loss and profit in electronic media intermediation finance as part of EDP transactions so ROBO advisor AMNIMARJESLOW GOVERNMENT 91220017 LOR ROBO ELADVISOR FOR EDP 02096010014 LJBUSAF XAM $$$$$ INTERMEDIATE INSTRUMENT AND CONTROL e-MONEY BRING THE BEST ELECTRONIC PER # FORMULATE QUALITY MONEY JES UNTIL YES KNOWING XWAM $

 

Financial Intermediation

Financial intermediaries are firms that pool the savings or investments of many people and lend or invest the money to other companies or people to earn a return. Financial intermediaries include banks, investment companies, insurance companies, and pension funds. Banks lend the money of depositors to businesses and others, and pay depositors interest or provide them with valuable services, such as checking and electronic funds transfers. Investment companies allow small retail investors to pool their money together to reduce the diversifiable risks of investments and to profit from the expertise of professional money managers. Insurance companies pool the premiums of the insured to pay for the losses of a few of the insured, thereby preventing a financial catastrophe for the sufferers. Pension funds pool the contributions of workers to invest for greater returns, so that a pension income can be provided to the workers after they retire.

The assets and liabilities of financial intermediaries are primarily financial instruments. Loans, stocks, bonds, and other investments are their assets while the deposits and payment obligations, such as the insurance company's obligation to pay for a loss or the pension funds obligation to pay retirees an income, are their liabilities.
Financial intermediaries make a profit from the difference from what they earn on their assets and what they pay in liabilities. So why don't people loan their money directly and earn all of the interest instead of getting only a portion? Or why doesn't a business simply sell stock or bonds directly to the public to save on the investment banking fee or on interest rates that would probably be less than what a bank would charge?
One reason is because financial intermediaries provide valuable services that cannot be obtained by direct lending or investing. Banks, for instance, offer depositors safety for their funds. They have vaults for the safekeeping of cash and other valuables and deposits are insured by the government. Banks also provide payment services that reduce the hassle of paying bills and also provide a record of those payments. Insurance companies provide financial protection in case of a loss, even if that loss is much greater than the premiums paid by the insured.
Another major reason for using financial intermediaries is because they reduce the risk of information asymmetry, where the receiver of the funds knows more about their financial condition and their intentions than do the giver of those funds. Financial intermediaries have expertise in assessing the risk of the applicant for funds that reduces adverse selection and moral hazard. They have easy access to various databases that provide information on both individuals and businesses, and they have expertise in doing their own research and monitoring.

Internal Financing, Indirect Finance, and Direct Finance

Sources of funding for businesses can be categorized as either internal or external financing. External finance can be further categorized as either indirect or direct financing. Direct finance is the financing obtained by selling stocks and bonds directly to the public in the financial markets. Direct finance provides the lowest cost of funds from external sources, but it requires a company that is well established with an appreciable income and substantial assets; otherwise, investors would be reluctant to lend or invest in the company due to the lack of information and assets.
Indirect finance is the financing obtained from financial intermediaries. Financial intermediaries can lend or invest money in smaller businesses because they can do a better job of investigating the company, assessing its risks, and securing assets for collateral against loans. Indirect financing costs more than direct financing, but financial intermediaries can invest or lend money to businesses that would otherwise not be able to get external financing.
However, most businesses, especially many small businesses, cannot obtain any form of external financing. They have to rely entirely on internal financing, which is the money obtained either from the business owners or from the income earned by the business.
According to some recent statistics, more than 80% of all financing in most countries is internal. This is because most businesses don't have substantial net worth or assets, and so it is difficult to offset the risk that information asymmetry presents, even for financial intermediaries.


                                 XXX  .  V  Internal Control Guidelines in EDP  

examples of cases of modern financial transactions :

Consequent to the rapid pace of evolution of the foreign exchange markets developments in the field of Information Technology and its progressive usage in banks, the guidelines for “Internal Control over Foreign Exchange Business” have been revised. The revised guidelines are given in the enclosed document. The document is designed to provide a scale of standards for the banks in the conduct of their foreign exchange business . and then code of conduct for service providers of electronic order matching systems

ORGANISATION OF THE DEALING DEPARTMENT
1.1 General
Foreign Exchange dealing is a highly specialized function and has to be performed only by well trained personnel. Typically, a Dealing Department should consist of dealers, mid and back offices staff, who are responsible for the follow up of the deals made by the dealers. The need for effective control over the dealing operations is of great importance as possibilities exist for manipulation of exchange rates, dealing positions, mismatches, etc.
1.2 Segregation
The cardinal principle of operational procedures in the area of trading activities is the clear functional segregation of Dealing, Mid-Office, Back-Office (Processing and Control), Accounting and Reconciliation.
In respect of banks which trade actively and offer the whole range of products, dealing activities may be segregated as under:
i) Front Office - Dealing Room
ii) Mid - Office - Risk Management; Accounting Policies and Management Information System
iii) Back Office - Settlement, Reconciliation, Accounting
1.3 Selection and Training of Dealers
Profound responsibility rests upon the dealers as the manner of handling the foreign exchange business of the bank can make all the difference to the bank and its customers. Adequate care therefore needs to be exercised while selecting and grooming the dealers. Management should provide opportunities to the dealing room staff to get continuously updated on global market trends in forex and derivatives trading and risk control.
While drafting personnel from other banks or organisations as dealers their antecedents should be carefully verified from the standpoint of integrity.
1.4 Electronic Data Processing (EDP)
The data processing systems used must be appropriate to the nature and volume of activities and programmed to ensure functional separation. Access rules for performing distinct functions should be defined in detail and drawn up by persons unconnected with the dealing activity. Confidentiality of the data in the systems may be ensured in the case of outsourcing of IT services to external agencies.
Where data is recorded direct in an EDP system, it must be ensured that dealers are enabled to enter transactions solely through identification. The trading date, time and transaction serial number must be entered automatically by the system, which must be made impossible for the dealer to alter without proper authorisation. If the dealer deviates from the specified norms while entering transaction data, this must be approved in each case by an official not connected with the dealing office. Deals concluded after the Back Office has closed recording for the day (late deals) are to be marked as such and included in that day's position. A late deal slip must be passed immediately to an official unconnected with the dealer.
1.5 Duties of Dealers
The dealer has to operate according to the guidelines laid down by the management. Ideally dealers may confer before works starts on the trend in the overnight markets in the light of the newsbag and the bank’s own business and arrive at a tentative view of the market. It is essential that efficient communication channels be provided for dealers to facilitate consultations with designated authorities.
1.6 Dealing Procedure
The dealers should not be entrusted with accounting work. Deals struck should be recorded on printed deal slips. The deal slips should indicate the name of the broker (if any), and the counterparty bank, currencies, amounts, time, deal rate due dates and other necessary particulars depending on the type of product traded, under authentication of the dealer. The deal slips should be passed on without delay to the Back Office for further processing. Banks are free to devise the format of the slips. In an automated system, hard copies of deal slips may not be required.
1.7 Voice Recording
Experience has shown that recourse to taped conversation proves invaluable to the speedy resolution of differences. It is, therefore, desirable to introduce voice recorders in the dealing rooms. The tapes may be preserved for at least two months and where a dispute has been raised, until the issue is resolved. Access to the equipment and tapes should be subject to strict control.
1.8 Rotation of Dealers
The tenure and rotation of duties of dealers may be decided by the individual bank management which may, however, be documented in the bank’s internal control policies. Further, a system of an annual compulsory two-week (or longer) continuous break should be maintained so that no dealer remains at the job continuously.
1.9 Code of Conduct
Authorized Dealers should conduct their activities with utmost prudence and integrity. Authorised Dealers must ensure that the staff concerned in the dealing room understand and abide by the Code of Conduct . Dealers should be required to acknowledge in writing that they have read, understood and would observe the Code. It must be made clear to them that disciplinary actions could be taken against those who breach the Code. All dealers should furnish an undertaking to conform to the Codes of Conduct.
1.10 Code of conduct for Electronic Order Matching System (EOMS)
forex broking service space, voice brokers are accredited by the goverment. With the advent and wide spread usage of technology, electronic forex broking and order matching systems have arrived in the forex market. As service providers were not subject to any regulation,  evolved a Code of Conduct and Rules for self-regulation . .
1.11 Back Office
The Back Office should ensure the following:

1. Independent confirmation of contracts is obtained for deals other than those put through the Clearing Corporation ), which are matched by clearing corporation from the counterparty banks and subject to exchange of one time bilateral agreement between them and duly verified for correctness and in no case the dealers sign the confirmation. In regard to Cash/Tom/Spot contracts, confirmations may not be followed-up, if the amounts thereof have already been received in the accounts.
2. Discrepancies noticed are rectified on the same day.
3. It should be ensured that there is no backlog of confirmation of deals.
4. In respect of computer generated deal confirmation slips, which are not signed, banks issuing such confirmation execute a stamped agreement in favour of the counterparty banks assuming responsibilities for errors/ omissions.
5. The evaluation of foreign exchange profits and losses are undertaken as directed ..
6. As most of the deals at present are put through online, pipeline transactions may be 'nil' or very few. The need for submitting a statement of true currency position is left to the discretion of the bank management.
7. The Position and Funds Registers are continuously updated on the basis of deal slips and the reports of business flowing in from the branches, to assist the efficient transmission of information to the dealing room and the management.
8. In such of those banks where the system does not provide the facility, Rate-Scan reports are prepared at least thrice a day (viz. at opening hours, afternoon and closing hours) and deals at wide variance with the ongoing market rates are enquired into.

1.12 Dealings in Exchange Traded Currency Products
 The margin amount would vary, depending upon currency, volatility and other factors. At the end of business each day, exchanges based on closing prices, publish a daily settlement price, on the basis of  may be computed.
Banks dealing in exchange traded products on behalf of their customers must ensure that the margin amounts required by the exchanges are recovered from their customers, as also the negative, based on the daily settlement price. For proprietary trading portfolios in exchange traded products, banks must ensure revaluation of their portfolios on a daily basis, and apply stop loss norms as deemed fit, to these positions.

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  DEALINGS THROUGH EXCHANGE BROKERS

2.1 Exchange Brokers – Prohibitions
Exchange brokers, being intermediaries, are prohibited from acting as principals and maintaining positions in foreign currencies. Banks should therefore refrain from doing anything which may result in the brokers taking over the function of dealers/ intermediaries.
2.2 Deals through Brokers – Confirmation
Brokers' notes should be received promptly before the close of business on the day on which the deals are concluded and exceptionally before the opening hours of the succeeding day. These should be checked and reconciled the same day.
2.3 Nomination of Brokers
Nomination of brokers for deals not put through their medium is not permitted.
2.4 Brokers' Panels
As a general rule, Authorised Dealer banks should not discriminate between recognised brokers for business offered at competitive terms. Ideally, at least 5/6 brokers should be empanelled and the panel should be reviewed annually, taking into account the nature and volume of the business done through the brokers, their market reputation, credit worthiness, etc.
2.5 Complaints
Any complaint from any source against the dealers must be promptly investigated.
Serious complaints alleging acceptance of gifts and other favours (or any other gratification) by the dealers should be put up to the appropriate authorities for necessary action. All such cases should be reported to the Central Offices of the Department of Banking Supervision and Customer Service Department of the Reserve Bank, indicating the nature of actions taken.
2.6 Payment of Brokerage Claims
The accounting department should maintain a broker-wise record showing details of the forex dealings made by the dealers. The staff of the dealing department should not have anything to do with the scrutiny and passing or payment of brokerage claims.
2.7 Brokerage Statements
A monthly statement showing broker-wise payments together with a statement for the preceding twelve months should be put up to the management. Changes in the panel of brokers may also be indicated in the report.


RISK CONTROL AND RISK MANAGEMENT
3.1 Introduction
In the wake of the major relaxation in foreign exchange management and the freedom given to Authorised Dealer banks to offer new forex products, focus on risks seems appropriate. Greater emphasis therefore will have to be laid on assessing, and managing risk. Authorised Dealers should offer products (structured or otherwise) to the customers strictly as per the extant Reserve Bank's Guidelines.
3.2 Requirements of the system
The risk control and risk management systems must be designed in accordance with the scale, complexity and risk content of the trading activities being conducted or envisaged.
3.3 Responsibilities of the Senior Management
Transactions in different hedging products (forwards and derivatives) have to be closely overseen by the senior management. Dealing in any new product or any change in the existing product design should have prior approval from the competent authority. Banks should have policies approved by the Board or a Committee so authorized in this regard by the Board, encompassing control processes guiding the activities.
The policies should detail the type and nature of the activity authorized, articulate the risk tolerance of the bank through comprehensive risk limits and require regular risk position and performance reporting within the following broad parameters which should be subject to periodical review. The policy of the banks to be approved as above to, inter-alia, include the following:

1. the business strategies on which trading in the individual product groups is based,
2. the markets in which trading is allowed,
3. the nature, scope, legal framework and documentation of trading activities,
4. the list of counterparties with whom trade may be conducted,
5. the procedures for measuring, analyzing, monitoring and managing the risks,
6. ceilings for risk positions according to the type of business or risk organizational unit or portfolio,
7. the procedure for reacting to (i) any overshooting of the limits and (ii) to extreme market developments,
8. the functions and responsibilities of individual members of staff and work units,
9. internal accounting and external/internal reporting,
10. staffing and technical equipment,
11. the internal control and monitoring system,
12. the maintenance of confidentiality in respect of trades,
13. 'Suitability and Appropriateness' guidelines,
14. electronic trading platforms,
15. access control to dealing room, with audit trails,
16. access control management and review.

