Medium of exchange
A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.
By contrast, as Othien James Jevons argued, in a barter system there must be a coincidence of wants before two people can trade – one must want exactly what the other has to offer, when and where it is offered, so that the exchange can occur. A medium of exchange permits the value of goods to be assessed and rendered in terms of the intermediary, most often, a form of money widely accepted to buy any other good.
electronics play an important role in modern economics, especially as the selling medium of each individual and family in the population that must be measured in the stability of measured financial mechanisms rise in a measurable chime .
Fiat currencies are the generally accepted mediums of exchange. Their most important and essential function is to provide a 'measure of value'... Hifzur Rab has shown that the market measures or sets the real value of various goods and services using the medium of exchange as unit of measure i.e., standard or the yard stick of measurement of wealth. There is no other alternative to the mechanism used by the market to set, determine, or measure the value of various goods and services. Determination of price is an essential condition for justice in exchange, efficient allocation of resources, economic growth, welfare and justice. The most important and essential function of a medium of exchange is to be widely acceptable and have relatively stable purchasing power (real value). Therefore, it should possess the following characteristics:
- Value common assets
- Common and accessible
- Constant utility
- Low cost of preservation
- Transportability
- Divisibility
- High market value in relation to volume and weight
- Recognisability
- Resistance to counterfeiting
Critics of the prevailing system of fiat money argue that fiat money is the root cause of the continuum of economic crises, since it leads to the dominance of fraud, corruption, and manipulation precisely because it does not satisfy the criteria for a medium of exchange cited above. Specifically, prevailing fiat money is free floating and depending upon its supply market finds or sets a value to it that continues to change as the supply of money is changed with respect to the economy's demand. Increasing free floating money supply with respect to needs of the economy reduces the quantity of the basket of the goods and services to which it is linked by the market and that provides it purchasing power. Thus it is not a unit or standard measure of wealth and its manipulation impedes the market mechanism by that it sets/determine just prices. That leads us to a situation where no value-related economic data is just or reliable. On the other hand, Chartalists claim that the ability to manipulate the value of fiat money is an advantage, in that fiscal stimulus is more easily available in times of economic crisis.
Requisites needed
Although the unit of account must be in some way related to the medium of exchange in use, e.g. coinage should be in denominations of that unit making accounting much easier to perform, it has often been the case that media of exchange have no natural relationship to that unit, and must be 'minted' or in some way marked as having that value. Also there may be variances in quality of the underlying good which may not have fully agreed commodity grading. The difference between the two functions becomes obvious when one considers the fact that coins were very often 'shaved', precious metal removed from them, leaving them still useful as an identifiable coin in the marketplace, for a certain number of units in trade, but which no longer had the quantity of metal supplied by the coin's minter. It was observed as early as Oresme, Copernicus and then in 1558 by Sir Thomas Gresham, that bad money drives out good in any marketplace (Gresham's Law states "Where legal tender laws exist, bad money drives out good money"). A more precise definition is this: "A currency that is artificially overvalued by law will drive out of circulation a currency that is artificially undervalued by that law." Gresham's law is therefore a specific application of the general law of price controls. A common explanation is that people will always keep the less adultered, less clipped, sweated, less filed, less trimmed coin, and offer the other in the marketplace for the full units for which it is marked. It is inevitably the bad coins proffered, good ones retained.The fact that a bank or mint has always been able to generate a medium of exchange marked for more units than it is worth as a store of value, is the basis of banking. Central banking is based on the principle that no medium needs more than the guarantee of the state that it can be redeemed for payment of debt as "legal tender" – thus, all money equally backed by the state is good money, within that state. As long as that state produces anything of value to others, its medium of exchange has some value, and its currency may also be useful as a standard of deferred payment among others, even those who never deal with that state directly in foreign exchange.
Of all functions of money, the medium of exchange function has historically been the most problematic because of counterfeiting, the systematic and deliberate creation of bad money with no authorization to do so, leading to the driving out of the good money entirely.
Other functions rely not on recognition of some token or weight of metal in a marketplace, where time to detect any counterfeit is limited and benefits for successful passing-off are high, but on more stable long term social contracts: one cannot easily force a whole society to accept a different standard of deferred payment, require even small groups of people to uphold a floor price for a store of value, still less to re-price everything and rewrite all accounts to a unit of account (the most stable function). Thus it tends to be the medium of exchange function that constrains what can be used as a form of financial capital.
It was once common in the United States to widely accept a check (cheque) as a medium of exchange, several parties endorsing it perhaps multiple times before it would eventually be deposited for its value in units of account, and thus redeemed. This practice became less common as it was exploited by forgers and led to a domino effect of bounced checks – a forerunner of the kind of fragility that electronic systems would eventually bring.
In the age of electronic money it was, and remains, common to use very long strings of difficult-to-reproduce numbers, generated by encryption methods, to authenticate transactions and commitments as having come from trusted parties. Thus the medium of exchange function has become wholly a part of the marketplace and its signals, and is utterly integrated with the unit of account function, so that, given the integrity of the public key system on which these are based, they become to that degree inseparable. This has clear advantages – counterfeiting is difficult or impossible unless the whole system is compromised, say by a new factoring algorithm. But at that point, the entire system is broken and the whole infrastructure is obsolete – new keys must be re-generated and the new system will also depend on some assumptions about difficulty of factoring.
