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. Currency In Circulation

    Currency that is physically used to conduct transactions between ...
  3. Physical Asset

    An item of economic, commercial or exchange value that has a ...
  4. Electronic Check

    A form of payment made via the internet that is designed to perform ...
  5. Actuals

    The physical commodity that underlies a futures contract or is ...
  6. Dematerialization - DEMAT

    The move from physical certificates to electronic book keeping. ...
Related Articles
  1. Investing

    3 Physically Backed ETFs Worth Your While (GLD, SLV)

    Learn about physically backed ETFs, what they are and how they can help provide your portfolio with pure precious metals exposure.
  2. Investing

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.
  3. 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.
  4. Insights

    How Currency Works

    Currency offers key advantages over economies based on direct trade. It provides sellers with a broader market for their goods and services. It is also a durable asset for people to accumulate ...
  5. Insights

    What Is Money?

    It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  6. Investing

    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.
  7. Taxes

    The Link Between The Fed, Money, Debt And Taxes

    Assets on the Fed's balance sheet, money supply level, national debt level and economic production should be maintained in equilibrium.
  8. 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.
  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. 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 >>
  5. 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 >>
  6. What percentage of an electronics company's spending is typically spent on research ...

    Examine the electronics sector and learn what percentage of an electronics company's spending is usually allocated to research ... Read Answer >>
Trading Center