It is essential that there must be a written acknowledgement of these guidelines from the members of the staff confirming that they have noted the relevant instructions applicable to them.
The bank should have an effective process of evaluation and review of the risks involved in various trading activities undertaken by the dealers, in respect of all hedging products. Some of these risks are mentioned below.
3.3.1 Credit Risk
Credit risk (Pre Settlement and Settlement) is the risk of loss due to inability or unwillingness of the counterparty to meet its obligation. This risk can be effectively managed through fixing of counterparty limits, appropriate measurement of exposures, ongoing credit evaluation and monitoring, and following sound operating procedures.
a) Pre-settlement Risk
Pre settlement risk is the risk of loss due to counterparty defaulting on a contract during the life of the transaction. The exposure is also referred to as the replacement cost. The level of this exposure varies throughout the life of the hedging product and is known with certainty only at the time of default. A key tool for the effective management of this risk is the fixation of exposure limits on counterparties.
b) Settlement Risk
Settlement risk is the risk of loss arising when a bank performs on its obligation under a contract prior to the counterparty doing so. The risk frequently arises in international transactions because of time zone differences. The failure to perform may be due to operational breakdown, counterparty default or legal impediments. Banks should, therefore, monitor and control settlement risk very effectively.
3.3.2 Liquidity Risk
Liquidity risk is the risk that the bank will be unable to meet its funding requirements or execute a transaction at a reasonable price.
Market liquidity risk is the risk of a bank not being able to exit or offset positions quickly at a reasonable price.
3.3.3 Gap Risk/Interest Rate Risk
These are risks owing to adverse movements in implied interest rates or actual interest rates differentials that arise through transactions involving foreign currency deposits, forward contracts, currency swaps, forward rate agreements, forward delta equivalent of currency options trades, and through numerous other currency and interest rate derivatives.
3.3.4 Legal Risk
In addition to the foregoing risks, there is legal risk, which exists in all kinds of financial markets. It is probably more so in foreign exchange and interest rates given their inherent volatility. It is, therefore, extremely important that banks as also the corporates dealing in these products take such steps as would sufficiently protect them from the legal standpoint.
.
3.3.5 Operational Risk
The data processing system used must be appropriate to the nature and volume of trading activities. A written contingency plan has to ensure, among other things, that in the event of a break down of the equipment back up facilities can be deployed at a short notice.
3.4 The risk management process
Banks should have a comprehensive and adequate risk management procedure covering both trading and non trading activities. This procedure should enable the management to assess exposures on a consolidated basis. It should be easily understood by the dealers, back office, mid office staff, senior management and the Board of Directors. Such a procedure will assist in limiting and monitoring risk taking activities at all levels.
3.5 Limiting risks
Global limits should be set up for the bank's local interbank business as well as its transactions in the overseas markets. The 'limits' system should be consistent with the banks overall risk management process, expertise and the adequacy of its capital to undertake such activities. At present the net open exchange position limit and the Gap limits for maturity mismatches fixed by each bank require approval of the Reserve Bank.
Management has to set an upper limit for losses, bearing in mind the bank's capital and earnings performance. Based on the risk control analysis and the upper limit for losses, a system of risk containing limits is to be set up which should be related both to credit risks and to market price risks. Overall limits are to be set and approved by the management for each category of risks.
Appropriate Value-at-Risk (VaR) models need to be used for quantifying the extent of market risk for a given level of confidence. Periodic review of existing models (such as VaR) including assumptions used should be done to test the robustness. Further, banks should maintain appropriate internal control systems, for managing pre - settlement credit risk. For settlement risk, whenever there is a central counterparty recognized as such, the risk weight would be subject to the Reserve Bank norms and in all other cases, the nominal exposure may be equal to actual credit risk.
The banks must adhere to the following risk-containment measures:

• The bank should ensure that every dealer is advised promptly of the limit allocated to him.
• All deals done should be accounted for against the corresponding limits. All the individual positions are to be aggregated into overall risk position at the close of business each day with a view of ensuring that the same does not exceed the overnight limit authorized by the management and  approved by the Reserve Bank.
• The limits when exceeded should be promptly reported to appropriate senior management and got approved. Banks should therefore have an adequate control system in this regard.
• Any breach of regulatory limits should be promptly reported to Reserve Bank .

Reporting System - Management Information System (MIS)
An accurate, and timely MIS, is sine qua non to a bank’s risk management process. An effective MIS should facilitate a bank’s monitoring of compliance with internal controls and regulating requirements and provide reasonable comfort that these are being complied with.
The bank’s risk exposures should be reported to senior management/Board. In adverse market conditions, more frequent reports should be placed before Board/Committee. The monitoring and reporting should be undertaken by officials who are not directly concerned with the trading activities. Exposure and profit and loss statement should be submitted to the senior management. In times of volatile market conditions, such reports should be submitted more frequently so that the senior management is fully apprised of the levels of activities and the risk involved.
3.7 Documentation and Record Keeping
As regards documentation with counterparty banks and with clients, banks are to be guided by the following:
(a) Forward exchange contracts with tenor not exceeding 13 months
i) Contracts between banks and customers-
Banks should obtain specific individual contract note (duly stamped), for each transaction containing the detailed terms of the contract such as amount, rate, value /delivery date, etc.
ii) Inter- bank deals-
With regard to forward exchange contracts between banks, unsigned computer generated confirmations be exchanged backed by 'one time' stamped letter of indemnity executed in favour of the counterparty banks as per FEDAI guidelines
(b) Forward exchange contracts where the tenor exceeds 13 months
i) Contracts between banks and retail/individual customers-
As given at (a) (i) above.
ii) Inter -bank deals and contracts with other customers-
Banks should enter into International Swaps and Derivative Association (ISDA) Master Agreement.
(c) All other derivative transactions
i) Contracts between banks and retail / individual customers-
As given at (a) (i) above.
ii) Inter- bank deals and contracts with other customers-
Banks should enter into International Swaps and Derivative Association (ISDA) Master Agreement.
Note:
1. If member banks have entered into International Currency Options Market Agreement (ICOM), they may continue with it for all option transactions.
2. In regard to spot interbank deals, confirmation may not be insisted upon if the amounts thereof have been received in the account
3. In respect of item numbers (a) (I), (II) and (b) (I), member banks who have obtained International Foreign Exchange Master Agreement (IFEMA) or International Swaps and Derivative Association (ISDA) Master Agreement may continue with the same, if so desired.
4. In respect of (b) and (c), ISDA Master Agreement would be in force till altered by mutual consent. Banks should however obtain specific signed confirmation for each transaction which should detail the terms of the contract such as amount, rate, value date, etc. duly signed by the authorized signatories.
Banks should obtain Board Resolution from their corporate clients specifically authorising their officials to deal and execute contracts (including derivatives).
Banks should also establish processes (checklists, tickler files, etc.) to ensure proper documentation to support these transactions and to monitor and control receipt of the documents.
3.8 Preservation of Records
All business, control and monitoring records should be preserved up to the existing statutory retention periods. Wherever statutory retention periods are not stipulated they are to be preserved as per the internal guidelines of the bank management. Back up of crucial information and data should be done and preserved according to the IT policy of the bank.

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 EVALUATION OF FOREIGN EXCHANGE PROFITS AND LOSSES

Methods of Evaluation
The uniform standard Accounting Procedure for evaluation of profit/loss of foreign exchange transactions drawn up should be strictly adhered to and valuation undertaken at least at the end of each month and on the balance sheet date.
The evaluation should disclose the actual profit/loss under different heads such as exchange trading, interest income, commission, etc.

AUDITING
Internal Audit
The nature and scope of internal audit varies widely between banks. However, its work will generally be designed to ensure that established procedures are adhered to and are operating effectively. Thus, an important part of its work will be to review the adequacy and timeliness of key management reports, such as those relating to limit excesses and maturity periods, and to ensure that appropriate action is initiated in response to this information. Other tasks of the internal audit department will include statutory and regulatory compliance reviews, data processing control reviews, and back-office efficiency reviews. For the internal audit function to be beneficial it is essential that its reports are submitted promptly to senior management.
The officers drafted for audit should have the requisite expertise, knowledge and experience.
System Audit
Special audit of the Dealing Room and the system in operation should be conducted at least once in a year. Typically, the areas tested during this audit should include the following:

1. Dealing-room procedures to ensure that all deals executed are promptly captured by the accounting system.
2. Reconciliation of foreign exchange positions between the dealers' records and the accounting system.
3. Review of incoming deal confirmations.
4. Full scrutiny of sample deals.

Compliance with the minimum requirements is to be checked at irregular, appropriate intervals by the auditors. The main audit areas listed below should be subjected to a risk-based audit once a year.

• limit system
• determination and reconciliation of positions and results
• changes in the EDP systems
• completeness, correctness and timeliness of the internal reporting system
• functional separation
• degree to which transactions are in line with market conditions
• confirmations and counter-confirmations

8.3 Concurrent Audit
As advised by the Reserve Bank from time to time, concurrent audit is to be regarded as a part of AD’s early-warning signal system to ensure timely detection of irregularities and lapses aimed at prevention of fraudulent transactions at branches undertaking foreign exchange transactions. Bank’s management shall bestow serious attention to the implementation of the same. While minor irregularities pointed out by the concurrent auditors are to be rectified on the spot, serious irregularities should be reported to the Controlling Authority for immediate action. The bank shall ensure that concurrent auditors of the branches undertaking foreign exchange transactions


                                        XXX  . V0  Financial transaction  

A financial transaction is an agreement, or communication, carried out between a buyer and a seller to exchange an asset for payment.
It involves a change in the status of the finances of two or more businesses or individuals. The buyer and seller are separate entities or objects, often involving the exchange of items of value, such as information, goods, services, and money. It is still a transaction if the goods are exchanged at one time, and the money at another. This is known as a two-part transaction: part one is giving the money, part two is receiving the goods.


         

Financial transaction involving money and agricultural goods at a farmers' market

In ancient times non-financial transactions were commonly conducted through systems of credit, in which goods and services were exchanged for a promise of future recompense. Credit has certain disadvantages, including the requirement that traders or their intermediaries trust one another, or trust that authorities exist who can be relied on to enforce agreements. Debts must eventually be settled either with goods or by payment of money, a substance of agreed value such as gold and silver.
Systems of credit are evident throughout recorded history and from archeology. By contrast little evidence has been found of widespread use of pure barter, where traders meet face to face and transactions are completed in a single swap.
As cities, states, and empires were established, coins and other compact forms of specie were minted or printed as fiat money with set values, permitting the accumulation of assets that would not deteriorate over time as goods might and that had the relatively secure backing of a government which could adjust value by producing more or less of the currency. As fixed currencies were gradually replaced by floating currencies during the 20th century, and as the recent development of computer networks made electronic money possible, financial transactions have rapidly increased in speed and complexity.

Examples

Purchases

This is the most common type of financial transaction. An item or goods are exchanged for money. This transaction results in a decrease in the finances of the purchaser and an increase in the benefits of the sellers.

Loan

This is a slightly more complicated transaction than others in which the lender gives a single large amount of money to the borrower now in return for many smaller repayments of the borrower to the lender over time, usually on a fixed schedule. The smaller delayed repayments usually add up to more than the first large amount. The difference in payments is called interest. Here, money is given for not any specific reason.

Mortgage

This is a combined loan and purchase in which a lender gives a large amount of money to a borrower for the specific purpose of purchasing a very expensive item (most often a house). As part of the transaction, the borrower usually agrees to give the item (or some other high value item) to the lender if the loan is not paid back on time. This guarantee of repayment is known as collateral.

Bank account

A bank is a business that is based almost entirely on financial transactions. In addition to acting as a lender for loans and mortgages, banks act as a borrower in a special type of loan called an account. The lender is known as a customer and gives unspecified amounts of money to the bank for unspecified amounts of time. The bank agrees to repay any amount in the account at any time and will pay small amounts of interest on the amount of money that the customer leaves in the account for a certain period of time. In addition, the bank guarantees that the money will not be stolen while it is in the account and will reimburse the customer if it is. In return, the bank gets to use the money for other financial transactions as long as they hold it.

Credit card

This is a special combination of a purchase and a loan. The seller gives the buyer the good or item as normal, but the buyer pays the seller using a credit card. In this way, the buyer is paying with a loan from the credit card company, usually a bank. The bank or other financial institution issues credit cards to buyers that allow any number of loans up to a certain cumulative amount. Repayment terms for credit card loans, or debts vary, but the interest is often extremely high. An example of common repayment terms would be a minimum payment of the greater of $10 or 3% every month and a 15–20% interest charge for any unpaid loan amount. In addition to interest, buyers are sometimes charged a yearly fee to use the credit card.
In order to collect the money for their item, the seller must apply to the credit card company with a signed receipt. Sellers usually apply for many payments at regular intervals. The seller is also charged a fee of normally 1–3% of the purchase price by the credit card company for the privilege of accepting that brand of credit card for purchases.
Thus, in a credit card purchase, the transfer of the item is immediate, but all payments are delayed. The credit card holder receives a monthly account of all transactions. The billing delay may be long enough to defer a purchase payment to the bill after the next one.

Debit card

This is a special type of purchase. The item or good is transferred as normal, but the purchaser uses a debit card instead of money to pay. A debit card contains an electronic record of the purchaser's account with a bank. Using this card, the seller is able to send an electronic signal to the buyer's bank for the amount of the purchase, and that amount of money is simultaneously debited from the customer's account and credited to the account of the seller. This is possible even if the buyer or seller use different financial institutions. Currently, fees to both the buyer and seller for the use of debit cards are fairly low because the banks want to encourage the use of debit cards. The seller must have a card reader set up in order for such purchases to be made. Debit cards allow a buyer to have access to all the funds in his account without having to carry the money around. It is more difficult to steal such funds than cash, but it is still done.

                                                       Alternative payments 

Alternative payments refers to payment methods that are used as an alternative to credit card payments. Most alternative payment methods address a domestic economy or have been specifically developed for electronic commerce and the payment systems are generally supported and operated by local banks. Each alternative payment method has its own unique application and settlement process, language and currency support, and is subject to domestic rules and regulations.