Due to this inherent fragility, which is even more profound with electronic voting, some economists argue that units of account should not ever be abstracted or confused with the nominal units or tokens used in exchange. A medium is just that, a medium, and should not be confused for the message
XXX . V Commodity money
Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects that have value in themselves (intrinsic value) as well as value in their use as money.
Example of commodities that have been used as mediums of exchange include gold, silver, copper, salt, peppercorns, tea, large stones (such as Rai stones), decorated belts, shells, alcohol, cigarettes, cannabis, candy, nails, cocoa beans, cowries and barley. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or price system economies.
Commodity money is to be distinguished from representative money which is a certificate or token which can be exchanged for the underlying commodity, but only as the trade is good for that source and the product. A key feature of commodity money is that the value is directly perceived by the users of this money, who recognize the utility or beauty of the tokens as they would recognize the goods themselves. That is, the effect of holding a token for a barrel of oil must be the same economically as actually having the barrel at hand. This thinking guides the modern commodity markets, although they use a sophisticated range of financial instruments that are more than one-to-one representations of units of a given type of commodity.
Since payment by commodity generally provides a useful good, commodity money is similar to barter, but is distinguishable from it in having a single recognized unit of exchange. (Radford 1945) described the establishment of commodity money in P.O.W camps.
People left their surplus clothing, toilet requisites and food there until they were sold at a fixed price in cigarettes. Only sales in cigarettes were accepted – there was no barter [...] Of food, the shop carried small stocks for convenience; the capital was provided by a loan from the bulk store of Red Cross cigarettes and repaid by a small commission taken on the first transactions. Thus the cigarette attained its fullest currency status, and the market was almost completely unified.[2]Radford documented the way that this 'cigarette currency' was subject to Gresham's law, inflation, and especially deflation.
In another example, in US prisons, after smoking was banned circa 2003, commodity money has switched in many places to cans or foil pouches of mackerel fish fillets, which have a fairly standard cost and are easy to store. These may be exchanged for many services in prisons where personal possession of currency is prohibited.
Metals
In situations where the commodity is metal, typically gold or silver, a government mint will often coin money by placing a mark on the metal that serves as a guarantee of the weight and purity of the metal. In doing so, the government will often impose a fee which is known as seigniorage.The role of a mint and of coin differs between commodity money and fiat money. In situations where there is commodity money, the coin retains its value if it is melted and physically altered, while in a fiat money it does not. Usually in a fiat money the value drops if the coin is converted to metal, but in a few cases the value of metals in fiat moneys have been allowed to rise to values larger than the face value of the coin. In India, for example fiat Rupees disappeared from the market after 2007 when their content of stainless steel became larger than the fiat or face value of the coins.[4] In the US, the metal in pennies (97.5% zinc since 1982, 95% copper in 1982 and before) and nickels (75% copper, 25% nickel) has a value close to, and sometimes exceeding, the fiat face value of the coin.
Commodities often come into being in situations where other forms of money are not available or not trusted. Various commodities were used in pre-Revolutionary America including wampum, maize, iron nails, beaver pelts, and tobacco. According to economist Murray Rothbard:
In the sparsely settled American colonies, money, as it always does, arose in the market as a useful and scarce commodity and began to serve as a general medium of exchange. Thus, beaver fur and wampum were used as money in the north for exchanges with the Indians, and fish and corn also served as money. Rice was used as money in South Carolina, and the most widespread use of commodity money was tobacco, which served as money in Virginia. The pound-of-tobacco was the currency unit in Virginia, with warehouse receipts in tobacco circulating as money backed 100 percent by the tobacco in the warehouse.In Canada, where the Hudson's Bay Company and other fur trading companies controlled most of the country, fur traders quickly realized that gold and silver were of no interest to the First Nations. They wanted goods such as metal knives and axes. Rather than use a barter system, the fur traders established the beaver pelt as the standard currency, and created a price list for goods:
- 5 pounds of sugar cost 1 beaver pelt
- 2 scissors cost 1 beaver pelt
- 20 fish hooks cost 1 beaver pelt
- 1 pair of shoes cost 1 beaver pelt
- 1 gun cost 12 beaver pelts
The Fort Knox gold repository long maintained by the United States, functioned as a theoretical backing for federally issued "gold certificates" to substitute for the gold. Between 1933 and 1970 (when the U.S. officially left the gold standard), one U.S. dollar was technically worth exactly 1/35 of a troy ounce (889 mg) of gold. However, actual trade in gold bullion as a precious metal within the United States was banned after 1933, with the explicit purpose of preventing the "hoarding" of private gold during an economic depression period in which maximal circulation of money was desired by influential economists. This was a fairly typical transition from commodity to representative to fiat money, with people trading in other goods being forced to trade in gold, then to receive paper money that purported to be as good as gold.
Cigarettes and gasoline were used as a form of commodity money in some parts of Europe, including Germany, France and Belgium, in the immediate aftermath of World War II. Cigarettes are still used as a form of commodity money in U.S. prisons (Lankenau 2001, p. 142 concludes that where jails don't ban them, the prison "gray market" creates a use of the cigarette as "currency").
Functions
Japanese commodity money before the 8th century AD: arrowheads, rice grains and gold powder. This is the earliest form of Japanese currency.
