a payment option for their users, whereas 20 years ago, no one could have imagined this would be possible. This demonstrates the extent of change in the industry. Recently, an increasing number of people have terminated their contracts at traditional banks and started using e-money. Consumers see e-money as a simpler and less dependent payment method, which explains their switch from traditional banks to e-money.
Moreover, users can freely make peer-to-peer transactions on platforms like PayPal, which has always been a feature of a traditional bank. All in all, e-money has become one of the main payment methods in e-commerce, as well as peer-to-peer transactions.
E-money and Fraud
As much as e-money looks like an attractive and perfect payment method, very few things are perfect in this world. E-money is known and criticized for its use in fraud and scams. E-money and its platforms are used as a tool by various fraudsters and scammers to trick credulous people or businesses, in such ways appropriating their funds, savings, or products.
“E-money is known and criticized for its use in fraud and scams.”
Fraudsters love and use e-money frequently because in-person human-to-human interactions, personal identifications, and strict regulations are usually absent. This lets fraudsters and scammers remain unidentified and thus unpunished. Fraudsters are especially active in the digital goods and services industry, because of the ease with which they can immediately use or redeem products and never be captured.
Recommended reading: The Online Fraud Survival Guide
Because of this phenomenon, Alphacomm fraud prevention specialists came up with a solution. Protectmaxx can detect and reject fraudulent transactions within seconds, helping businesses prevent expensive chargebacks and revenue losses.
Get in touch with a fraud expert today
If you are a business operating in the digital goods and services industry, you probably experienced fraud and thought that there is no sustainable way to prevent this unpleasant occurrence. However, Protectmaxx can eliminate fraud, boost profits, and contribute to a sustainable business. Get in contact with our experts today.
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