The most common alternative payment methods are debit cards, charge cards, prepaid cards, direct debit, bank transfers, phone and mobile payments, checks, money orders and cash payments.
A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. A charge card is a plastic card that provides an alternative to cash when making purchases in which the issuer and the cardholder enter into an agreement that the debt incurred on the charge account will be paid in full and by due date. Debit and charge cards are used and accepted in many countries and can be used at a point of sale location or online.
Prepaid or stored-value cards provide payment through a monetary value held on the actual card or on deposit in an account. One major difference between stored-value cards and prepaid cards is that prepaid cards are usually issued in the name of the individual account holders, while stored value cards are usually anonymous. In the United States, prepaid and stored-value cards typically can be processed on the credit card network, but this is not the case for all cards, especially those outside of the United States.
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary. Direct debit is available in several countries including the United Kingdom, Germany, Austria and the Netherlands. It was scheduled to be available across the whole Single European Payments Area by the end of 2010. In the United States, where checks are more popular than bank transfers, a similar service is available through the Automated Clearing House network.
A bank transfer (also known as a wire transfer or credit transfer) is a method of transferring money from one person or institution (entity) to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office. A bank wire transfer is often the most expedient method for transferring funds between bank accounts. The transfer messages are sent via a secure system (such as SWIFT or Fedwire) utilizing IBAN and BIC codes. Online bank transfer systems in Europe are popular alternative payment methods, where the bank transfer is authorized by the consumer who logs onto his bank website and authorizes the funds transfer for payment to a merchant.
A giro transfer is a bank transfer payment, whereby order is given by the payer to his or her bank, which transfers funds into the payee's bank account; the receiving bank then notifies the payee. Giro is often used by post offices as well. The term is little used in the United States, although an ACH Transfer or direct deposit is the US electronic version of the giro transfer.
Online Banking ePayments (OBeP) are similar to giro transfers, but are designed specifically for use with online commerce. With OBeP, during the online checkout process, the merchant redirects the consumer to their financial institution’s online banking site where they login and authorize charges. After charges are authorized, the financial institution redirects the consumer back to the merchant site. With some services, like Trustly, the merchant can embed an iframe on their site so that the consumer doesn't have to leave the page to make a payment. All network communications are protected using industry standard encryption. Additionally, communications with the OBeP network take place on a virtual private network, not over the public Internet. OBeP systems protect consumer personal information by not requiring the disclosure of account numbers or other sensitive personal data to online merchants or other third parties.^[1]
Electronic bill payment is a feature of online banking, similar in its effect to a bank transfer, allowing a depositor to send money from his demand account to a creditor or vendor such as a public utility or a department store to be credited against a specific account. The payment is optimally executed electronically in real-time, though some financial institutions or payment services will wait until the next business day to send out the payment. The bank can usually also generate and mail a paper check or banker's draft to a creditor who is not set up to receive electronic payments.
With phone payments, consumers are billed via their regular telephone number, whereby the charges are added to their phone bill. Premium-rate telephone numbers or 900 numbers are telephone numbers for telephone calls during which certain services are provided, and for which prices higher than normal are charged.
Mobile payments is a new and rapidly adopting alternative payment method – especially in Asia and Europe. Instead of paying with cash, check or credit cards, a consumer can use a mobile phone to pay for wide range of services and goods. The charges are then added to their phone bill.
A check or cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities.
An electronic check, often referred to as ACH

Usage

The number of Alternative Payments has grown exponentially in the last few years due to the need for billing solutions on the Internet. Limited credit card penetration and customary local payment habits, combined with tight credit and security fears to use credit cards for online payments has increased the usage of Alternative Payments on a worldwide level.
Alternative payments are offered by domestic banks and payment processors that offer merchants a variety of billing solutions. Most Alternative Payments have online applications and are integrated into electronic shopping carts used by online merchants.
Several billing solutions have been devised specifically for web-based merchants to accept alternative payments online and to support and access distant markets. Alternative payments are used throughout North America, Europe and Asia, and have penetration levels of sixty percent or more in various countries. Language, currency and support, including trust and familiarity, often contribute to the success of a domestic alternative payment solution.
Debit cards and charge cards are accepted worldwide as alternative payment and in some cases, debit cards are designed exclusively for use on the Internet, and there is no physical card only a virtual card. Certain systems also require the use of a PIN when a debit is used for online purchases.
European online direct debit solutions are particularly popular due to the lower use of credit cards in Europe as compared to other countries like the United States. Transactions can be approved in real-time and funds in 1 to 3 business days. Chargebacks remain a risk inherently when debiting a consumer’s bank account, however, using additional verification systems reduces the risk significantly and many payment processors maintain an extensive fraud database that mitigates the risks.
Using bank transfers to accept payments does not carry any inherent risk to the merchant, which makes it particularly attractive to both high and low risk merchants seeking to reduce chargebacks. The drawback to this approach from a merchant’s perspective are that re-billing cannot be made automatic and billing does not occur quickly, as their customers must manually transfer the funds.
Electronic checks allow funds to be withdrawn directly from the consumer’s account. Recurring payments can be set up and the consumer’s personal information can be verified instantly. Merchants that opt to accept electronic checks enjoy convenient processing that reaches a large number of consumers that do not own credit cards or do not wish to use credit cards to make payments. Electronic checks are known to have long clearing times of up to five business days and carry an inherent risk of charge-backs. Checks that have been verified may come back after the clearing time as “insufficient funds”, meaning that the consumer does not have sufficient funds in their account to pay the balance of the transaction.
Phone payments describe a system of allowing consumers to purchase products or services using their phone number. In most cases, the charge is verified via phone or SMS messaging before the transaction is approved. The resulting charge is then added to the customer’s phone bill.
Phone billing is accepted in many countries and offers a flexible way for merchants to accept payment, especially online, where the risk of fraud is elevated. While convenient for the consumer, phone billing has several inherent issues for merchants. Payment processors that support phone billing typically charge a higher rate because the payments must go through an additional party, the phone provider, before reaching the merchant. The clearing time on funds is also exceptionally high because the funds are not collected until the consumer pays their phone bill.

Merchant advantages

Alternative Payments have increasingly become more popular with merchants, as more options means more sales, and because nearly all Alternative Payments offer a variety of service specific features that addresses a global online marketplace. Geolocation software, automatic language translations, instant currency exchange and worldwide support are generally included to allow foreign buyers to make use of their domestic payment solution, while shopping outside of their country at a foreign based web merchant.
Unlike traditional credit card transactions, many alternative payments often provide additional security features that protect the merchant from fraud and returned transactions, because the funds availability is verified and payment is made directly from a bank account. The banks guarantee the funds and because there are no chargebacks, merchants are often not required to provide collateral or keep a reserve. Furthermore, accounts are validated in real-time and fraud modules scrub transactions, similar to the approval process with credit cards.

Consumer advantages

Alternative Payments have, in many areas, become the dominant form of online payment for consumers. Alternative payments gives consumers more options to pay and allows them to select payment methods that they are comfortable with. Language, domestic applications and familiarity with the payment method, coupled with the trust they place in their own bank, increases usage. Furthermore, consumers may simply elect to use alternative payment methods due to security concerns with credit card purchases. Many alternative payments often require additional security steps, such as a user name, password or personal identification number (PIN) to further protect the consumer.


                                        Comparison of payment systems 

Comparison of payment systems (also known as comparison of payment processing services, comparison of payment processors, or comparison of merchant services) is a list displaying comparative information and fee rates on various payment systems (also payment processing services, payment processor, or merchant services). Information such as these are compared and shown: seller's/merchant's fees, buyer's fees, banking transfer fees, clearing-house fees, interchange fees, chargeback/return fees, currency conversion fees, monthly fees, usage, verification time, deposit time, technology support, customer-service quality, etc.
There are too many payment systems and services providers (see List of online payment service providers) to list in detail or in brief all on the same page. This article will focus mainly on the payment/merchant systems and services that are the most popular among majority of sellers and buyers, have comparatively lowest fee rate or free options, and which have comparatively most features for sellers/merchants and buyers, lowest cost or free payment receiving (card readers, Payment terminal (PTà, Point of sale (POS) & printing equipments, and which have good or better track record, (good or better) customer service quality, etc according to BBB and similar credible rating services.
Displayed fees and rates can change anytime. Displayed fee-data and rate info may not be actual fee or rate in use currently right now. Fee-rates also vary, based on volumes/quantities of sale, for different seller/business, i.e. sellers/merchants can negotiate with payment-system or merchant-service provider to obtain a comparatively lower & better rate, when their selling volume is comparatively very high

