DEFINITION of 'Electronic Money'

Electronic money is money which exists only in banking computer systems and is not held in any physical form. In the United States, only a small fraction of the currency in circulation exists in physical form. The need for physical currency has declined as more and more citizens use electronic alternatives to physical currency.

BREAKING DOWN 'Electronic Money'

In the U.S. many people receive their paychecks through direct deposit, move money with electronic fund transfers, and spend money with credit and debit cards. While physical currency still has advantages in certain situations, its role has gradually diminished. While it might seem to be a worrying thought that your bank account balance is nothing but an entry in a computer system, it is really nothing new. Fiat paper currency has no inherent worth either.

RELATED TERMS
  1. Physical Option

    An option that is based on a physical asset. Physical options ...
  2. Physical Asset

    An item of economic, commercial or exchange value that has a ...
  3. Actuals

    The physical commodity that underlies a futures contract or is ...
  4. Electronic Check

    A form of payment made via the internet that is designed to perform ...
  5. Dematerialization - DEMAT

    The move from physical certificates to electronic book keeping. ...
  6. Electronic Currency Trading

    A method of trading currencies through an online brokerage account. ...
Related Articles
  1. Investing

    The Most Affordable Way to Buy Gold: Physical Gold or ETFs?

    Investing in gold has never been easier than it is today. Check out this article to learn more about gold ETFs and other ways that you can add gold to your portfolio.
  2. Insights

    Understanding How the Federal Reserve Creates Money

    Read about how the Federal Reserve actually targets and creates new money in the economy, and find out why the savings and loans system magnifies this process.
  3. Trading

    Understanding Taxes on Physical Gold/Silver Investments

    Physical gold and silver holdings are taxed when sold-- here's how the cost basis is calculated, and ways you can offset taxes owed.
  4. Tech

    Why the War on Cash?

    Recently, the European Central Bank (ECB) announced that it intends to stop minting €500 notes, in a move that they say is meant to curb fraud and money laundering.
  5. Investing

    Amazon Breaks New Ground with First Brick-and-Mortar Store (AMZN)

    Amazon is now making its first foray into physical retail - but with distinctly Amazon-esque twists on the traditional book retail model
  6. Investing

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
  7. Insights

    The Currency Board: Understanding The Government's Bank

    Currency board, central bank - what's the difference? Find out more about this little-known monetary authority.
  8. Trading

    What Happens in a Currency Crisis?

    A currency crisis comes from a decline in the value of a country’s currency.
  9. Investing

    Old Stock Certificates: Lost Treasure?

    Today, most stocks reside electronically in a broker’s computer. But it is possible to stumble across a physical stock certificate.
RELATED FAQS
  1. What is the electronics sector?

    Learn more about the electronics sector and the challenges and opportunities presented to electronics companies by new and ... Read Answer >>
  2. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ... Read Answer >>
  3. Is all paper money fiat money?

    Learn how the United States has converted from a gold-backed money system to a fiat one. Learn what is considered fiat money ... Read Answer >>
  4. Human capital vs. physical capital: What is the difference?

    Learn the difference between physical capital and human capital and how to find the value of each in financial statements ... Read Answer >>
  5. What protects an investor’s interest in the case of terrorist sabotage, or act of ...

    Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents ... Read Answer >>
  6. What other sectors are most similar to electronics?

    Find out which segments of the economy are similar to the electronics sector and how innovation and technology impact the ... Read Answer >>
Trading Center