In recent years, payment for goods and services online is becoming increasingly popularsince this method is accessible, convenient and saves time.What the benefits and peculiarities of the functioning of electronic funds are – in the following.
Essence of electronic money
Electronic money means the equivalent of traditional fiat (paper) money in circulation within a specific electronic payment system (hereinafter − EPS). The essence of electronic money is the storage of monetary value on electronic media − smart cards or computer hard drives. Their turn is carried out using computer networks, the Internet, payment cards, electronic wallets and devices working with payment cards (ATMs, POS-terminals). In essence, electronic money is not money in the traditional sense of the word.
The real money remains in the operator of the EPS, that is, in the case of payments through the EPS, the movement of real money does not happen, electronic money is exchanged for real after the transaction expires through the partner banks of the operator.
The circulation of electronic funds may be carried out either in accordance with the rules established or agreed with the state central banks, and according to its own rules of non-state electronic payment systems.
Types of electronic funds
There are two types of electronic money − state and private. State e-money expressed in national currency is an integral part of the state payment system, and private one is electronic units of non-state payment systems, which regulate their issue and circulation by their own rules. The state does not provide the reliability or liquidity of private money.
Discount cards of merchants are not recognized as e-money, as well as e-money are not gift cards, petrol stations cards (fuel cards), tickets to travel in urban transport, telephone cards, etc., which are accepted as a means of payment exclusively by their issuers.
Role and functions of the bank in e-money issuing
The requirements governing the issue and use of electronic money in Ukraine are set out in Art. 15 of the Law of Ukraine “On Payment Systems and Transfer of Funds in Ukraine” of 05.04.2001, No. 2346-ІІІ and the Regulation on Electronic Money in Ukraine, approved by the Resolution of the Board of the National Bank of Ukraine dated November 4, 2010, No. 481. The Regulation regulates activities related to the issuance of electronic money in Ukraine and introduces monitoring of such activities.
Only banks have the right to carry out the issuance of electronic money in Ukraine. The Bank provides its clients with the following financial services in the area of electronic money usage:
- distribution of electronic money;
- exchange transactions with electronic money;
- provision of electronic money replenishment means of electronic devices;
- acceptance of electronic money in exchange for cash/cashless funds.
In accordance with the requirements of para. 15.2 of Art. 15 of the Law of Ukraine “On payment systems and transfer of funds in Ukraine”, a bank that plans to issue electronic money, is obliged to first agree with the National Bank of Ukraine (hereinafter − the National Bank, NBU) the rules for their use in accordance with the procedure established by the regulatory act of the NBU. In accordance with the requirements of the National Bank, entities engaged in electronic money transactions (electronic money issuer, operator, agents, traders and users) can do this only in accordance with the rules agreed with the NBU.
Principle of electronic money payment
The principle of electronic money is generally simple. Any business or company can be in the role of a trader receiving electronic money for goods and services, as well as a user paying them for purchases. For this purpose, the company as a legal entity, on the basis of an agreement concluded with the bank (issuer or settlement agent), should open two electronic accounts (wallets) − one for obtaining electronic money as a trader, and the other one for settlements as a user.
In order to make a payment, first, it is necessary to purchase means of payment system (liability) for the real money. They are credited to the electronic wallet, and then they are used by the user. E-wallet can be replenished through the branches of the banks with which the system co-operates, from the payment card, from the current bank account or via payment terminals.
In case of receipt of electronic money on electronic wallet, they can be transferred to cash or to a bank account.
In accordance with para.3.3 of the Regulation on electronic money in Ukraine, users − individuals have the right to use electronic funds to pay for goods, as well as to transfer them to other users. They can transfer electronic money to other users − individuals using prepaid cards in the amount of up to UAH 500 per day and not more than UAH 4 thousand for one month.
Users − business entities − legal entities have the right to receive electronic money exclusively in exchange for cashless funds. They can use such money only for the payment of goods.
Traders are entitled to accept electronic money from users as a means of payment for goods, expressed in hryvnias only. Funds received can be used exclusively for exchange of non-cash funds or return electronic money to users in case of returning goods purchased in this way in accordance with the Law of Ukraine “On Consumer Rights Protection”.
Electronic money can be transferred in the national currency only under condition of withdrawal from the payment system.