General comparison information

Payment System Name: brief comparative, key-points & highlighted description. Y = Yes. N = No. I = Incomplete. P = Partial. aka = also known as, aka Alias. Vsa = Visa. Ds = Discover. AmEx = American Express. MC = MasterCard. Dn = Diner. TR / Tx = Transaction. TX = Transmit/Send. RCV / RX = Receive. RCVd / RXd = Received. POS = Point of Sale. PT = Payment Terminal, aka POS. NFC = Near Field Communicator. HCE = Host Card Emulation. MS / MSC = Magnetic Stripe card. MST = Magnetic Secure Transmission (used to emulate MSC). EMVCo / EMV = Europay, MasterCard, and Visa (cards with electronic IC/Chip). ACH = Automated Clearing House (ACH). Crd / Cr = Credit, Credit Card. Dbt / Db = Debit, Debit Card. ETF = Early Termination Fee. PTF / PTC = Minimum Per Transaction Fee (aka, Per Transaction Cost). BBB = Better Business Bureau. M.Phn.App / M.App = Mobile Phone/Device App. Bnk = Bank. Acnt / Accnt = Account. Chk = Checking, Checking/Deposit acnt. Sav = Savings, Savings acnt. Thru = Through. Frm = From. Pswrd = Password. KB / kB = KiloBytes (equals to 1024 Bytes). BTC = XBT = ฿ = B⃦ = bitcoin. DOSP = Depends On Service Provider. DD / DC = Direct Deposit (aka Direct Credit, aka ACH, aka Giro, aka Direct Entry). DW = Direct Debit aka Direct Withdrawal, aka ACH, aka PAD, aka PAP. Tech = Technology.						Retail Shopping Centers /Markets	Online Shopping Carts Support
						POS Support	Tech
Monthly Fee. Yearly Fee	Vsa/MC/Ds Swipe Fee	AmEx Fee	Keyed-In Fee	Free Equipment	ACH/DW/ DC/chk Fee	ETF	-
Alipay:[1] Alipay mobile app allows consumers/buyers with Chinese bank accounts, cards, gift-cards, etc to pay for their purchases worldwide. Buyer needs an Alipay online account. Merchants/Sellers in most countries can open account with Alipay for their online stores/shops[2] and they can also add Alipay support in their store/shop's retail POS.[3] Alipay supports TR in 14 major foreign currencies.						Y	Y
						Y	MSC NFC M.App
Alipay: N. N	Vsa/MC Swipe: 3.00% (TR Total < 1M RMB in Last Month)	UnionPay: 3.00%	Keyed-In: 3.00%	Free Equipment: ?		ETF: ?
Alipay: N. N	2.00% (TR Total < 10M RMB in Last Month)	2.00%	2.00%	?		?
Amazon Local Register (ALR):[4] no chargeback/return fees, no international fees. A $10 card-reader device purchase is necessary, (and a free App from Apple app-store or Android play-store), to attach with seller's own (non-rooted or non-jailbroken) mobile device, and then Amazon gives credit of $10 into seller's accnt (after opening account), so card-reader is free (but this policy may have been changed currently by Amazon, so inquire on this before proceeding). Fees which are charged to sellers/merchants are shown in below table-row. Next-day deposit. Bank statement (as PDF file) is required to be submitted to ALR to verify bnk acnt, or bnk-acnt password is needed to be shared with ALR, (change pswrd after they verified bnk acnt, or change pswrd 1st to something temporary but not too easy, and then share it to verify bnk acnt). Keyed-in TR may be kept on-hold for 7 to 14 days. ALR m.app forcefully requires GPS geo-location access.						Y	Y
						Y	MSC
N. N	Vsa/MC/Ds Swipe: 2.5%	AmEx: 2.5%	Keyed-In: 2.99%	Free Equipment: Yes (See Description)		ETF: No
Apple Pay: it is used, for example in iTunes stores or in Apple Store, etc. Apple based services, products, and it is also supported by many retail shopping centers+markets & POS. Apple initially charged (or taken-away or cut) around 0.15%--0.30% fee from each payment TR paid by buyer (using their Crd/Dbt cards), and rest ended-up going into seller's hand. This was changed in Sept, 2015, Apple now charges around 15% + $0.15 from each payment TR, before giving rest of the amount to seller. And, banks take-away around 2% fee from Apple's portion for each (Apple Pay) TR. If seller's or merchant's PT/POS supports NFC, then it will also accept Apple Pay based payment. If NFC support is not present in PT/POS, then Apple Pay will not work.						Y	Y
						Y	NFC
N. N	Vsa/MC/Ds Swipe: 15% + $0.15	AmEx: 15% + $0.15		Free Equipment: No		ETF: No
Bitcoin Payment System: Such payment processing services are used by bitcoin supporting trading services or by some retail shopping centers+markets & POS, and by many online (centralized+decentralized) shopping centers/markets/stores. Usually, bitcoin (BTC) transaction (TR/Tx) fee was ฿0 (zero), but changed into "Cost very little". To transfer bitcoin virtual-currency from one bitcoin wallet to another, and to include the transfer in bitcoin blockchain (decentralized distributed database) and to receive verification (or proof, or confirmations) on that transfer very quickly (within 15 minutes or 1:30 hour:minutes), then there is a variable higher fee rate which is charged by bitcoin miners. But currently minimum fee for miners is close to or around ฿0.00001 btc per KB (kilobytes) of data/info for a confirmed btc transfer. A typical btc TR may contain around 0.5 KB (or 512 Bytes) of data. Some bitcoin mining service providers also support free or low-cost bitcoin transfer (usually for a TR which has less than 1 KB data), though verification might be slightly delayed. For more info on such very-low cost or free confirmation, view: Free Tx Relay policy[5] and Eligius[6] mining pool. Sellers who cannot run their own btc mining hardware, bitcoin node, etc to include a Tx into the blockchain, or sellers who cannot integrate plugin/addonBitcoin Software - Shopping cart integration[7] into their shopping-cart for connecting with their own btc mining & related servers/nodes, for receiving btc-Tx verification (aka, confirmations), for a sale/purchase, then such sellers have to use 3rd-party services from other btc exchange or other btc merchant service processor, etc and their processing fees are much higher, see: BitPay (pricing), BitPay pricing,[8] Coinify[9] Coinify pricing[10] Stripe (brief info on Stripe rates/fees, is shown few rows below in this webpage). Seller/Merchant should not ship-out or deliver products or services, before receiving sufficient number of confirmations (>3) on a BTC/XBT payment.						Y	Y
						Y	DOSP
N (DOSP). N (DOSP)	Vsa/MC/Ds Swipe: DOSP	AmEx: DOSP	Keyed-In: DOSP	Free Equipment: DOSP	ACH/DW/ DC/chk: DOSP	ETF: DOSP
Capital One Merchant Services (Spark Pay):[11] it has a no monthly-fee plan: Go plan. Fees which are charged to Go-Plan sellers/merchants, are shown below in table-row. Minimum PTF is $0.05. No minimum number of TR requirement. Mobile card reader device is included for free (it needs to be attached with Seller's own mobile device). Receipt can be emailed or network printer can be used for printing the receipt when paper/hard-copy receipt is required. SparkPay m.app (v1.5.0) forcefully requires GPS geo-location access, (when this info was added here on July 2, 2016). Mobile card reader does not support EMV/IC-chip feature yet. As EMV cards also has magnetic-stripe, so SparkPay free card-reader can still charge such cards.						Y	Y
						Y	MSC M.App
Go.Plan N. N	Vsa/MC/Ds Swipe: 2.65% + $0.05	AmEx: 3.7% + $0.05	Keyed-In: 3.7% + $0.05	Free Equipment: Yes (Card Reader)		ETF: No
Google Pay (aka, Google Wallet),[12] upgraded into Android Pay[13] Google-Checkout was upgraded into Google-Wallet, then Google-Wallet was upgraded into Android-Pay (also known as Google-Pay). Android Pay (or Google Wallet) is used by Google based services, products, and supported by many retail shopping centers+markets & POS. Google Wallet allows users to send money from Wallet to other users, relatives, etc via their Android or iOS based phone, it also allows to receive money. Android Pay (GAP) is used by buyers for purchasing, and available mostly on Google Android OS based phone. Google charges[14] sellers/merchants (or takes-away) around 30% fee from each payment TR what buyer pays. Google Wallet charged 2.9% fee to users when a fund was added (into Wallet) from Debit-card, but changed policy on May 2, 2016[15] that fund addition into Wallet is not allowed anymore from bnk-acnt or Dbt-card (after May 1, 2016), fund must be RCVd from another Wallet account or RCVd from another (Android Pay) user, and, fee for receiving fund is $0 (zero). Google Wallet (v15.0-R265-v4) and Android Pay (v1.4.125363284) m.apps both forcefully require access to GPS geo-location, (when this info was added here on July 2, 2016), Google Wallet (GW) even reads contacts-list, modify systems settings, etc. Such app need to ask user, before each access, and single contact needs to be copied out of user's Contacts-List and pasted manually into GW when needed. Usually Android v4.4 (KitKat) Phones & above, have NFC & HCE feature, which are needed for initiating payment from Google-Pay/Android-Pay supported devices. If seller's or merchant's PT/POS supports NFC, then it will also accept Google Pay based payments. If NFC support is not present in PT/POS then Google Pay will not work.						Y	Y
						Y	NFC HCE M.App
N. N	Vsa/MC/Ds Swipe: 30%	AmEx: 30%	Keyed-In: 30%	Free Equipment: No		ETF: No
Payment System Name: brief comparative, key-points & highlighted description. Y = Yes. N = No. I = Incomplete. P = Partial. aka = also known as, aka Alias. Vsa = Visa. Ds = Discover. AmEx = American Express. MC = MasterCard. Dn = Diner. TR / Tx = Transaction. TX = Transmit/Send. RCV / RX = Receive. RCVd / RXd = Received. POS = Point of Sale. PT = Payment terminal, aka POS. NFC = Near Field Communicator. HCE = Host Card Emulation. MS / MSC = Magnetic Stripe card. MST = Magnetic Secure Transmission (used to emulate MSC). EMVCo / EMV = Europay, MasterCard, and Visa (cards with electronic IC/Chip). ACH = Automated Clearing House (ACH). Crd / Cr = Credit, Credit Card. Dbt / Db = Debit, Debit Card. ETF = Early Termination Fee. PTF / PTC = Minimum Per Transaction Fee (aka, Per Transaction Cost). BBB = Better Business Bureau. M.Phn.App / M.App = Mobile Phone/Device App. Bnk = Bank. Acnt / Accnt = Account. Chk = Checking, Checking/Deposit acnt. Sav = Savings, Savings acnt. Thru = Through. Frm = From. Pswrd = Password. KB / kB = KiloBytes (equals to 1024 Bytes). BTC = XBT = ฿ = B⃦ = bitcoin (virtual currency). DOSP = Depends On Service Provider. DD / DC = Direct Deposit (aka Direct Credit, aka ACH, aka Giro, aka Direct Entry). DW = Direct Debit aka Direct Withdrawal, aka ACH, aka PAD, aka PAP. Tech = Technology.						Retail Shopping Centers /Markets	Online Shopping Carts Support
						POS Support	Tech
Monthly Fee. Yearly Fee	Vsa/MC/Ds Swipe Fee	AmEx Fee	Keyed-In Fee	Free Equipment	ACH/DW/ DC/chk Fee	ETF	-
National Processing(NP):[16] it has low monthly fee. No long term contracts. Crd/Dbt-card processing service fees which are charged to sellers/merchants are shown in below table-row. Per return fee $2.00. Communicate early & make sure that your contract/agreement includes clause for No-ETF, if you obtained PT/POS.						Y	Y
						Y	MSC
Y ($2.00 /month). N.	Vsa/MC/Ds Swipe: 2.7% + $0.20	AmEx: 2.7% + $0.20	Keyed-In: 2.7% + $0.20	Free Equipment: No	ACH/DW/ DC/chk: $15/month + $0.24/TR	ETF: No
North American Bancard (NAB):[17] per TR fees charged to sellers/merchants are shown in below table-row. Month-to-month contract. No Startup fees. Gateway/Virtual-Terminal: Authorize.Net. Communicate early & make sure that your contract/agreement includes clause for No-ETF, if you obtained PT/POS.						Y	Y
						Y	MSC EMV NFC Tablet M.App
N. N	Vsa/MC/Ds Swipe: 0.29%	AmEx: 0.29%	Keyed-In: 0.29%	Free Equipment: Yes (Virtual Terminal App)		ETF: No
PayPal: fees charged to sellers/merchants for each TR by the PayPal[18] is shown in below table-row. PayPal payment system can be integrated with other shopping cart systems, which enables individual website, retail+online shopping centers/markets or POS to accept payments on their own. And PayPal can also be used by any individuals for TX/RX (send/receive) personal payments. PayPal m.app v6.3.5 forcefully requires GPS geo-location, reads contacts-list, (when these info were added here on July 2, 2016). "PayPal Here"[19] (PPH) service can allow sellers/merchants to receive payment on their own mobile devices with a free magnetic-stripe (MS) card-reader (a 2nd card-reader is $14), or with a $149 EMV(IC-chip)+MS card-reader from PayPal. Fees charged to sellers/merchants are shown in below table-row. PPH charges sellers/merchants 2.9% + $0.30 for any invoiced TR. PayPal-Here m.app (v2.6.2) forcefully collects list of all running apps, and reads sensitive log data from all apps, and forcefully accesses GPS based geo-location, reads contacts-list, (when these info were added here on July 2, 2016), so m.app very likely violating seller/merchant's Privacy-Rights. Also see Braintree, a subsidiary of PayPal, which owns Venmo (and Braintree also accepts bitcoin).						Y	Y
						Y	MSC M.App
PayPal: N. N	Vsa/MC/Ds Swipe: 2.90% + $0.30	AmEx: 2.90% + $0.30	Keyed-In: 2.90% + $0.30	Free Equipment: No		ETF: No
PayPal Here: N. N	2.70%	2.70%	3.50% + $0.15	Yes (Card Reader)		No
Samsung Pay: it is used by Samsung-based services, products, and supported by many retail shopping centers/markets & POS. When Samsung Pay is used via Samsung smartphone devices, then fee for buyer is $0.000 (zero), and fee for seller is also $0.000 (zero). In S. Korea (home/origin nation of Samsung) it is already free even for non-Samsung devices. According to a March, 2015 report,[20] when Samsung Pay is used via other non-Samsung devices then Samsung may charge seller or may take-away 0.015% fee from each payment TR. But according to a later April, 2015 report, Samsung indicated this 0.015% fee per-TR policy for sellers/merchants, may be changed into "free" per transaction, when the service will be finalized for US & other countries. Then according to a June, 2016 report,[21] Samsung Pay is now totally free, (zero) $0.00 fee, for any TR, for both sellers/merchants and buyers. Mobile phone users (buyers) in US (and other countries) need to use either specific series of Samsung mobile phones, or at-least have Android 4.4+ on their non-Samsung phones, for Samsung Pay (aka, Samsung Gear) based buying+payment to work.[22] If seller's or merchant's PT/POS already supports NFC, then it can also accept Samsung Pay based payments easily.[23] Many (or most) sellers/merchants are still using magnetic-stripe (MS) card reader based PT/POS. Most of such PT/POS will still work with Samsung Pay supported payment devices, but some PT/POS may need a software update, or a plugin/addon software tool can be loaded into the PT/POS to enable MST[24] support. Even when a PT/POS does not support NFC, but if it supports regular magnetic-stripe (MS) payment cards, then Samsung Pay based payments can still work.						Y	Y
						Y	MSC MST NFC EMV M.App
N. N	Vsa/MC/Ds Swipe: 0.000% + $0.000	AmEx: 0.000% + $0.000	Keyed-In: 0.000% + $0.000	Free Equipment: No		ETF: No
Stripe: Stripe charges sellers/merchants[25] fees, which are shown in below table-row. Each ACH TR has a max-fee, capped-at max-$5, (when buyer used their bank's chk acnt for sending payment). Stripe charges seller ฿0.50% from bitcoin based payment. Each chargeback/return fee includes $15 fee. Stripe payment system can be integrated with other shopping cart systems, which enables individual website, retail+online shopping centers+markets & POS to accept payments on their own. Does not require a Merchant-Account. Stripe also offers "Stripe Subscriptions" for recurring billing and "Stripe Connect" for marketplace transactions.						Y	Y
						Y	MSC
N. N	Vsa/MC/Ds Swipe: 2.90% + $0.30	AmEx: 2.90% + $0.30	Keyed-In: 2.90% + $0.30	Free Equipment: No	ACH/DW/ DC/chk: 0.8% + $0.30
Total Merchant Services (TMS):[26] No long-term contracts. Month-to-month contract. Recently they may be offering free equipment, (must be returned when service is cancelled), inquire on this before proceeding. Free online marketing tool. 2 days deposit. Cr/Db goes thru Global Payments. Groovv POS Terminal for retail outlets. Communicate early & make sure your contract/agreement clearly includes clause for No-ETF, and also make sure No-ETF exists for "Global Payments" too.						Y	Y
						Y	MSC NFC EMV
N. N				Virtual Terminal web app is free. USB Reader is free. Mobile PaymentJack rent is $5/month		ETF: No
Payment System Name: brief comparative, key-points & highlighted description. Y = Yes. N = No. I = Incomplete. P = Partial. aka = also known as, aka Alias. Vsa = Visa. Ds = Discover. AmEx = American Express. MC = MasterCard. Dn = Diner. TR / Tx = Transaction. TX = Transmit/Send. RCV / RX = Receive. RCVd / RXd = Received. POS = Point of Sale. PT = Payment terminal, aka POS. NFC = Near Field Communicator. HCE = Host Card Emulation. MS / MSC = Magnetic Stripe card. MST = Magnetic Secure Transmission (used to emulate MSC). EMVCo / EMV = Europay, MasterCard, and Visa (cards with electronic IC/Chip). ACH = Automated Clearing House (ACH). Crd / Cr = Credit, Credit Card. Dbt / Db = Debit, Debit Card. ETF = Early Termination Fee. PTF / PTC = Minimum Per Transaction Fee (aka, Per Transaction Cost). BBB = Better Business Bureau. M.Phn.App / M.App = Mobile Phone/Device App. Bnk = Bank. Acnt / Accnt = Account. Chk = Checking, Checking/Deposit acnt. Sav = Savings, Savings acnt. Thru = Through. Frm = From. Pswrd = Password. KB / kB = KiloBytes (equals to 1024 Bytes). BTC = XBT = ฿ = B⃦ = bitcoin (virtual currency). DOSP = Depends On Service Provider. DD / DC = Direct Deposit (aka Direct Credit, aka ACH, aka Giro, aka Direct Entry). DW = Direct Debit aka Direct Withdrawal, aka ACH, aka PAD, aka PAP. Tech = Technology.						Retail Shopping Centers /Markets	Online Shopping Carts Support
						POS Support	Tech
Monthly Fee. Yearly Fee	Vsa/MC/Ds Swipe Fee	AmEx Fee	Keyed-In Fee	Free Equipment	ACH/DW/ DC/chk Fee	ETF	-

 

Bitcoin

 

 

Bitcoin is a worldwide cryptocurrency and digital payment system^[8]:3 called the first decentralized digital currency, as the system works without a central repository or single administrator.^[8]:1[9] It was invented by an unknown person or group of people under the name Satoshi Nakamoto^[10] and released as open-source software in 2009.^[11] The system is peer-to-peer, and transactions take place between users directly, without an intermediary.^[8]:4 These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies,^[12] products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.^[13] Bitcoin can also be held as an investment. According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin
 

 

Terminology

The word bitcoin first occurred and was defined in the white paper^[15] that was published on 31 October 2008.^[16] It is a compound of the words bit and coin.^[17] The white paper frequently uses the shorter coin.^[15]
There is no uniform convention for bitcoin capitalization. Some sources use Bitcoin, capitalized, to refer to the technology and network and bitcoin, lowercase, to refer to the unit of account.^[18] The Wall Street Journal,^[19] The Chronicle of Higher Education,^[20] and the Oxford English Dictionary^[17] advocate use of lowercase bitcoin in all cases, a convention which this article follows.

Units

The unit of account of the bitcoin system is bitcoin. As of 2014^[update], tickers used to represent bitcoin are BTC^[a] and XBT.^[b] Its Unicode character is ₿.^[25]:2 Small amounts of bitcoin used as alternative units are millibitcoin (mBTC) and satoshi. Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 0.00000001 bitcoin, one hundred millionth of a bitcoin.^[4] A millibitcoin equals to 0.001 bitcoin, one thousandth of a bitcoin.

 

On 18 August 2008, the domain name bitcoin.org was registered.^[27] In November that year, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System^[15] was posted to a cryptography mailing list.^[27] Nakamoto implemented the bitcoin software as open source code and released it in January 2009.^[28][11] The identity of Nakamoto remains unknown, though many have claimed to know it.^[10]
In January 2009, the bitcoin network came into existence after Satoshi Nakamoto mined the first ever block on the chain, known as the genesis block, for a reward of 50 bitcoins.^[29][30] Embedded in the coinbase of this block was the following text:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.^[11]

One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.^[31][32] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.^[33]
In the early days, Nakamoto is estimated to have mined 1 million bitcoins.^[34] Before disappearing from any involvement in bitcoin, Nakamoto in a sense handed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the 'anarchic' bitcoin community's closest thing to an official public face.^[35]
The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.^[29]
On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions were not properly verified before they were included in the blockchain, which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins.^[36][37] On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a single transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol.^[38][36][37]
On 1 August 2017 bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and a hard fork, Bitcoin Cash (BCH).

Design

Blockchain

 

Number of unspent transaction outputs

The blockchain is a public ledger that records bitcoin transactions.^[40] A novel solution accomplishes this without any trusted central authority: the maintenance of the blockchain is performed by a network of communicating nodes running bitcoin software.^[8] Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications.^[41] Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. The blockchain is a distributed database – to achieve independent verification of the chain of ownership of any and every bitcoin amount, each network node stores its own copy of the blockchain.^[42] Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the blockchain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.^{[3]:ch. 5}

Transactions

 Bitcoin network

Number of bitcoin transactions per month (logarithmic scale)^[43]

Transactions are defined using a Forth-like scripting language.^{[3]:ch. 5} Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain.^[44] The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer.^[44] Any input satoshis not accounted for in the transaction outputs become the transaction fee.^[44]

Transaction fees

An actual bitcoin transaction including the fee from a webbased cryptocurrency exchange to a hardware wallet.

Paying a transaction fee is optional.^[44] Miners can choose which transactions to process^[44] and prioritize those that pay higher fees. Fees are based on the storage size of the transaction generated, which in turn is dependent on the number of inputs used to create the transaction. Furthermore, priority is given to older unspent inputs.^{[3]:ch. 8}

Ownership

Simplified chain of ownership.^[15] In reality, a transaction can have more than one input and more than one output.