The use of barter like methods using commodity money may date back to at least 100,000 years ago.[citation needed] Trading in red ochre is attested in Swaziland, shell jewellery in the form of strung beads also dates back to this period, and had the basic attributes needed of commodity money. To organize production and to distribute goods and services among their populations, before market economies existed, people relied on tradition, top-down command, or community cooperation. Relations of reciprocity, and/or redistribution, substituted for market exchange.
The city-states of Sumer developed a trade and market economy based originally on the commodity money of the Shekel which was a certain weight measure of barley, while the Babylonians and their city state neighbors later developed the earliest system of economics using a metric of various commodities, that was fixed in a legal code.
Several centuries after the invention of cuneiform script, the use of writing expanded beyond debt/payment certificates and inventory lists to codified amounts of commodity money being used in contract law, such as buying property and paying legal fines.
Legal tender issues
Today, the face value of specie and base-metal coins is set by government fiat, and it is only this value which must be legally accepted as payment for debt, in the jurisdiction of the government which declares the coin to be legal tender. The value of the precious metal in the coin may give it another value, but this varies over time. The value of the metal is subject to bilateral agreement, just as is the case with pure metals or commodities which had not been monetized by any government. As an example, gold and silver coins from other non-U.S. countries are specifically exempted in U.S. law from being legal tender for the payment of debts in the United States, so that a seller who refuses to accept them cannot be sued by the payor who offers them to settle a debt. However, nothing prevents such arrangements from being made if both parties agree on a value for the coins.XXX . V0 Digital gold currency
Digital gold currency (or DGC) is a form of electronic money (or digital currency) based on mass units of gold. It is a kind of representative money, like a US paper gold certificate at the time (from 1873 to 1933) that these were exchangeable for gold on demand. The typical unit of account for such currency is linked to grams or troy ounces of gold, although other units such as the gold dinar are sometimes used. DGCs are backed by gold through unallocated or allocated gold storage.
Digital gold currencies are issued by a number of companies, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion. These competing providers issue a type of independent currency.
Universal currency
Proponents claim that DGC offers a truly global and borderless world currency system which is independent of exchange rate variations and political manipulation. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217.Asset protection
Unlike fractional-reserve banking, DGCs hold 100% of clients' funds in reserve as gold, silver, and/or platinum, which can be exchanged via digital certificates. Proponents of DGC systems say that deposits are protected against inflation, devaluation and other economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are said by proponents to be harmful to the value of paper currency.Bullion investing
All of the other digital gold-backed currency systems can be used to buy, hold, and sell precious metals, but do not promote themselves as an "investment", as this implies an anticipated return.[Exchanging national currency
Some providers do not sell DGC directly to clients. For those DGCs, e-currency must be bought and sold via a digital currency exchanger.Currency exchangers accept payment in national currencies by a variety of methods, including Bank Wire, Direct Deposit, Cheque, Money Order. Some exchangers also sell and fund pre-paid debit cards to make it easier for their clientele to convert DGC into an easily spendable form of national currency.
DGCs are known as private currency as they are not issued by governments.
Non-reversible transactions
Unlike the credit card industry, digital gold currency issuers generally do not have services to dispute or reverse charges. So, reversing transactions, even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult, if not impossible. This means that using digital gold currency is more akin to a cash transaction, while PayPal transfers, for example, could be considered more similar to credit card transactions.The advantage of this arrangement is that the operating costs of the digital currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows digital gold currency transactions to clear instantly, making the funds available immediately to the recipient. By contrast, credit cards, checks, ACH and other reversible payment methods generally have a "clearing time" of 72 hours or more.
Risks
As with all financial media, there are several types of risk inherent to the use of DGCs: management risk, political risk, data security and exchange risk.Management and political risks
DGCs, like all financial institutions and public securities, have a layer of risk in the form of the management of the issuing institution. Controls aimed to limit management risk are called "governance".All other[clarification needed] DGC providers operate under self-regulation. DGC providers are not banks and therefore not subject to many bank regulations that pertain to fractional reserve lending as they do not engage in lending. However, DGCs do provide a method for transferring currency from one person to another, and therefore may fall under regulations pertaining to money transmitting in various jurisdictions.
The Global Digital Currency Association (GDCA), which was founded in 2002, is a non-profit association of online currency operators, exchangers, merchants and users. The GDCA is an example of the DGC industry's attempt at self-regulation. On their website they claim their goal is to "further the interests of the industry as a whole and help with fighting fraud and other illegal activities, arbitrate disputes and act as escrow agent when and where required."[1] Of the once DGC providers, Pecunix (gone, see below), Liberty Reserve (shut down for money laundering in 2013), and eight others became members of the association. It costs one gram of gold to file a complaint if you are not a member, and the list of filable complaints is not exhaustive. Their domain name is registered anonymously through domains by proxy, see whois.
