Electronic Cash and the Innovation Process: A User Paradigm

This paper looks at the innovation process in an emerging service product in the financial sector. The role of banks in the development and diffusion of electronic cash is addressed in the context of their role as 'lead users'. Since the introduction of Electronic Funds Transfer (EFT), banks have been learning how to manage large amounts of detailed information about money. Merchants, consumers and banks transact mainly through the use of various information and communication technology systems. One of the most important developments in this area has been the advent of the Internet and the opportunity for direct electronic ordering and delivery. Electronic commerce, however, has yet to overcome a major obstacle to its proliferation, that is, a suitable and instantaneous means of payment. This paper examines electronic cash and its generation, diffusion and take-up in the economy. Electronic cash is a store of monetary value, held in digital form, which is available for immediate exchange in transactions. The paper considers electronic cash in terms of its suitability to the Internet and as an off-line payment method and analyses the sources of investment in electronic cash and the willingness and capability of the financial services industry to pave the way for its deployment. The results show that banks have the know-how and the need to innovate in this field. They are user-initiators as well as suppliers of electronic cash and play the role of a need-forecasting laboratory. The obstacles they face in terms of the lock-in of traditional operations are not very significant. Driven by the Internet phenomenon, electronic commerce presents enormous opportunities for consumers and businesses worldwide. Within the European Single Market, it is already stimulating competition and generating innovative businesses, markets and trading communities. Electronic commerce will certainly have a considerable impact on Europe's competitiveness in global markets. Not only does Europe stand to benefit from the development of electronic commerce, but it is also well positioned for its deployment 1 , given the prospect it offers for cross-border commercial exchanges. The introduction of a single currency also present significant opportunities. In fact, the relationship is a mutually beneficial one: the ability to trade in a single currency will stimulate electronic commerce, and electronic commerce could, in turn, facilitate the transition to the Euro. Given that electronic commerce will not develop without suitable and efficient electronic payment systems, the European Commission, the European Monetary Institute and the Member …