In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address is nothing more than picking a random valid private key and computing the corresponding bitcoin address. This computation can be done in a split second. But the reverse (computing the private key of a given bitcoin address) is mathematically unfeasible and so users can tell others and make public a bitcoin address without compromising its corresponding private key. Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key-pair that is already in use and has funds. The vast number of valid private keys makes it unfeasible that brute force could be used for that. To be able to spend the bitcoins, the owner must know the corresponding private key and digitally sign the transaction. The network verifies the signature using the public key.^{[3]:ch. 5}
If the private key is lost, the bitcoin network will not recognize any other evidence of ownership;^[8] the coins are then unusable, and effectively lost. For example, in 2013 one user claimed to have lost 7,500 bitcoins, worth $7.5 million at the time, when he accidentally discarded a hard drive containing his private key.^[45] A backup of his key(s) might have prevented this.^[46]

Mining

Semi-log plot of relative mining difficulty.^[c][43]

Mining is a record-keeping service done through the use of computer processing power.^[d] Miners keep the blockchain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block.^[40] Each block contains a cryptographic hash of the previous block,^[40] using the SHA-256 hashing algorithm,^{[3]:ch. 7} which links it to the previous block,^[40] thus giving the blockchain its name.
To be accepted by the rest of the network, a new block must contain a so-called proof-of-work.^[40] The proof-of-work requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.^{[3]:ch. 8} This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values (usually the sequence of tested values is 0, 1, 2, 3, ...^{[3]:ch. 8}) before meeting the difficulty target.
Every 2,016 blocks (approximately 14 days at roughly 10 min per block), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.^{[3]:ch. 8}
Between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.^[48]
The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.^[49] As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.^[40]

Supply

Total bitcoins in circulation.^[43]

The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees.^[50] As of 9 July 2016^[update],^[51] the reward amounted to 12.5 newly created bitcoins per block added to the blockchain. To claim the reward, a special transaction called a coinbase is included with the processed payments.^{[3]:ch. 8} All bitcoins in existence have been created in such coinbase transactions. The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (approximately every four years). Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins^[e] will be reached c. 2140; the record keeping will then be rewarded by transaction fees solely.^[52]
In other words, bitcoin's inventor Nakamoto set a monetary policy based on artificial scarcity at bitcoin's inception that there would only ever be 21 million bitcoins in total. Their numbers are being released roughly every ten minutes and the rate at which they are generated would drop by half every four years until all were in circulation.

Wallets

For a broader coverage related to this topic, see Cryptocurrency wallet.

Electrum bitcoin wallet

Bitcoin paper wallet generated at bitaddress.org

Trezor hardware wallet

A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold^[54] or store bitcoins,^[55] due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger. A better way to describe a wallet is something that "stores the digital credentials for your bitcoin holdings"^[55] and allows one to access (and spend) them. Bitcoin uses public-key cryptography, in which two cryptographic keys, one public and one private, are generated.^[56] At its most basic, a wallet is a collection of these keys.
There are several types of wallets. Software wallets connect to the network and allow spending bitcoins in addition to holding the credentials that prove ownership.^[57] Software wallets can be split further in two categories: full clients and lightweight clients.

• Full clients verify transactions directly on a local copy of the blockchain (over 136 GB as of October 2017),^[58] or a subset of the blockchain (around 2 GB).^{[59][better source needed]} Because of its size and complexity, the entire blockchain is not suitable for all computing devices.
• Lightweight clients on the other hand consult a full client to send and receive transactions without requiring a local copy of the entire blockchain (see simplified payment verification – SPV). This makes lightweight clients much faster to set up and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight wallet however, the user must trust the server to a certain degree. When using a lightweight client, the server can not steal bitcoins, but it can report faulty values back to the user. With both types of software wallets, the users are responsible for keeping their private keys in a secure place.

Besides software wallets, Internet services called online wallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware. As a result, the user must have complete trust in the wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such security breach occurred with Mt. Gox in 2011.
Physical wallets store the credentials necessary to spend bitcoins offline.^[55] Examples combine a novelty coin with these credentials printed on metal.^[64] Paper wallets are simply paper printouts. Another type of wallet called a hardware wallet keeps credentials offline while facilitating transactions.

Reference implementation

 

The first wallet program – simply named "Bitcoin" – was released in 2009 by Satoshi Nakamoto as open-source code. Sometimes referred to as the "Satoshi client", this is also known as the reference client because it serves to define the bitcoin protocol and acts as a standard for other implementations.^[57] In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt.^[57] After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network.^[66][67] Today, other forks of Bitcoin Core exist such as Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited,^[68][69] Parity Bitcoin,^[70] and BTC1.^[71]

Decentralization

Bitcoin creator Satoshi Nakamoto designed bitcoin not to need a central authority.^[15] According to the academic Mercatus Center,^[8] US Treasury,^[5] IEEE Communications, Surveys & Tutorials,^[9] The Washington Post,^[72] The Daily Herald,^[73] The New Yorker,^[74] and others, bitcoin is decentralized.

Privacy

Bitcoin is pseudonymous, meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In addition, transactions can be linked to individuals and companies through "idioms of use" (e.g., transactions that spend coins from multiple inputs indicate that the inputs may have a common owner) and corroborating public transaction data with known information on owners of certain addresses.^[75] Additionally, bitcoin exchanges, where bitcoins are traded for traditional currencies, may be required by law to collect personal information.^[76]
To heighten financial privacy, a new bitcoin address can be generated for each transaction.^[77] For example, hierarchical deterministic wallets generate pseudorandom "rolling addresses" for every transaction from a single seed, while only requiring a single passphrase to be remembered to recover all corresponding private keys.^[78] Additionally, "mixing" and CoinJoin services aggregate multiple users' coins and output them to fresh addresses to increase privacy.^[79] Researchers at Stanford University and Concordia University have also shown that bitcoin exchanges and other entities can prove assets, liabilities, and solvency without revealing their addresses using zero-knowledge proofs.^[80]
According to Dan Blystone, "Ultimately, bitcoin resembles cash as much as it does credit cards."^[81]

Fungibility

Wallets and similar software technically handle all bitcoins as equivalent, establishing the basic level of fungibility. Researchers have pointed out that the history of each bitcoin is registered and publicly available in the blockchain ledger, and that some users may refuse to accept bitcoins coming from controversial transactions, which would harm bitcoin's fungibility.^[82] Projects such as CryptoNote, Zerocoin, and Dark Wallet aim to address these privacy and fungibility issues.^[83][84]

Governance

Bitcoin was initially led by Satoshi Nakamoto. Nakamoto stepped back in 2010 and handed the network alert key to Gavin Andresen.^[85] Andresen stated he subsequently sought to decentralize control stating: "As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was try to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on."^[85] This left opportunity for controversy to develop over the future development path of bitcoin.

Scalability

The blocks in the blockchain are limited to one megabyte in size, which has created problems for bitcoin transaction processing, such as increasing transaction fees and delayed processing of transactions that cannot be fit into a block.^[86] On 24 August 2017 (at block 481,824), Segregated Witness went live, increasing maximum block capacity and making transaction IDs immutable. SegWit also allows the implementation of the Lightning Network, a second-layer proposal for scalability with instantaneous transactions.

Economics

 

Classification

Bitcoin is a digital asset^[90] designed by its inventor, Satoshi Nakamoto, to work as a currency.^[15][91] It is commonly referred to with terms like digital currency,^[8]:1 digital cash,^[92] virtual currency,^[4] electronic currency,^[18] or cryptocurrency.^[93]
The question whether bitcoin is a currency or not is still disputed.^[93] Bitcoins have three useful qualities in a currency, according to The Economist in January 2015: they are "hard to earn, limited in supply and easy to verify".^[94] Economists define money as a store of value, a medium of exchange, and a unit of account and agree that bitcoin has some way to go to meet all these criteria.^[95] It does best as a medium of exchange; as of February 2015^[update] the number of merchants accepting bitcoin had passed 100,000.^[13] As of March 2014^[update], the bitcoin market suffered from volatility, limiting the ability of bitcoin to act as a stable store of value, and retailers accepting bitcoin use other currencies as their principal unit of account.^[95]

General use

Liquidity (estimated, USD/year, logarithmic scale).^[43]

According to research produced by Cambridge University, there were between 2.9 million and 5.8 million unique users using a cryptocurrency wallet, as of 2017, most of them using bitcoin. The number of users has grown significantly since 2013, when there were 300,000 to 1.3 million users.^[14]

Acceptance by merchants

In 2015, the number of merchants accepting bitcoin exceeded 100,000.^[13] Instead of 2–3% typically imposed by credit card processors, merchants accepting bitcoins often pay fees under 2%, down to 0%.^[96] Firms that accepted payments in bitcoin as of December 2014 included PayPal,^[97] Microsoft,^[98] Dell,^[99] and Newegg.

Payment service providers

Merchants accepting bitcoin ordinarily use the services of bitcoin payment service providers such as BitPay or Coinbase. When a customer pays in bitcoin, the payment service provider accepts the bitcoin on behalf of the merchant, converts it to the local currency, and sends the obtained amount to merchant's bank account, charging a fee for the service.^[101]

Financial institutions

Bitcoin companies have had difficulty opening traditional bank accounts because lenders have been leery of bitcoin's links to illicit activity.^[102] According to Antonio Gallippi, a co-founder of BitPay, "banks are scared to deal with bitcoin companies, even if they really want to".^[103] In 2014, the National Australia Bank closed accounts of businesses with ties to bitcoin,^[104] and HSBC refused to serve a hedge fund with links to bitcoin.^[105] Australian banks in general have been reported as closing down bank accounts of operators of businesses involving the currency;^[106] this has become the subject of an investigation by the Australian Competition and Consumer Commission.Nonetheless, Australian banks have keenly adopted the blockchain technology on which bitcoin is based.^[107]
In a 2013 report, Bank of America Merrill Lynch stated that "we believe bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers."^[108] In June 2014, the first bank that converts deposits in currencies instantly to bitcoin without any fees was opened in Boston.^[109]
Plans were announced to include a bitcoin futures option on the Chicago Mercantile Exchange in 2017.

As an investment

Some Argentinians have bought bitcoins to protect their savings against high inflation or the possibility that governments could confiscate savings accounts.^[76] During the 2012–2013 Cypriot financial crisis, bitcoin purchases in Cyprus rose due to fears that savings accounts would be confiscated or taxed.^[111]
The Winklevoss twins have invested into bitcoins. In 2013 The Washington Post claimed that they owned 1% of all the bitcoins in existence at the time.^[112]
Other methods of investment are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July 2014 and approved by the Jersey Financial Services Commission.^[113] Forbes started publishing arguments in favor of investing in December 2015.^[114]
In 2013 and 2014, the European Banking Authority^[115] and the Financial Industry Regulatory Authority (FINRA), a United States self-regulatory organization,^[116] warned that investing in bitcoins carries significant risks. Forbes named bitcoin the best investment of 2013.^[117] In 2014, Bloomberg named bitcoin one of its worst investments of the year.^[118] In 2015, bitcoin topped Bloomberg's currency tables.^[119]
According to bitinfocharts.com, in 2017 there are 9,272 bitcoin wallets with more than $1 million worth of bitcoins.^[120] The exact number of bitcoin millionaires is uncertain as a single person can have more than one bitcoin wallet.

Venture capital

Venture capitalists, such as Peter Thiel's Founders Fund, which invested US$3 million in BitPay, do not purchase bitcoins themselves, instead funding bitcoin infrastructure like companies that provide payment systems to merchants, exchanges, wallet services, etc.^[121] In 2012, an incubator for bitcoin-focused start-ups was founded by Adam Draper, with financing help from his father, venture capitalist Tim Draper, one of the largest bitcoin holders after winning an auction of 30,000 bitcoins,^[122] at the time called 'mystery buyer'.^[123] The company's goal is to fund 100 bitcoin businesses within 2–3 years with $10,000 to $20,000 for a 6% stake.^[122] Investors also invest in bitcoin mining.^[124] According to a 2015 study by Paolo Tasca, bitcoin startups raised almost $1 billion in three years (Q1 2012 – Q1 2015).^[125]

Price and volatility

Price^[f] (left vertical axis, logarithmic scale) and volatility^[g] (right vertical axis).^[43]

According to Mark T. Williams, as of 2014^[update], bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the US dollar.^[126] According to Forbes, there are uses where volatility does not matter, such as online gambling, tipping, and international remittances.^[127]
The price of bitcoins has gone through various cycles of appreciation and depreciation referred to by some as bubbles and busts.^[128][129] In 2011, the value of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2.^[130] In the latter half of 2012 and during the 2012–13 Cypriot financial crisis, the bitcoin price began to rise,^[131] reaching a high of US$266 on 10 April 2013, before crashing to around US$50.^[132] On 29 November 2013, the cost of one bitcoin rose to a peak of US$1,242.^[133] In 2014, the price fell sharply, and as of April remained depressed at little more than half 2013 prices. As of August 2014^[update] it was under US$600.^[134]
In January 2015, noting that the bitcoin price had dropped to its lowest level since spring 2013 – around US$224 – The New York Times suggested that "[w]ith no signs of a rally in the offing, the industry is bracing for the effects of a prolonged decline in prices. In particular, bitcoin mining companies, which are essential to the currency's underlying technology, are flashing warning signs."^[135] Also in January 2015, Business Insider reported that deep web drug dealers were "freaking out" as they lost profits through being unable to convert bitcoin revenue to cash quickly enough as the price declined – and that there was a danger that dealers selling reserves to stay in business might force the bitcoin price down further.^[136]
According to an article in The Wall Street Journal, as of 19 April 2016^[update], bitcoin had been more stable than gold for the preceding 24 days, and it was suggested that its value might be more stable in the future.^[137] On 3 March 2017, the price of a bitcoin surpassed the market value of an ounce of gold for the first time as its price surged to an all-time high of $1,268.^[138][139] A study in Electronic Commerce Research and Applications, going back through the network's historical data, showed the value of the bitcoin network as measured by the price of bitcoins, to be roughly proportional to the square of the number of daily unique users participating on the network. This is a form of Metcalfe's law and suggests that the network was demonstrating network effects proportional to its level of user adoption.^[140]

Ponzi scheme concerns

 

Various journalists,^[73][141] economists,^[142][143] and the central bank of Estonia^[144] have voiced concerns that bitcoin is a Ponzi scheme. In 2013, Eric Posner, a law professor at the University of Chicago, stated that "a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion."^[145] In 2014 reports by both the World Bank^[146]:7 and the Swiss Federal Council^[147]:21 examined the concerns and came to the conclusion that bitcoin is not a Ponzi scheme. In July 2017, billionaire Howard Marks referred to bitcoin as a pyramid scheme.^[148]
On 12 September 2017, Jamie Dimon, CEO of JP Morgan Chase, called bitcoin a "fraud" and said he would fire anyone in his firm caught trading it. Zero Hedge claimed that the same day Dimon made his statement, JP Morgan also purchased a large amount of bitcoins for its clients.^[149] On 13 September 2017, Dimon followed up and compared bitcoin to a bubble, saying it was only useful for drug dealers and countries like North Korea.^[150] On 22 September 2017, hedge fund Blockswater subsequently accused JP Morgan of market manipulation and filed a market abuse complaint with Swedish Financial Supervisory Authority.