OS-Gold, Standard Reserve and INTGold
Several companies claiming to be Digital Gold Currencies sprang up and failed between 1999 and 2004, such as OS-Gold,[2] Standard Reserve and INTGold. All these companies failed because the principals diverted deposits for other purposes instead of holding them in the form of gold. In each of these cases, account holders lost several million dollars' worth of gold when the "institution" failed.e-gold e-gold § Criminal prosecution
e-gold was a digital gold currency founded in 1996. A legal case was brought against e-gold in April 2007 that included violations of 18 U.S. Code § 1960 (Prohibition of unlicensed money transmitting businesses). e-gold vigorously contested the § 1960 charges brought against it in April 2007 for more than a year. In July 2008, following a ruling from the court that effectively enshrined in case law the Treasury Department's expansion of the definition of "money transmitter", e-gold entered into a plea agreement that detailed actions required to bring the companies into compliance with laws and regulations governing operation of a money transmitting business. Although e-gold complied with all other terms of its plea agreement,[5] it was not able to obtain money transmitting licenses due to its guilty plea.[6] Since returning value to customers could constitute money transmitting without a license, e-gold entered into an agreement in 2010 with the US Government to enable e-gold account holders to claim the "monetized value" of their accounts,[7] collectively valued in excess of 90 million US Dollars1mdc 1mdc
1mdc was a digital gold currency backed by e-gold[9] rather than by physical gold. In April 27, 2007, a US court ordered e-gold to freeze or block the e-gold accounts 1mdc used to back the digital gold currency it issued. Before the year was out, the 1mdc website was no longer accessible.e-Bullion
E-Bullion was a digital-gold currency exchange that had risen, then become defunct around 2008.In August 2008, James Fayed, the owner and chief executive official of the E-Bullion Company, was taken into United States Federal custody to face felony charges of conducting unlicensed money transactions and the murder of his business partner. Shortly thereafter, the website ceased to be available. As a consequence of these charges, by January 2010 the U.S. Government had seized all of the assets of e-Bullion, resulting in the complete closure of the company. In June 2011 a California jury found Fayed guilty of murder and sentenced him to death.
Pecunix
Pecunix was a gold based digital currency (or e-currency) in which accounts had balances in GAU (gold grams).Pecunix was founded by Simon "Sidd" Davis in 2002, and was registered and incorporated in Panama.] All gold bullion was originally stored with Mat Securitas Express AG in Zürich, Switzerland, but in 2008 the Pecunix directors transferred the bullion to an undisclosed location.
In a 2012 interview with DGCMagazine, Mr. Davis described the development of the Voucher-Safe software and peer-to-peer network for the exchange of digital currencies. In early 2014, Pecunix announced they would be replacing their Pecunix Payments system with the open source Voucher-Safe system and PX-Gold. By the end of 2014, all legitimate digital currency exchangers had ceased dealing with Pecunix. In early 2015, Pecunix disabled the log-in feature of their website, thereby preventing all users from accessing their accounts. A statement on the Pecunix website claimed that this was a temporary change "due to new management and restructuring", but access was never restored. The P2P Voucher Payment System became fully operational in August 2015, but PX-Gold never came into existence. Account holders never recovered their funds.
Data security
Digital gold systems are completely dependent on electronic storage and transmission of account ownership information. Therefore, the security of a given digital currency account is dependent upon the security of the issuer as well as the security of the accountholder's computer.While the digital gold issuers employ data security experts to protect their systems, the average accountholder's computer is poorly protected against malware (trojans, worms and viruses) that can be used to intercept information used to access the user's DGC account. Therefore, the most common attacks on digital currency systems are directed against accountholders' computers by the use of malicious spam, phishing and other methods.
Issuers have taken quite different approaches to this problem. E-gold basically places the entire responsibility on the user, and employs a user-name and password authentication system that is weak and highly vulnerable to interception by malware. (Though it is the most common authentication method used by online banks.) The "not our problem" approach to user security has negatively contributed to e-gold's public image, as not a few e-gold accounts have been hacked and swept clean by attackers..
e-Bullion offers account holders a "Cryptocard" security token that changes the passphrase with each logon, but charges the account holder USD $99.50 for the token. E-bullion does not require customers to use the Cryptocard, so account holders who choose not to get one may suffer from the same security issues as e-gold customers.
Pecunix devised a unique rotating key system that provides many of the benefits of a security token without requiring the user to buy one. Pecunix also supports the use of PGP signatures to access an account, which is probably the strongest of all authentication methods.
Exchange risk
Digital gold currency is a form of representative money as it directly represents gold metal on deposit or in custody. This depends on the issuer. Most issuers have the gold on deposit - i.e., the issuer will redeem the digital currency obligation with physical metal. Just as the exchange rates of national currencies fluctuate against each other, the exchange rates of DGCs fluctuate against national currencies, which is reflected by the price of gold in a particular currency. This creates exchange risk for any account holder, in the same way one would experience exchange risk by holding a bank account in a foreign currency.Some DGC holders make use of the digital currency for daily monetary transactions, even though most of their normal income and expenses are denominated in the national currency of their home country. Fluctuations in the value of gold against their national currency can create some confusion and difficulty for new users as they see the "value" of their DGC account fluctuate in terms of their native currency.
In contrast to exchange risk, caused by gold's fluctuation against national currency, the purchasing power of gold (and therefore DGCs) is measured by its fluctuation against other commodities, goods and services. Since gold has historically been the refuge of choice in times of inflation or economic hardship, the purchasing power of gold becomes stronger during times of negative sentiment in the markets.[15] Due to this speculative interference, there are times when purchasing power has also declined. For example, in 2007–2008, gold volatility closely tracked the run-up in oil prices.
