Also known as electronic cash, ecash, and digital money, "digital cash" is a term that refers to any system that relies on the use of crediting accounts with small amounts of cash and allowing those credits to be used to make purchases online. The amount of the deposits of digital cash can be in very small increments, even a fraction of the lowest type of coinage used within a monetary system. Purchasing products with electronic money may involve disbursements of any size.
One of the differences that sets digital cash apart from other types of cash transactions is that the identity of the buyer does not have to be revealed. The actual transaction is managed with the use of a number normally known as a digital certificate. This number provides verification that the digital cash is negotiable and can be accepted as the payment option for the services purchased. This is different from using a credit card to buy something online, a transaction in which the buyer must provide basic information related to the credit card account before the vendor can process the payment.
The concept of digital cash is sometimes used with online businesses, allowing the business owner to issue cash credits to individuals who perform certain online functions for the owner. With this arrangement, the individual allows the credits to accumulate and can then use them to purchase services from the site owner. A slight variation of this approach allows the user to reach a cash out amount and then request that the digital cash be converted and transferred to another account, where it can be withdrawn and used in the same manner as standard currency.
A broader application of digital cash includes any type of electronic transfer of currency. This would mean that when an employee is paid by an employer using an electronic funds transfer (EFT) the transfer involves electronic money that has the same status as any type of currency. This is true whether the money is transferred into some sort of electronic account that is accessed with a debit card, or a standard bank account that can be accessed with cash withdrawals, writing of checks, or use of debit cards. Online services that allow consumers to pay for purchases by initiating a debit on a related bank account or a credit card, but does not pass the banking or credit card information on to the seller, can also be classed in this broader concept of digital cash.