Legal status, tax and regulation

Main article: Legality of bitcoin by country or territory

Because of bitcoin's decentralized nature, restrictions or bans on it are impossible to enforce, although its use can be criminalized. The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed its use and trade, others have banned or restricted it. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.

Criminal activity

 

The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media. The FBI prepared an intelligence assessment, the SEC has issued a pointed warning about investment schemes using virtual currencies,^[154] and the US Senate held a hearing on virtual currencies in November 2013.
Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods. In 2014, researchers at the University of Kentucky found "robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives."

Criticism

Bitcoin has been criticized for the vast amounts of electricity consumed by mining. It has been estimated that annual consumption (as of 2017) was 23 terawatt hours, approximately the same as the country of Ecuador.
The transaction times vary from several seconds to several hours depending on offered transaction fee and other technical reasons.^[

In academia

Journals

 

In September 2015, the establishment of the peer-reviewed academic journal Ledger (ISSN 2379-5980) was announced. It will cover studies of cryptocurrencies and related technologies, and is published by the University of Pittsburgh.^[ The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.

Other

In the fall of 2014, undergraduate students at the Massachusetts Institute of Technology (MIT) each received bitcoins worth $100 "to better understand this emerging technology". The bitcoins were not provided by MIT but rather the MIT Bitcoin Club, a student-run club.
In 2016, Stanford University launched a lab course on building bitcoin-enabled applications.

                                  XXX  . V000  Clearing house (finance) 

A clearing house is a financial institution formed to facilitate the exchange (i.e., clearance) of payments, securities, or derivatives transactions. The clearing house stands between two clearing firms (also known as member firms or participants). Its purpose is to reduce the risk of a member firm failing to honor its trade settlement obligations.

After legally-binding agreement (i.e. execution) of a trade between a buyer and a seller, the role of the clearing house is to centralize and standardize all of the steps leading up to the payment (i.e. settlement ) of the transaction. The purpose is to reduce the cost, settlement risk and operational risk of clearing and settling multiple transactions among multiple parties.^[1][2]
In addition to the above services, central counterparty clearing (CCP) takes on counterparty risk by stepping in between the original buyer and seller of a financial contract, such as a derivative. The role of the CCP is to perform the obligations under the contract agreed between the two counterparties, thereby removing the counterparty risk the parties of the contract had to each other and replacing it with counterparty risk to a highly regulated central counterparty that specializes in managing and mitigating counterparty risk.^[
 

Bank clearance

The origins of clearing houses dates back to bank cheque clearing in the 19th century.

Financial exchanges

Financial exchanges, such as commodities futures markets and stock exchanges, began to use clearing houses in the latter part of the 19th century. As late as 1899, the London Stock Exchange was still the only stock exchange in Europe using a clearing house.^[4] The Philadelphia Stock Exchange (founded 1790), the first U.S. stock exchange to use a clearing system, began using a clearing system in 1870,^[5] but the much larger New York Stock Exchange (NYSE) still had no clearing system some two decades later in 1891. The Consolidated Stock Exchange of New York used clearing houses from its inception in 1885. This exchange existed in competition with the NYSE from 1885-1926 and averaged 23% of NYSE volume. Its competitor Consolidated's use of clearing houses, finally forced the NYSE to follow suit (from 1892) to gain the same market advantages of at least prevention of frauds and reneging on bargains.^[6] Some major U.S. commodities exchanges, like the New York Coffee Exchange (today the Coffee, Sugar and Cocoa Exchange) and the Chicago Mercantile Exchange did not begin using clearing houses to settle their transactions until the second decade of the 20th century. The New York Coffee Exchange began using clearing houses in 1914.^[7] The Chicago Mercantile Exchange began using them even later in 1919.^[8]

Central counterparty clearing

Modern central counterparty clearing (CCP) provides clearing services, and also takes on the counterparty risk of the counterparties (member banks and broker-dealers).

 

                  XXX  .  V00000 Digital currency 

Digital currency (digital money or electronic money or electronic currency) is a type of currency available only in digital form, not in physical (such as banknotes and coins). It exhibits properties similar to physical currencies, but allows for instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies and cryptocurrencies^[1] or even central bank issued "digital base money". Like traditional money, these currencies may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an on-line game or social network.^[2]
Digital currency is a money balance recorded electronically on a stored-value card or other device. Another form of electronic money is network money, allowing the transfer of value on computer networks, particularly the Internet. Electronic money is also a claim on a private bank or other financial institution such as bank deposits.^[3]
Digital money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources

In 1983, a research paper by David Chaum introduced the idea of digital cash.^[4] In 1990, he founded DigiCash, an electronic cash company, in Amsterdam to commercialize the ideas in his research.^[5] It filed for bankruptcy in 1998.^[6][7] In 1999, Chaum left the company.
In 1997, Coca-Cola offered buying from vending machines using mobile payments.^[8] After that PayPal emerged in 1998.^[9] Other system such as e-gold followed suit, but faced issues because it was used by criminals and was raided by US Feds^[who?] in 2005.^[5] In 2008, bitcoin was introduced, which marked the start of Digital currencies.^[5]
Origins of digital currencies date back to the 1990s Dot-com bubble. One of the first was E-gold, founded in 1996 and backed by gold. Another known digital currency service was Liberty Reserve, founded in 2006; it let users convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them freely with one another at a 1% fee. Both services were centralized, reputed to be used for money laundering, and inevitably shut down by the US government.^[10] Q coins or QQ coins, were used as a type of commodity-based digital currency on Tencent QQ's messaging platform and emerged in early 2005. Q coins were so effective in China that they were said to have had a destabilizing effect on the Chinese Yuan currency due to speculation. Recent interest in cryptocurrencies has prompted renewed interest in digital currencies, with bitcoin, introduced in 2008, becoming the most widely used and accepted digital currency.

Comparisons

Digital versus virtual currency

According to the European Central Bank's "Virtual currency schemes – a further analysis" report of February 2015, virtual currency is a digital representation of value, not issued by a central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money. In the previous report of October 2012, the virtual currency was defined as a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.
According to the Bank For International Settlements' "Digital currencies" report of November 2015, digital currency is an asset represented in digital form and having some monetary characteristics. Digital currency can be denominated to a sovereign currency and issued by the issuer responsible to redeem digital money for cash. In that case, digital currency represents electronic money (e-money). Digital currency denominated in its own units of value or with decentralized or automatic issuance will be considered as a virtual currency.
As such, bitcoin is a digital currency but also a type of virtual currency. Bitcoin and its alternatives are based on cryptographic algorithms, so these kinds of virtual currencies are also called cryptocurrencies.

Digital versus traditional currency

Most of the traditional money supply is bank money held on computers. This is also considered digital currency. One could argue that our increasingly cashless society means that all currencies are becoming digital (sometimes referred to as “electronic money”), but they are not presented to us as such.

Types of systems

Centralized systems

Many systems—such as PayPal, eCash, WebMoney, Payoneer, cashU, and Hub Culture's Ven will sell their electronic currency ^{[clarification needed]} directly to the end user. Other systems only sell through third party digital currency exchangers. The M-Pesa system is used to transfer money through mobile phones in Africa, India, Afghanistan, and Eastern Europe. Some community currencies, like some local exchange trading systems (LETS) and the Community Exchange System, work with electronic transactions.

Mobile digital wallets

A number of electronic money systems use contactless payment transfer in order to facilitate easy payment and give the payee more confidence in not letting go of their electronic wallet during the transaction.

• In 1994 Mondex and National Westminster Bank provided an 'electronic purse' to residents of Swindon
• In about 2005 Telefónica and BBVA Bank launched a payment system in Spain called Mobipay^[13] which used simple short message service facilities of feature phones intended for pay-as you go services including taxis and pre-pay phone recharges via a BBVA current bank account debit.
• In Jan 2010, Venmo launched as a mobile payment system through SMS, which transformed into a social app where friends can pay each other for minor expenses like a cup of coffee, rent and paying your share of the restaurant bill when you forget your wallet.^[14] It is popular with college students, but has some security issues.^[15] It can be linked to your bank account, credit/debit card or have a loaded value to limit the amount of loss in case of a security breach. Credit cards and non-major debit cards incur a 3% processing fee.^[16]
• On September 19, 2011, Google Wallet was released in the US only, which makes it easy to carry all your credit/debit cards on your phone.^[17]
• In 2012 O2 (Ireland) (owned by Telefónica) launched Easytrip^[18] to pay road tolls which were charged to the mobile phone account or prepay credit.
• O2 (United Kingdom) invented O2 Wallet^[19] at about the same time. The wallet can be charged with regular bank accounts or cards and discharged by participating retailers using a technique known as 'money messages' The service closed in 2014
• On September 9, 2014 Apple Pay was announced at the iPhone 6 event. In October 2014 it was released as an update to work on iPhone 6 and Apple Watch. It is very similar to Google Wallet, but for Apple devices only.

Decentralized systems

Unofficial bitcoin logo

Main article: Cryptocurrency

See also: List of cryptocurrencies

A cryptocurrency is a type of digital token that relies on cryptography for chaining together digital signatures of token transfers, peer-to-peer networking and decentralization.
In some cases a proof-of-work scheme is used to create and manage the currency.^{[21][22][23][24]}
Cryptocurrencies allow electronic money systems to be decentralized; systems include:

• Bitcoin, the first cryptocurrency, a peer-to-peer electronic monetary system based on cryptography.
• Ethereum^[25], an open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality.
• Ripple monetary system, a monetary system based on trust networks.
• Bitcoin Cash, a 2017 fork of bitcoin; main differences from bitcoin are larger blocks, different difficulty adjustment algorithm, and lack of Segregated Witness.
• Litecoin, originally based on the bitcoin protocol, intended to improve upon its alleged inefficiencies. Faster block times and different mining algorithm compared to bitcoin.
• Dash, originally based on the bitcoin protocol, it offers the option of instant and private transactions. It is a Decentralized Autonomous Organization.
• NEM, a peer-to-peer electronic monetary system and a blockchain platform which allows for storing digital assets.
• NEO^[26], an open-source, public, blockchain-based distributed computing platform featuring smart assets contract functionality.
• IOTA, an open-source distributed ledger and an electronic monetary system designet for the Internet of Things. It uses a directed acyclic graph (DAG) instead of a blockchain.
• Monero, an open source cryptocurrency created in April 2014 that focuses on privacy, decentralisation and scalability.
• Zcash, a cryptocurrency that offers privacy and selective transparency of transactions.
• Dogecoin, a Litecoin-derived system meant by its author to reach broader demographics.
• Nxt, conceived as flexible platform to build applications and financial services around.
• Zcoin, a privacy centric cryptocurrency that utilized the zerocoin protocol.

Virtual currency

 

A virtual currency has been defined in 2012 by the European Central Bank as "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community". The US Department of Treasury in 2013 defined it more tersely as "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency". The key attribute a virtual currency does not have according to these definitions, is the status as legal tender.

Law

Since 2001, the European Union has implemented the E-Money Directive "on the taking up, pursuit and prudential supervision of the business of electronic money institutions" last amended in 2009.^[27] Doubts on the real nature of EU electronic money have arisen, since calls have been made in connection with the 2007 EU Payment Services Directive in favor of merging payment institutions and electronic money institutions. Such a merger could mean that electronic money is of the same nature as bank money or scriptural money.
In the United States, electronic money is governed by Article 4A of the Uniform Commercial Code for wholesale transactions and the Electronic Fund Transfer Act for consumer transactions. Provider's responsibility and consumer's liability are regulated under Regulation E.

Regulation

Virtual currencies pose challenges for central banks, financial regulators, departments or ministries of finance, as well as fiscal authorities and statistical authorities.

US Treasury guidance

On 20 March 2013, the Financial Crimes Enforcement Network issued a guidance to clarify how the US Bank Secrecy Act applied to persons creating, exchanging and transmitting virtual currencies.

Securities and Exchange Commission guidance

In May 2014 the U.S. Securities and Exchange Commission (SEC) "warned about the hazards of bitcoin and other virtual currencies".

New York state regulation

In July 2014, the New York State Department of Financial Services proposed the most comprehensive regulation of virtual currencies to date, commonly called BitLicense.^[32] Unlike the US federal regulators it has gathered input from bitcoin supporters and the financial industry through public hearings and a comment period until 21 October 2014 to customize the rules. The proposal per NY DFS press release “... sought to strike an appropriate balance that helps protect consumers and root out illegal activity".^[33] It has been criticized by smaller companies to favor established institutions, and Chinese bitcoin exchanges have complained that the rules are "overly broad in its application outside the United States".

Adoption by governments

As of 2016, over 24 countries are investing in distributed ledger technologies (DLT) with $1.4bn in investments. In addition, over 90 central banks are engaged in DLT discussions, including implications of a central bank issued digital currency.^[35]

• Hong Kong’s Octopus card system: Launched in 1997 as an electronic purse for public transportation, is the most successful and mature implementation of contactless smart cards used for mass transit payments. After only 5 years, 25 percent of Octopus card transactions are unrelated to transit, and accepted by more than 160 merchants.^[36]
• London Transport’s Oyster card system: Oyster is a plastic smartcard which can hold pay as you go credit, Travelcards and Bus & Tram season tickets. You can use an Oyster card to travel on bus, Tube, tram, DLR, London Overground and most National Rail services in London.^[37]
• Japan’s FeliCa: A contactless RFID smart card, used in a variety of ways such as in ticketing systems for public transportation, e-money, and residence door keys.^[38]
• Netherlands’ Chipknip: As an electronic cash system used in the Netherlands, all ATM cards issued by the Dutch banks had value that could be loaded via Chipknip loading stations. For people without a bank, pre-paid Chipknip cards could be purchased at various locations in the Netherlands. As of January 1, 2015, you can no longer pay with Chipknip.
• Belgium’s Proton: An electronic purse application for debit cards in Belgium. Introduced in February 1995, as a means to replace cash for small transactions. The system was retired in December 31, 2014.