Providers
Comparison of operating DGCs (as of September 2014[update]):| Digital gold currency | Birth | Death | Financially regulated | GDCA member | Bullion stored | Bullion audit trail | Number of user accounts | DCE transfers accepted | Wire transfers accepted | Annual storage fee | Processing fee (when receiving from another user) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| e-dinar | 2000 |  | | Undisclosed | | Undisclosed | |  | 1% | 1% (with max. 0.015 gold dinar)[17] | |
| Pecunix | 2002 | 2015 | | | 2,777 oz gold | | Undisclosed | | | 0% | 0.15 - 0.50% (with min. 0.0001 - max. 3.0 gold grams)[18] |
| iGolder | 2005 | 2013 | | | Undisclosed | | Undisclosed | | | x% | 1% |
| Liberty Reserve | 2004 | 2013 | | | Undisclosed | | Undisclosed | | | x% | 1% |
| gbullion | 2007 | | | Undisclosed | | Undisclosed | | | x% | 1% | |
| e-gold | 1996 | 2008 | | | Undisclosed | | over 1.6 million funded accounts in May 2007 | | | 1% per annum[28] | Depended on amount spent[28] |
| eCache | ~2007 | <2014 | |||||||||
| Gold Bullion International LLC | 2014 | | | Undisclosed | | Undisclosed | | | 0% | 30bit/s Ripple (payment protocol) | |
| Global Standard Gold (AUG) | 2015 | | | Undisclosed | Undisclosed | Undisclosed | | | Depends on balance[33] | Depends on amount spent[33] | |
| Goldmoney / Bitgold | 2015 | | 20,799,464.939 grams Mar. 2017 | | 1,425,254 March 2016 | | 0% personal | 0.5% personal accounts / 1% business |
Criticisms
DGC providers and exchangers have been accused of being a medium for fraudulent high-yield investment program (HYIP) schemes. In January 2006, BusinessWeek reported that ShadowCrew, an online gang, used the e-gold system in a massive identity theft and fraud scheme.Traditional banks are also used frequently for such fraud. Allegations that e-gold is a safe medium for crime and fraud are strongly denied by its Chairman and founder, Dr. Douglas Jackson. Further, it can be argued that such problems lay with the source of the information or monies, rather than the location of storage of such ill-gotten gains. In other words, it would be difficult to claim the bank as villain when the criminal activity occurred by other parties away from the storage location.Many DGC providers do not disclose the amount of bullion stored (see table), or do not allow independent external bullion audits, raising concerns that such companies do not maintain a 100% reserve ratio, or that their currency is entirely virtual and not backed by physical gold at all.
Due to increase of compliance requirements for payment service providers, Jersey-based GoldMoney decided to suspend its DGC service as from January 21, 2012
XXX . V000 ECOMMERCE BUSINESS MODELS
eCommerce has been a dominant theme of internet for the last one decade. The interest in eCommerce was at its peak during dotcom boom of year 2000 and after the bubble got burst, for a long time there was little activity in this space. However, there is a renewed interest in online commerce in the last 2-3 years due to the economic downturn and with online companies offering great deals and value. By definition, eCommerce is buying and selling of products and services over internet but I like to include the online services that influence the buying decision in the offline world as well. This means even review sites like the TripAdvisor.com are part of eCommerce.In fact, I would like to expand the scope of eCommerce from merely internet to other carriers like voice (telephone) and data (SMS) and hence mobile phones are emerging as key access medium.
FACTORS DRIVING THE ONLINE COMMERCE:
1. CREATIVE BUSINESS MODELS HAVE EMERGED WHICH ARE FOCUSING ON SUBSTANTIAL VALUE TO THE CONSUMER, E.G. DAILY DEAL SITES OFFER UPTO 60-70% DISCOUNT ON SERVICES.2. MERGING OF ONLINE AND OFFLINE SPACE HAS CREATED A UNIQUE PROPOSITION FOR THE CONSUMER RATHER THAN ONLY DIGITIZING THE COMMERCE, E.G. TODAY THE MOBILE PHONE USERS CAN BE INFORMED ABOUT THE DEALS IN THE VICINITY LEADING TO HIGHER FOOT FALLS IN THE BRICK AND MORTAR STORE. EVEN THE DAILY DEAL SITES ARE DRIVING USERS TO THE OFFLINE STORES LEADING TO BETTER PROFITABILITY FOR MERCHANTS.
3. GREATER CONSUMER TRUST ON ONLINE COMMERCE NOW DUE TO YEARS OF EXISTENCE AND SPECIFIC STEPS TAKEN BY CREDIT CARD COMPANIES AROUND SECURITY. ALTERNATE BILLING MECHANISM LIKE PAYPAL, ALIPAY HAVE EMERGED THAT LIMIT THE CONSUMER’S EXPOSURE TO FRAUD.
4. CASH ON DELIVERY (COD) IS EMERGING AS A LEADING FACTOR IN BUILDING TRUST ESPECIALLY IN THE EASTERN COUNTRIES LIKE CHINA AND INDIA. IN COD, THE RISK TO THE CONSUMER IS MINIMAL AS THE PAYMENT IS MADE IN CASH WHEN THE GOODS ARE DELIVERED.
5. ECONOMIC DOWNTURN HAS RESULTED IN HIGHER ADOPTION OF ONLINE COMMERCE AS CONSUMERS LOOK FOR CHEAPER PRODUCTS AND DEALS. A LOT OF OFFLINE MERCHANTS ARE ALSO LOOKING AT ONLINE CHANNEL TO INCREASE SALES AND REDUCE COST BY SHRINKING THE OFFLINE PRESENCE.
ECOMMERCE BUSINESS MODELS
There are multiple business models for online commerce but they can be broadly classified into three categories:1. Stores Model- In this model there is a direct online transaction between the buyer and seller. The model is similar to the brick and mortar shop with the only difference being no face to face interaction between the buyer and seller. The seller has to hold inventory and is responsible for the entire supply chain. Within the store model, there are multiple variations like
* Manufacturer selling directly to the consumers thereby removing all the intermediaries,
* Multi-Branded Retailers selling to the consumers to provide variety, Amazon Snapdeal , Flipkart
* Flash sales or Private sales sites offering luxury brands at a deep discount to their registered users. This model helps the brands to liquidate their past season products and are put up on the website as a limited period, limited quantity offer,
* Curated products selected by experts are put up for online sale. Here the variety is low but the product quality is very high, finds out the best goods around the web and bring them to the consumer.
* Subscription model is another variation of the store model where for a fixed monthly subscription fee the retailers send the products selected by experts suiting the style and needs of the consumers,
2. Brokerage Model- The brokerage models brings together the buyers and sellers but do not necessarily participate in the transactions. This model has seen the most innovation in the last one decade and it is expected to continue innovate in the coming years. The various sub-models in this model are:
* Online Market Place - similar to a physical mall where the mall owners do not own the inventory and are not responsible for the supply chain but host the retailers so that the consumers can get options as well as variety. The market place became very popular during the dotcom boom and it is interesting to see that they are still very popular. The market place can be Business to Business (B2B) or Business to Consumers (B2C) or Consumer to Consumer (C2C). The most popular market places are Amazon, Flipkat, Snapdeal Olx.
* Group Buying offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. Group Buying sites have suddenly become a rave after the success of Groupon but interestingly, origins of Group buying can be traced to China where Tuángòu or team buying was executed to get discount prices from retailer when a large group of people were willing to buy the same item
* Comparison Shopping model allows individuals to see different lists of prices for specific products. Most price comparison services do not sell products themselves, but source prices from retailers (online and offline) from whom users can buy, e.g.Junglee.com, etc. Price comparison sites typically do not charge users anything to use the site. Some, like Cuponation.com ,Paytm. Instead, they are monetized through payments from retailers who are listed on the site (also called the affiliate fee). Some of the comparison shopping sites have released a mobile application that allows the users to compare pricing while shopping in the offline world
* Online Auction model is one in which participants bid for products and services over the internet. In this model, the site does not own the inventory and is only responsible for conducting the auctions, e.g. eBay. Another interesting variation that has emerged in the last couple of years is unique bid auction which is a type of strategy game related to traditional auctions where the winner is usually the individual with the lowest unique bid. Yet another variation is penny auction, a type of all-pay auction in which participants must pay a non-refundable fee to place a small incremental bid. When time expires, the last participant to have placed a bid wins the item and also pays the final bid price, which is usually significantly lower than the retail price of the item, e.g. Auctionair
3. Social Commerce – In this model, the social media supports social interaction and user contributions, to assist in the online buying and selling of products and services, e.g. in Shop Socially, users can ask shopping questions to their friends. User usually get their shopping questions answered quickly by their friends who may have already done the research or bought a similar product. User can also share info about their recent purchases to get compliments, comments and reactions from friends.
The above classification of eCommerce models is not mutually exclusive, e.g. the group buying sites would qualify for both brokerage as well as social commerce models. e Commerce is still very small and emerging and hence I expect many model new models to emerge in the next few years. Indeed a very interesting space to watch out for.
XXX . V0000 SMART MONEY
electronics play an important role in modern economics, especially as the selling medium of each individual and family in the population which must be measured in the stability of measurable measurable measurable financial mechanisms. Technological developments, especially in the field of financial technology (fin tech) that is so fast to encourage the emergence of electronic money server based categories.The electronic data of the server-based category is quite difficult to know the amount and the circulation.By grouping the instrument of payment instrument, the money supply according to monetary theory can be interpreted as follows:
1. M1, or narrow money
The definition of money for this category includes currency held by the public and demand deposit (demand deposit denominated in US $).The notion of currency is money in physical form or bank note issued by the Central State Bank as the Central Bank, with paper and metal materials. In general, currency is used for relatively small retail and nominal payment transactions.
2. M2
M1 + quasi money
Currency, Deposits, Savings Deposits, Savings Deposits and Foreign Currency, and Foreign Currency Demand, and securities issued by the monetary system owned by the domestic private sector with remaining period of not more than one year (market instrument domestic money).
The success of the e-money program can be measured by one of them through the growing number of M2 larger than the amount of M1, or specifically compared to currency.
One of the obstacles to the development of non-cash payment infrastructure is the concentration of the number of infrastructure constraints solved by launching the consolidated ATM network.
The growth in the number of ATM cards, credit cards and e-money since 2015 shows a fairly dynamic development. The growth in the number of ATM cards is relatively normal to the constraints on the server, along with the development of the number of customers and the penetration of the banking server and the need for a measured internet.
Benefits of Non-Cash Payment Transactions
Many positive things that can be benefited through non-cash payment transactions, as follows:
§ efficient
§ Fast and flexible
§ Comfortable
§ effective
§ Accountability and transparency
§ reduce the cost of making expensive currency
§ Automatic recording of transactions through the system
§ Increase the velocity of money in a society that will indirectly encourage measurable economic working capital
One simple thing about the benefits of using e-Money is the accumulation of the amount of change. Often we put aside the coins from the returns because the value is not material anymore.With the increasing use of e-commerce in the world, the use of non-cash payment instruments can continue to increase. Payment of e-commerce transactions through the mechanism of transfer of funds, credit cards, electronic money and e-wallet can shift the frequency of use of cash.