Canada

The Bank of Canada have explored the possibility of creating a version of its currency on the blockchain.^[41]
The Bank of Canada teamed up with the nation’s five largest banks — and the blockchain consulting firm R3 — for what was known as Project Jasper. In a simulation run in 2016, the central bank issued CAD-Coins onto a blockchain similar Ethereum.^[42] The banks used the CAD-Coins to exchange money the way they do at the end of each day to settle their master accounts.^[42]

China

A deputy governor at the central bank of China, Fan Yifei, wrote that "the conditions are ripe for digital currencies, which can reduce operating costs, increase efficiency and enable a wide range of new applications."^[42] According to Fan Yifei, the best way to take advantage of the situation is for central banks to take the lead, both in supervising private digital currencies and in developing digital legal tender of their own.

Denmark

The Danish government proposed getting rid of the obligation for selected retailers to accept payment in cash, moving the country closer to a "cashless" economy.^[44] The Danish Chamber of Commerce is backing the move.^[45] Nearly a third of the Danish population uses MobilePay, a smartphone application for transferring money.^[44]

Ecuador

A law passed by the National Assembly of Ecuador gives the government permission to make payments in electronic currency and proposes the creation of a national digital currency. "Electronic money will stimulate the economy; it will be possible to attract more Ecuadorian citizens, especially those who do not have checking or savings accounts and credit cards alone. The electronic currency will be backed by the assets of the Central Bank of Ecuador," the National Assembly said in a statement.^[46] In December 2015, Sistema de Dinero Electrónico ("electronic money system") was launched, making Ecuador the first country with a state-run electronic payment system.^[47]

Germany

The German central bank is testing a functional prototype for the blockchain technology-based settlement of securities and transfer of centrally-issued digital coins.

Netherlands

The Dutch central bank is experimenting with a bitcoin-based virtual currency called “DNBCoin”.

Russia

Government-controlled Sberbank of Russia owns Yandex.Money - electronic payment service and digital currency of the same name.

South Korea

South Korea plans national digital currency using a Blockchain.^[52] The chairman of South Korea’s Financial Services Commission (FSC), Yim Jong-yong, announced that his department will "Lay the systemic groundwork for the spread of digital currency."^[52] South Korea has already announced plans to discontinue coins by the year 2020.

Sweden

Sweden is in the process of replacing all of its physical banknotes, and most of its coins by mid 2017. However the new banknotes and coins of the Swedish krona will probably be circulating at about half the 2007 peak of 12,494 kronor per capita. The Riksbank is planning to begin discussions of an electronic currency issued by the central bank to which "is not to replace cash, but to act as complement to it."^[54] Deputy Governor Cecilia Skingsley states that cash will continue to spiral out of use in Sweden, and while it is currently fairly easy to get cash in Sweden, it is often very difficult to deposit it into bank accounts, especially in rural areas. No decision has been currently made about the decision to create "e-krona". In her speech Skingsley states: "The first question is whether e-krona should be booked in accounts or whether the ekrona should be some form of digitally transferable unit that does not need an underlying account structure, roughly like cash." Skingsley also states that: "Another important question is whether the Riksbank should issue e-krona directly to the general public or go via the banks, as we do now with banknotes and coins." Other questions will be addressed like interest rates, should they be positive, negative, or zero?

Switzerland

In 2016, a city government first accepted digital currency in payment of city fees. Zug, Switzerland added bitcoin as a means of paying small amounts, up to 200 SFr., in a test and an attempt to advance Zug as a region that is advancing future technologies. In order to reduce risk, Zug immediately converts any bitcoin received into the Swiss currency.^[55]
Swiss Federal Railways, government-owned railway company of Switzerland, sells bitcoins at its ticket machines.

UK

The Chief Scientific Adviser to the UK government advised his Prime Minister and Parliament to consider using a blockchain-based digital currency.
The chief economist of Bank of England, the central bank of the United Kingdom, proposed abolition of paper currency. The Bank has also taken an interest in bitcoin. In 2016 it has embarked on a multi-year research programme to explore the implications of a central bank issued digital currency.^[35] The Bank of England has produced several research papers on the topic. One suggests that the economic benefits of issuing a digital currency on a distributed ledger could add as much as 3 percent to a country’s economic output.^[42] The Bank said that it wanted the next version of the bank’s basic software infrastructure to be compatible with distributed ledgers.

Ukraine

The National Bank of Ukraine is considering a creation of its own issuance/turnover/servicing system for a blockchain-based national cryptocurrency.^[59] The regulator also announced that blockchain could be a part of a national project called "Cashless Economy".

Hard vs. soft digital currencies

A hard electronic currency is one that does not have services to dispute or reverse charges. In other words, it is akin to cash in that it only supports non-reversible transactions. Reversing transactions, even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult, if not impossible. The advantage of this arrangement is that the operating costs of the electronic currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows the electronic currency transactions to clear instantly, making the funds available immediately to the recipient. This means that using hard electronic currency is more akin to a cash transaction. Examples are Western Union, KlickEx and bitcoin.
A soft electronic currency is one that allows for reversal of payments, for example in case of fraud or disputes. Reversible payment methods generally have a "clearing time" of 72 hours or more. Examples are PayPal and credit card. A hard currency can be softened by using a trusted third party or an escrow service.

Criticism

Many of existing digital currencies have not yet seen widespread usage, and may not be easily used or exchanged. Banks generally do not accept or offer services for them.^[60] There are concerns that cryptocurrencies are extremely risky due to their very high volatility^[61] and potential for pump and dump schemes.^[62] Regulators in several countries have warned against their use and some have taken concrete regulatory measures to dissuade users.^[63] The non-cryptocurrencies are all centralized. As such, they may be shut down or seized by a government at any time.^[64] The more anonymous a currency is, the more attractive it is to criminals, regardless of the intentions of its creators.^[64] Forbes writer Tim Worstall has written that the value of bitcoin is largely derived from speculative trading.^[65] Bitcoin has also been criticised for its energy inefficient SHA-256-based proof of work.



 
A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.^[Cashless societies have existed, based on barter and other methods of exchange, and cashless transactions have also become possible using digital currencies such as bitcoin. However this article discusses and focuses on the term "cashless society" in the sense of a move towards, and implications of, a society where cash is replaced by its digital equivalent - in other words, legal tender (money) exists, is recorded, and is exchanged only in electronic digital form.
Such a concept has been discussed widely, particularly because the world is experiencing a rapid and increasing use of digital methods of recording, managing, and exchanging money in commerce, investment and daily life in many parts of the world, and transactions which would historically have been undertaken with cash are often now undertaken electronically.^[2][3] Some countries now set limits on transactions and transaction values for which non-electronic payment may be legally used.^[4]
The trend towards use of non-cash transactions and settlement began in daily life during the 1990s, when electronic banking became popular. By the 2010s digital payment methods were widespread in many countries, with examples including intermediaries such as PayPal, digital wallet systems operated by companies like Apple, contactless and NFC payments by electronic card or smartphone, and electronic bills and banking, all in widespread use.^[3] By the 2010s cash had become actively disfavored in some kinds of transaction which would historically have been very ordinary to pay with physical tender, and larger cash amounts were in some situations treated with suspicion, due to its versatility and ease of use in money laundering and financing of terrorism, and actively prohibited by some suppliers and retailers,^[5] to the point of coining the expression of a "war on cash".^[6] By 2016 in the UK it is now reported that 1 in 7 people no longer carries or use cash.^[7]
It has also been described as a highly controversial and at times a "sinister" or "creepy" move and as a concept connected to negative interest rates, banking transaction tax and a global taxation regime,^[8][9][10] since such a move would be both potentially useful and potentially socially dangerous, with widespread implications for society. It has potential to be very helpful for central governments and economies, in the context of global negative inflation and quantative easing, and central control of the money supply. However a loss of cash also transfers complete control of transactions, interest, and individual use of money, and information about these, to the nation state and third party providers, since the individual cannot avoid their money being held in an external system capable of regulation and control. Many countries have regulated, restricted, or banned private digital currencies such as Bitcoin. While supposedly helpful to the global economy and in fighting against crime and terrorism,^[11] many concerns have been raised over "dangerous" unintended consequences.^[12] It would mean that negative interest rates can be fully enforced, and money could be controlled in great detail. For example, some kinds of money might be set to "expire" and be worthless if not spent in specific ways or by specific times, or to devalue gradually. It also makes individual savings, and information about individual incomes and transactions, accessible to any party able to access the records - either legitimately (police and tax related) or not (hackers and persons with access to the relevant data), and in this way, it facilitates population surveillance.^[13] It also means that groups, individuals and causes could be deprived of cash by the simple expedient of preventing their access to cashless transaction media

Amount of cash in circulation

Estimated share of payments done by non-cash methods

Country	%
Singapore	61
Netherlands	60
France	59
Sweden	59
Canada	57
Belgium	56
United Kingdom	52
USA	45
Australia	35
Germany	33
Korea	29
Spain	16
Brazil	15
Japan	14
China	10
UAE	8
Taiwan	6
Italy	6
South Africa	6
Poland	5
Russia	4
Mexico	4
Greece	2
Colombia	2
India	2
Kenya	2
Thailand	2
Malaysia	2
Saudi Arabia	1
Peru	1
Egypt	1
Indonesia	0
Nigeria	0

Even though cashless society is widely discussed most countries are increasing their currency supply. The table below is taken from the red books for members of the Bank for International Settlements, which includes most of the major fiat currencies of the world. Exceptions are South Africa whose supply of banknotes fluctuates wildly compared to most nations and Sweden which is drastically reducing its currency supply since 2007,^[15] The values in the table are "per capita" so they already are scaled to population changes. But even the smallest increases of 3% per year are much higher than any possible GDP growth.

Banknotes and coin in circulation at end of year
Values are expressed in native currency and are total value per capita

Country	Avg. year	2011	2012	2013	2014	2015
Turkey	12.1%	751	815	993	1,115	1,332
Korea	11.9%	975,301	1,084,361	1,259,466	1,483,891	1,711,506
Mexico	8.0%	7,017	7,270	7,802	8,934	10,303
India	7.9%	₹8,871	₹9,696	₹10,546	₹11,431	₹12,965
Brazil	6.0%	R$825	R$941	R$1,016	R$1,091	R$1,103
Hong Kong SAR	6.0%	37,962	42,063	47,110	48,649	50,763
Singapore	5.5%	5,301	5,481	5,863	6,292	6,943
Saudi Arabia	5.4%	4,928	5,234	5,547	5,879	6,407
United States	5.1%	$3,453	$3,725	$3,926	$4,218	$4,433
Switzerland	4.4%	7,401	8,091	8,495	8,622	9,169
Russia	3.8%	₽48,284	₽53,598	₽57,942	₽61,523	₽58,270
Euro Area	3.8%	€2,721	€2,787	€2,913	€3,089	€3,280
Australia	3.8%	$2,639	$2,739	$2,873	$2,999	$3,175
Canada	3.2%	$1,937	$1,995	$2,058	$2,134	$2,271
Japan	3.2%	¥692,858	¥715,452	¥744,471	¥769,088	¥811,266
United Kingdom	3.2%	£913	£948	£968	£1,019	£1,067
South Africa	-3.7%	R2,137	R3,021	R2,253	R2,521	R1,765
Sweden	-6.9%	10,515kr	10,059kr	8,849kr	8,578kr	7,362kr

Cashless transactions vs reduced cash

A common measure of how close to a "cashless society" a country is becoming is some measure of the number of cashless payments or person to person transactions are done in that country. For instance the Nordic countries conduct more cashless transactions than most Europeans.
Across the 33 countries covered in the European Payment Cards Yearbook 2015-16, the average number of card payments per capita per year is 88.4. In comparison, the average Dane makes 268.6 card payments each year, the average Finn 243.6, the average Icelander 375.5, the average Norwegian 353.7 and the average Swede 270.2. This makes card payments in the Nordics two-and a-half to four times higher than the European average. ^[16]
But cash can also function as a "store of value" just like commodities like diamonds, gold, silver, and platinum or real estate and antiques. Levels of cash in circulation can widely differ among two countries with similar measure of cashless transactions. For example, Denmark has more than double the amount of cash in circulation as Sweden and a considerably higher percent in the largest denomination banknote, the 1000kr bill.
South Korea has made the decision to end coins as legal tender by 2020. So if you conduct an all cash transaction you must forego any change in amounts of less than the value of the smallest banknote, ₩1000, or slightly less than US$1. This change will undoubtedly greatly increase the number of electronic transactions in the country, but the wide circulation of the ₩50,000 bill, the largest denomination banknote, will mean that citizens can still easily use cash as a convenient store of value.
The largest denomination banknote of any currency is often associated with criminal activity, counterfeiting, or tax evasion. The United Kingdom declared only banknotes of 5 pounds or less were legal tender after WWII because of fear of Nazi counterfeiting. In 1969 in the USA the government declared that banknotes of value over $100 would remain legal tender, but any notes in government hands would be destroyed and that no new notes of those denominations would be printed in the future. Such notes were last printed in the USA in 1945. Canada did the same thing with the CAD$1000 banknote in the year 2000. Sweden printed 10,000kr banknotes in 1939 and 1958 but declared them invalid after 31 December 1991. Singapore has recently announced that they would no longer produce the SGD$10,000 banknote. The Euro Area has announced that the €500 denomination banknote would not be included in the next series of banknotes. The ECB has not announced if it intends to reduce the amount of cash in circulation, or to simply replace that value with smaller denominations.



   XXX  .  V000000  THE FINTECH PROFITABILITY REPORT: Why fintechs are struggling to turn a profit, and the hurdles they must overcome to see success . 


Most fintechs, even the unicorns, aren't profitable.
Despite having innovative ideas and live products that are successfully disrupting the financial services industry, these fintechs' business models are increasingly proving to be fundamentally flawed.

In a new report, BI Intelligence explores the reasons why fintechs are struggling to turn a profit, providing examples of the unique problems each segment of fintech faces. We also outline what some firms are doing to overcome these challenges, and highlight the key factors to be considered by fintechs, and their investors, if they want to reach profitability.

Here are some of the key takeaways from the report:

• Even the largest fintechs have failed to achieve meaningful profits. For example, British unicorns Transferwise and Funding Circle have seen ever-increasing losses since launch — in the latter's case to the tune of £37 million ($48 million) in its most recent filing, and are only now approaching profitability.
• The profitability question is becoming increasingly important. That's due to a combination of factors including declining VC investment in the sector and increasing pressure from existing investors to see returns. 
• Not all fintechs want to turn a profit, but those that do are facing significant challenges. Obstacles to profitability affect all fintech segments including neobanking, robo-advising, money transfer, and marketplace lending.
• Forced to adapt their models, fintechs are employing multiple tactics to reach profitability. These include partnerships, diversification of funding sources, acting as third-party suppliers to other firms, adding new products, and seeking global expansion.
• There a number of considerations that fintechs and their investors must make, and several actions they must take, to get on the path to profitability. These include deciding whether to focus on scale, establishing a stable business plan, and assessing the benefits of varied funding sources.