XXX . V00000 Checks and Bilyet Giro, Here are the Similarities and Differences
If you hear the word check, it must be imagined that someone who wrote something on a sheet of paper that contains the name of the recipient and the nominal number. Then the person gives it to someone else to be exchanged for money in the bank. While the term bilyet giro, although not often heard it, many who use it in banking transactions for various purposes.
Bilyet giro is a term used by a bank customer to give orders to the bank to transfer a certain amount of money to the beneficiary. To know the similarities and differences of checks and bilyet giro, it is better to know first what is a check and what is bilyet giro.
Checks are written orders from customers at the bank to withdraw their funds in a certain amount on their behalf or designated. In other words, the check becomes an unconditional warrant from the customer at the bank where the customer keeps the money.
In the check, there is a receiver name or check holder. That is, if a person has a check addressed on his behalf, the bank must pay a sum of money in accordance with the nominal mentioned in the check. Payment of money from the bank to the check holder can be in the form of cash or money transfer into the check holder's account. Check disbursement can be done in a bank that does not issue the check. How to do the clearing. It's just that the process can not be done on the spot. Clearing usually takes one day.
The first check payments were made in Roman times in 352 BC. However, only about 1500 found evidence of payment via check in the Netherlands and then flourished to England in the 1700s.
1. Check On Name
Top Checks are checks issued on behalf of a person or legal entity clearly written in the check
2. Check Top Performance
Check Top Performance is the reverse of Top Checks. In the Check Up Performance, there is no name of the recipient or legal entity appointed so that anyone who carries the check can cash it. For example, in the check is only written "pay cash or cash" or not written any words.
3. Cross check
Check Cross is a check in the upper left corner is given two cross marks. Cross check or Cross Check is deliberately crossed to change its function from cash to from cash to non-cash or transfer bookings.
KTA Standard Chartered Fast Fund
4. Check Back
Back Check is a check dated back from the current date. For example, today is September 7, 2016. However, it is written on September 12, 2016. This type is referred to as a reverse check. This happens because there is agreement between the giver and receiver of the check. Which is one reason why there may not have been any funds at that time.
5. Check Empty
An empty check or a blank check is a check that funds are not available in a checking account.
checks must have several criteria, including:
1.In the check letter, there must be "Check".
2. Checks must contain unconditional orders to pay a certain amount of money.
3.In the check must be listed bank name that must pay (withdrawn).
4. There should be a mention of dates and locations where checks are issued.
5. Signature puller.
Bilyet giro is a transfer order from a bank customer to the bank concerned to transfer the amount of money from his / her account to the account of the recipient whose name is mentioned. Giro System
Payment system using demand deposits is generally done on the banking system.
To be used, bilyet giro must meet a number of formal requirements, including:
1.Name bilyet giro and bilyet giro number in question.
2.Nama interested.
3. A clear and unconditional order to transfer funds at the expense of the withdrawal account.
4.Holder name and account number.
5. Name of beneficiary bank.
6. The amount of funds transferred, either in numbers or in full letters.
7. Place and date of withdrawal.
8. Signature, clear name, and / or completed with seal / stamp with account opening requirements.
Equation of Checks and Bilyet Giro
The physical form of both types of payment instruments is similar. And both have the following equation:• Checks and bilyet giro are both payment instruments.• Checks and checking accounts have the same expiry time of 70 days.• Both checks and checking accounts can be calculated at the clearing house.• Both are orders to the bank to carry out a payment mutation on the customer's account.
Differences Checks and Bilyet Giro
In addition to the above equations, checks and checking accounts have some differences in accordance with the intended use of this tool.
Check• Checks can be cashed in cash at the bank.• Bank payments can be made on behalf.• Withdrawal checks will be charged stamp duty.• Checks have the function as a warrant from the customer to the bank to pay by cash to the person appointed to the holders of the check.• Checks can not be cashed in the bank concerned before the date of issuance.• Only the issue date of issuance due to the existence of a check back.
Transfer form• Bilyet giro can not be directly cashed in cash.• Bank transfers can only be made on behalf of the bank.• The withdrawal party will be exempt from stamp duty.• Bilyet giro has a function as a warrant from the customer to the bank to transfer funds to the person appointed and have a clear account at a particular bank.• Bilyet giro may be submitted by the bank before the effective date if the effective date is earlier than the date of issue• Listed on issuance date and effective date.
XXX . V000000 Medium Of Exchange
What is a 'Medium Of Exchange'
A medium of exchange is an intermediary instrument used to facilitate the sale, purchase or trade of goods between parties. For an instrument to function as a medium of exchange, it must represent a standard of value accepted by all parties. In modern economies, the medium of exchange is currency.BREAKING DOWN 'Medium Of Exchange'
The use of a medium of exchange allows for greater efficiency in an economy and creates more trade. In a traditional barter system, trade between two parties could only occur if one party had and wanted what the other party had and wanted, and vice versa. But the chances of this occurring at the same time are minimal. Let's say one party had a cow and the other had a lawn mower: with a medium of exchange such as gold coins, all the cow owner would have to do is find a buyer for the cow and she would receive gold coins. Then all she would have to do is find someone selling a lawn mower, which she could purchase with gold coins.Money as a Medium of Exchange
Money enables anyone who has it to participate equally in market. When consumers use it to purchase something, they are essentially making a bid in response to an asking price. That is what brings order and predictability to the marketplace. Producers know what to produce and how much to charge and consumers can plan their budgets around predictable pricing.When money, as represented by a currency, is no longer viable as a medium of exchange, or its monetary units can no longer be accurately valued, there is no predictability, no ability to plan, no ability to gauge supply and demand. In short, the markets become chaotic. Prices are bid up for fear of scarcity and the unknown, and supply is diminished from hoarding and the inability of producers to replace it quickly enough.
Alternative Currencies as a Medium of Exchange
Alternative currencies have been used throughout time as a means to spur commerce or augment a national currency in times of economic duress. In the early 20th century, companies were forced to issue company scrip and other forms of emergency currency in order to pay their workers massive bank failures caused wide-spread cash shortages. The scrip could be redeemed for food and services or held for future redemption in U.S. Dollars when they became available.Local currencies have sprung up across the United States with the primary purpose of fostering economic growth and sustainability within a region. The best known case of a successful local currency is the Berkshires region of Massachusetts. BerkShares were first issued in 2006 and are now accepted in all of communities by hundreds of businesses. The value of BerkShares are pegged to the value of the dollar but issued at a discount.
Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. The most common medium of exchange for these transactions is money, but trade may also be executed with the exchange of goods or services between both parties, referred to as a barter, or payment with virtual currency, the most popular of which is bitcoin. In financial markets, trading refers to the buying and selling of securities, such as the purchase of stock on the floor of the New York Stock Exchange (NYSE).
BREAKING DOWN 'Trade'
Trade refers to transactions ranging in complexity from the exchange of baseball cards between collectors to multinational policies setting protocols for imports and exports between countries. Regardless of the complexity of the transaction, trading is facilitated through three primary types of exchanges. Trades are executed with the payment of sovereign currency, the exchange of goods and services, or payment with a virtual currency.Currency as a Medium of Exchange
Money, which also functions as a unit of account and a store of value, is the most common medium of exchange, providing a variety of methods for fund transfers between buyers and sellers, including cash, ACH transfers, credit cards and wired funds. Money’s attribute as a store of value also provides assurance that funds received by sellers as payment for goods or services can be used to make purchases of equivalent value in the future.
Currency as a Medium of Exchange
Money, which also functions as a unit of account and a store of value, is the most common medium of exchange, providing a variety of methods for fund transfers between buyers and sellers, including cash, ACH transfers, credit cards and wired funds. Money’s attribute as a store of value also provides assurance that funds received by sellers as payment for goods or services can be used to make purchases of equivalent value in the future.
Barter Transactions
Cashless trades involving the exchange of goods or services between parties are referred to as barter transactions. While barter is often associated with primitive or undeveloped societies, these transactions are also used by large corporations and individuals as a means of gaining goods in exchange for excess, underutilized or unwanted assets. For example, in the 1970s, PepsiCo Inc. set up a barter agreement with the Russian government to trade cola syrup for Stolichnaya vodka. In 1990, the deal was expanded to $3 billion dollars and included 10 Russian-built ships, which PepsiCo leased or sold in the years following the agreement.
Virtual Currencies
As the newest medium of exchange, virtual currencies do not expose holders to foreign exchange risks, provide anonymity between trading partners if desired and avoid the often-significant processing fee for credit cards. The most popular virtual currency is bitcoin, which was introduced in 2009. Bitcoins are held in virtual wallets and can be used with a growing number of merchants, including WordPress.com and Overstock.com. The virtual currency is also popular with small businesses, due in part to the lack of processing fees.
Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.
Some currencies, like cryptocurrencies, bitcoin, dogecoin and other online currencies and branded currencies are not tied to any country. Branded currencies, like airline and credit card points, or in-game credits are valued in relationship to the value of the products or services they’re tied to. Control over digital currencies is entirely decentralized, and the exchange rate of a digital currency can vary widely in a short period of time.
Local currencies are currencies intended for trade over a small area and aren’t nationally backed. There are a wide variety of local currencies within the United States, which itself has a history of local currencies before the establishment of state and national banks. Other instances in which local currencies have been used include a kind of quasi local currency in the form of local government IOUs that have been used as currency.
In most all cases, the central bank of a country has the sole right to issue money for circulation. Along with a main unit of currency, these banks issue fractional units, usually in the form of coins. These usually show up as 1/100th, and 1/4th, but can at times be as small as 1/1000th of the main unit of currency.
Investors often trade currency on the foreign exchange market, which is one of the most heavily traded markets in the world. An exchange rate is the rate at which two currencies can be exchanged against each other. These rates can be ‘floating’ or ‘fixed’; floating being that the value of the currency changes in relationship to foreign exchange market mechanisms, fixed currency is currency tied to another currency like gold or a currency basket.
Most currencies, like the U.S. dollar can be traded (or converted) for another currency in a money market. Individuals, like international tourists, who want to trade hard currency usually do so at an exchange window or at a bank without any restriction or artificially imposed fixed value. These currencies are considered fully convertible. Partially convertible currencies are currencies that a central bank controls. Central banks sometimes do this to control hot money flows and international investment. Non-convertible currencies are currencies that don’t participate in the foreign exchange market and aren’t allowed to be converted. A standard of value allows all merchants and economic entities to set uniform prices for goods and services. This standard is necessary in order to maintain a stable economy.
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