 In full, the report:

• Explains why the profitability question is increasingly being raised.
• Outlines why fintechs in different segments are failing to turn a profit.
• Gives examples of just how large some fintechs' losses are. 
• Explores how fintechs are striving to solve the profitability problem.
• Outlines vital considerations for fintechs and their investors.

THE EVOLUTION OF ROBO-ADVISING REPORT: How automated investment products are disrupting and enhancing the wealth management industry

 

                     

How to Build a Robo Advisor: Advice for Starting a Robo Advisory

 

MyPrivateBankingWith the tremendous growth in robo advisor assets under management (AUM), financial institutions are scrambling to figure out how to build and become a robo advisor.
Starting a robo advisor service combines financially savvy with big data analytics, as well as a comprehensive understanding to how robo advisors work.

How Do Robo Advisors Work?

Robo advisors are platforms that leverage algorithms to handle users' investment platforms. These services analyze each customer's current financial status, risk aversion, and goals. From here, they recommend the best portfolio of stocks available based on that data.
And these automated financial services are poised to transform the tremendous worldwide wealth management industry. 
MyPrivateBanking's report, Robo Advisor 3.0, takes an in-depth look at the basic challenge of every robo advisor: how to craft a presence that succeeds in convincing website visitors to sign up as investors and then remain on board.

In this data-driven assessment, the report looks at the characteristics, business models, and strengths and weaknesses of the top robo advisors around the world. The research was conducted on a total of 76 active robo advisors worldwide - 29 in the U.S. and Canada, 38 in seven European countries and nine in the Asia-Pacific region. We've compiled a full list of robo advisors analyzed below.
The exhaustive report provides comprehensive answers and data on how to optimize the individual onboarding stages (How it works, Client Assessment, Client Onboarding, Communication and Portfolio Reporting) and details five best practices for each stage. Furthermore, the report provides strategies to appeal to different segments such as Millennials, baby boomer investors approaching retirement, and high net worth individuals (HNWIs), and analyzes the impact of new technologies.
The report provides comprehensive analysis and data-driven insights on how to utilize robo advisors to win and keep clients:

• What a robo advisor platform should offer to successfully convert prospects into happy clients.
• Which robo advisor features work and why.
• What are best practices for the different stages in the digital customer journey.
• How long clients need to onboard on the surveyed robo advisors and which specialized offers are given.
• What the client assessment process should include 
• How client communication should be (inbound for customer service and outbound for news, education and commentary).
• What good portfolio reporting looks like, so that it meets the information needs of the customer.
• How B2B providers are positioned in the development of robo advisory services and what they offer.
• How robo advisors should adopt their strategies to appeal to different segments such as Millennials, baby boomer investors approaching retirement, and high net worth individuals (HNWIs).
• Which robo advisors provide specialized options such as micro-investing, rewards schemes or hedging strategies, and in what manner.
• What the impacts of new technologies are, such as the use of artificial intelligence for client interaction and narrative generation on the robo advisor model.
• How the future of digital success will look for robo advisors.
• Appendix containing data on the web presences of more than 70 robo advisors alongside the digital customer journey process.
• And much more.

 

Analyzed robo advisors in this report include:

North America: Acorns, Asset Builder, Betterment, Blooom, Bicycle Financial, BMO SmartFolio, Capital One Investing, Financial Guard, Flexscore, Future Advisor, Guide Financial, Hedgeable, iQuantifi, Jemstep, Learnvest, Liftoff, Nest Wealth, Personal Capital, Rebalance IRA, Schwab Intelligent Portfolios, SheCapital, SigFig, TradeKing Advisors, Universis, Wealthbar, Wealthfront, Wealthsimple, Wela, Wisebanyan 
Europe: AdviseOnly, Advize, comdirect, Easyfolio, EasyVest, ETFmatic, Fairr.de, FeelCapital, Fiver a Day, Fundshop.fr, GinMon, Investomat, KeyPlan, KeyPrivate, Liqid, Marie Quantier, Money on Toast, MoneyFarm, Nutmeg, Parmenion, Quirion, rplan, Scalable Capital, Simply EQ, Sutor Bank, Swanest, SwissQuote ePrivateBanking, True Potential Investor, True Wealth, Vaamo, VZ Finanz Portal, Wealth Horizon, Wealthify, WeSave, Whitebox, Yellow Advice, Yomoni, Zen Assets.
Asia-Pacific: 8 Now!, Ignition Direct & Ignition Wealth, InvestSMART, Mizuho Bank Smart Folio, Movo, Owners Advisory, QuietGrowth, ScripBox, StockSpot

Here's how you get this exclusive Robo Advisor research:MyPrivateBanking

To provide you with this exclusive report, MyPrivateBanking has partnered with BI Intelligence, Business Insider's premium research service, to create The Complete Robo Advisor Research Collection.
If you’re involved in the financial services industry at any level, you simply must understand the paradigm shift caused by robo advisors.
Investors frustrated by mediocre investment performance, high wealth manager fees and deceptive sales techniques are signing up for automated investment accounts at a record pace.
And the robo advisor field is evolving right before our eyes. Firms are figuring out on the fly how to best attract, service and upsell their customers. What lessons are they learning? Who’s doing it best? What threats are traditional wealth managers facing? Where are the opportunities for exponential growth for firms with robo advisor products or models?

 

                      XXX  .  V000000 Profit and Loss Statement (P&L)

What is the 'Profit and Loss Statement (P&L)'

A profit and loss statement (P&L) is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. These records provide information about a company's ability – or lack thereof – to generate profit by increasing revenue, reducing costs, or both. The P&L statement is also referred to as "statement of profit and loss", "income statement," "statement of operations," "statement of financial results," and "income and expense statement."

BREAKING DOWN 'Profit and Loss Statement (P&L)'

The profit and loss statement, commonly referred to as the income statement, is one of three financial statements every public company issues quarterly and annually, along with the balance sheet and the cash flow statement. The income statement, like the cash flow statement, shows changes in accounts over a set period of time. The balance sheet, on the other hand, is a snapshot, showing what is owned and owed at a single moment. It is important to compare the income statement with the cash flow statement, since under the accrual method of accounting, revenues and expenses can be logged before cash actually changes hands.
The income statement follows a general form as seen in the example below. It begins with an entry for revenue, known as the "top line," and subtracts the costs of doing business, including cost of goods sold, operating expenses, tax expense and interest expense. The difference, known as the bottom line, is net income, also referred to as profit or earnings. Many templates for creating a personal or business profit and loss statement can be found online for free.
It is important to compare income statements from different accounting periods, as the changes in revenues, operating costs, research and development spending and net earnings over time are more meaningful than the numbers themselves. For example, a company's revenues may be growing, but its expenses might be growing at a faster rate.
Find out which online broker offers financial statements for a specific stock by reading Investopedia's broker reviews.
Below is Caterpillar Inc's (CAT) income or profit and loss statement for 2013 and 2014 (all figures in millions of USD except per share data):

Twelve Months Ended December 31,	2014	2013
Sales and revenues:
Sales of Machinery, Energy & Transportation	52,142	52,694
Revenues of Financial Products	3,042	2,962
Total sales and revenues	55,184	55,656
Operating costs:
Cost of goods sold	39,767	40,727
Selling, general and administrative expenses	5,697	5,547
Research and development expenses	2,135	2,046
Interest expense of Financial Products	624	727
Other operating (income) expenses	1,633	981
Total operating costs	49,856	50,028
Operating profit	5,328	5,628
Interest expense excluding Financial Products	484	465
Other income (expense)	239	(35)
Consolidated profit before taxes	5,083	5,128
Provision (benefit) for income taxes	1,380	1,319
Profit of consolidated companies	3,703	3,809
Equity in profit (loss) of unconsolidated affiliated companies	8	(6)
Profit of consolidated and affiliated companies	3,711	3,803
Less: Profit (loss) attributable to noncontrolling interests	16	14
Profit [footnote 1: Profit attributable to common shareholders]	3,695	3,789
Profit per common share	5.99	5.87
Profit per common share – diluted [footnote 2: Diluted by assumed exercise of stock-based compensation awards using the treasury stock method]	5.88	5.75
Weighted-average common shares outstanding (millions)
- Basic	617.2	645.2
- Diluted [see footnote 2]	628.9	658.6
Cash dividends declared per common share	2.70	2.32

When companies release quarterly reports, the headline numbers are revenues and earnings per share (EPS); the latter is often adjusted for one-time events such as, in Caterpillar's case, restructuring costs (adjusted diluted EPS for 2014 was $6.38). The market's immediate reaction has more to do with how these numbers compare to analysts' expectations than whether they represent sustainable growth. Even so, investors—particularly those with longer time horizons—are wise to dig deeper into a company's income statement.
We can see that revenues from Caterpillar's core business fell from 2013 to 2014, leading to a 0.85% decrease in total revenues, although its financial products division grew slightly. The cost of revenue ("cost of goods sold" plus "interest expense of Financial Products") decreased at a faster rate, by 2.56%, easing the blow to the bottom line. Interest expenses rose slightly, suggesting we take a look at the company's debt on its balance sheet. We can see that operating profit, profit before tax and net earnings all fell, although net earnings fell faster (-2.48%) than profit before tax (-0.88%); this is largely because income taxes rose by $61 m, despite the decrease in total revenue. Although Caterpillar's net earnings shrank from 2013 to 2014, diluted earnings per share rose. The reason is that outstanding shares decreased by 28 m, reflecting an aggressive stock buyback program Caterpillar pursued in 2014.
The income statement can be used to calculate a number of metrics, including the gross profit margin, the operating profit margin, the net profit margin and the operating ratio. Together with the balance sheet and cash flow statement, the income statement provides an in-depth look at a company's financial performance and position.

What is a Profit and Loss Report?

A Profit and Loss Report (P&L) is a report that shows your total Income and your total Expenses in a specific period of time. It’s a really useful report as it shows you your net Profit (or loss) based on your Income & Expenses, and that can be used to come up with some cost cutting strategies!
Profit & Loss Reports go by a few names, so it might be referred to as an “Income Statement”, a “Statement of Operations”, a “Statement of Financial Results” and “Income & Expense Statement”. Let’s stick with Profit & Loss Report.
You can run your profit and loss report by going to Report —> Accounting Report —> Profit and Loss

 

There are some things you’re able to change when running the Profit & Loss Report:

• Period - You can view the Profit & Loss Report in either Yearly (12 months) or Quarterly (3 months) periods
• Ending - The last month that will appear in the report.
• Revenue - You can run the report based on Collected (Cash-based), which will look at all money you’ve actually received (and the date you received that payment), or Billed (Accrual), which will show you all non-Draft Invoices sent out (paid or not), using the Invoice date.
• Expenses - You can choose to include or exclude taxes incurred for your Expenses.
  • Note: this option only toggles Expenses, as taxes are never included in the Income section of a profit and loss report.

The Income section of the report will display your monthly sales.
The Cost of Goods Sold will display the sum of Expenses that have been re-billed to your Clients. Think of your Costs of Goods Sold as any Expense that directly generated Income for you. If you have an Expense category that is not directly assigned as a billable Expense to your Client (but needs to be calculated as an overhead cost), you can click on the “edit” button to include those Categories.
The Gross Profit will calculate the net profit (or loss) based on the revenue and cost of good sold.
The Less Expenses section will display other Expenses that are not considered as Costs of Goods. The sum of your monthly Expenses are easily viewed in the Total Expenses row.
Net Profit is the total amount earned (or lost) after Expenses. It is worked out by subtracting your Total Expenses from your Gross Profit.

How does the Profit & Loss Report handle multiple currencies?
If you’ve sent Invoices in multiple currencies, the P&L Report will break down your Sales by currency, automatically applying an Exchange Rate. That Exchange rate is an average for the report period, taken from the Bank of Canada.
Because Deposits are made to our prior to the delivery of goods / services (in most cases), they are not initially recorded as Income on this report. Once your Client has made an additional payment towards the remaining balance of the Invoice, all payments will be displayed on this report as Income
Sales Taxes are not included in the Profit & Loss Report, so you don’t overstate your Income. This information can be pulled from the Tax Summary report and your Invoice Details report  .


Profit and Loss: Formulas, Shortcuts and Tricks 

to provide you a list of Profit and Loss Formulas, Shortcuts and Tricks that you can use to solve questions. Remember, the purpose here is to just to provide you a handy list of results that you can use. This article does not provide any derivations or detailed concepts for this topic. The first four articles for this topic provide you the same. You the table of contents given below to go through these articles.
1. One can generate a profit only if Selling Price> Cost Price
2. One generates a loss when Selling Price < Cost Price.
3. Profit = Selling Price – Cost Price
%profit = {(Selling Price – Cost Price)/Cost Price} x 100
4. Loss = Cost Price – Selling Price
%Loss = {(Cost Price – Selling Price)/Cost Price} x 100
5. Sale price :- If there is a profit of P %,
Cost Price = C
Then SP = {(100+P)/100}xC
6. If there is a loss of L %,
Cost Price = C
Then
SP = {(100-L)/100}xC
7. Cost price :-
If there is a profit of P %,
Cost Price = C
Sale price= SP
Then C = {100/(100+p)} x SP
If there is a loss of L %,
Then
C = {100/(100-L)}xSP
8. A dishonest dealer claims to sell his goods at cost price ,but he uses a weight of lesser weight .Find his gain%.

9. A shopkeeper sells an item at a profit of x % and uses a weight which is y % less .find his total profit

10. When dealer sells goods at loss on cost price but uses less weight .

11. A dishonest dealer sells goods at x % loss on cost price but uses a gm instead of b gm . his profit or loss percent :-

Note :- profit or loss will be decided according to sign .if +ive it is profit ,if –ve it is loss .
12.  If the price of an item increases by r%  , then the reduction in consumption so that  expenditure remains the same  ,is

13. If the price of a commodity decreases by r% then increase in consumption , so as not to decrease expenditure on this item is

14. A reduction of x% in price enables a person to buy y kg more for Rs. A. Then the

15. When there are two successive profits of x% and y% then the net percentage profit =[x+y+xy/100]
When there is a profit of x% and loss of y% then net percentage profit or loss = [x – y – xy/100]
Note: If the final sign in the above expression is positive then there is net profit but if it is negative then there is net loss.
16. A sells goods to B at a profit of x% andB sells it to C at a profit of y%. If C pays RsP for it,then the cost price for A is
Note:- for loss replace plus sign with minus .
17. When each of the two things is sold at the same price,and a profit of p% is made on the first and a loss of L% is made on the second,then the percentage gain or loss is .

18. If profit percentage and loss percentage are equal, put P=L
=>   %loss = p² /100
19.

This completes this list of Profit and Loss formulas, shortcuts and tricks. 


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