Electronic cash
Encyclopedia
Electronic cash is the debit card system
of the German Central Credit Committee
, the association which represents the top German financial interest groups. Usually paired with a checking account, cards with an Electronic Cash logo are only handed out by proper credit institutions. An electronic card payment is generally made by the card owner entering their PIN (Personal Identification Number
) at a so-called EFT-POS-terminal (Electronic-Funds-Transfer-Terminal
). The name “EC” originally comes from the unified European checking system Eurocheque
. Comparable debit card systems are Maestro
and Visa Electron
. Banks and credit institutions who issue these cards often pair EC debit cards with Maestro functionality. These combined cards, recognizable by an additional Maestro logo, are referred to as “EC/Maestro cards”.
In 2006, the following companies had market shares of less than 3% each:
DVB Processing, CardProcess, Tyco/ADT, Bank-Verlag, CardTech, CCV Allcash, EKS, Alphyra, Experian, Paycom, Lavego, Telekurs.
In 2010, only CardTech and Lavego remain from the 2006 list (as well as the six top dogs), with AGES, BCB Processing, CardProcess, Deutsche Bahn
, Deutsche BP, Douglas Informatik & Service, Elavon, ESSO Deutschland, ICP International Cash Processing GmbH, Postbank
, Shell and transact also offering services now.
s for electronic cash: the pictogram
s “electronic cash PIN-Pad” and “girocard”. The technical attachment to the eligibility requirements for participation in the electronic cash system of the German credit services sector (retaling requirements) includes the retailer's obligation to use both the acceptance marks “electronic cash PIN-Pad” and “girocard” simultaneously for newly set up points of sale for the time being. Furthermore, the acceptance marks are printed onto the debit cards of German financial institutions.
The trademark on the acceptance marks (girocard and electronic-cash-PIN-pad) are held for the Central Credit Committee
by the EURO Kartensysteme GmbH
.
In a transitional period the pictogram “ec electronic cash” is still to be found as an acceptance mark on debit cards of the German credit services sector and on POS-terminals. This mark was used in the transitional period from Eurocheque (payment via certified cheque) to payment via ec-card (card based payment with PIN). After the abolishment of the Eurocheque, the allocation of ec-cards by the German credit services sector was suspended and the trademarks for Eurocheque were sold to Mastercard.
The German banking sector no longer uses the „ec electronic cash“ sign as an official acceptance mark for electronic cash. Newly issued debit cards use the „electronic cash PINPad“ and/or the „girocard“ pictogram. However, the old „ec electronic cash“ sign can still be found on some
of the debit cards in circulation. These cards, which were issued before the new pictograms were introduced, remain valid, but will gradually be replaced by the new cards in the course of the regular card exchange. Newly installed electronic-cash-POS terminals also bear the new pictograms.
terminal, consists of hardware
and software
components. The main hardware components are the security module
, the PIN pad, the printer, the display, the magnetic card reader, the chip-card reader, the communication module and the power supply.
The software mainly consists of the operating system, the communication software, the software of the security module and various software modules for OPT (Online-Personalization of Terminals), EMV
as well as additional applications such as prepayment, customer loyalty systems and remote administration. The most important element is the so-called security module, without which the terminal can only be used for electronic direct debit
(EDD) transactions.
All card terminals working with the electronic cash system have to be certified by the ZKA
(the German Central Credit Committee) in order to take part in cashless payment transactions. Terminals working exclusively with EDD do not require a ZKA certificate. Operating a card terminal requires a provider contract with the network operator. The data collected by the terminal is processed by the provider. For the time the terminal is in use the user (for example, the retailer) can contact the service provider. He can call a hotline and is guaranteed on-site technical support by a technician. He has a contact person who helps with questions about the account, transaction control, managing the contract, etc.
. This magnetic stripe is read-only and thus only contains static information. In addition, since the year 2000, more and more banks have started to add the EMV
chip to newly issued cards. By 2008, 70% of the cards issued had that chip. The new chip is capable of processing data like a small computer and can respond to requests without the entire contents being read. In contrast to magnetic stripes, the chips cannot be copied easily. To maintain downward compatibility
, especially with the Maestro card, which is most often integrated, the cards are still equipped with magnetic stripes. However, usually the chip as the more secure option is chosen wherever both means of communication are technically possible.
The magnetic stripe on a card has three paths. Until 30/9/2009, path 3 of the magnetic stripe was read for payments in Germany. Since then, the internationally customary path 2 is being read.
) works as follows:
Online authorization is a key feature of this payment method. Online authorization
validates the card against the list of blocked account numbers and checks the given PIN. Finally, it verifies whether the amount due is covered by the account balance (balance plus overdraft facility minus pending debits). Payment is rejected if any of the criteria listed above are not met. The authorization as well as the validation regarding sufficient funds and the daily limit is carried out by the headquarters of the institute from which the card is issued.
General procedure for electronic cash payment using the magnetic stripe:
a) if the card is blocked
b) if the PIN is correct
c) if the amount is covered
The payment is rejected if any of the criteria listed above is not fulfilled.
.
Steps three to six are not applicable if the credit limit has not been reached, thus resulting in no transaction costs. Additionally, the payment process is often accelerated because no online connection needs to be established. The bank thereby grants the customer additional credit.
Depending on the provider
, further costs such as for technical deployment may be incurred.
According to retailers' terms and conditions, shops have to accept electronic cash payments on the same conditions and at the same prices as with cash. Thus, they have to pay the charges and are not allowed to set a minimum sales amount.
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
of the German Central Credit Committee
Central Credit Committee
The Central Credit Committee is an industry association of the German banking industry. Its decisions are held normative for the national banking sector – either directly by interbank treaties or indirectly by preparing a corresponding ministerial or Bundesbank decision.- Structure :The Central...
, the association which represents the top German financial interest groups. Usually paired with a checking account, cards with an Electronic Cash logo are only handed out by proper credit institutions. An electronic card payment is generally made by the card owner entering their PIN (Personal Identification Number
Personal identification number
A personal identification number is a secret numeric password shared between a user and a system that can be used to authenticate the user to the system. Typically, the user is required to provide a non-confidential user identifier or token and a confidential PIN to gain access to the system...
) at a so-called EFT-POS-terminal (Electronic-Funds-Transfer-Terminal
EFTPOS
EFTPOS is the general term used for debit card based systems used for processing transactions through terminals at points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments...
). The name “EC” originally comes from the unified European checking system Eurocheque
Eurocheque
The Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies....
. Comparable debit card systems are Maestro
Maestro (debit card)
Maestro is a multi-national debit card service owned by MasterCard, and was founded in 1990. Maestro cards are obtained from associate banks and can be linked to the card holder's current account, or they can be prepaid cards...
and Visa Electron
Visa Electron
Visa Electron is a debit card available across most of the world, with the exception of Canada, Australia, Ireland and the United States. The card was introduced by VISA in the 1980s and is a sister card to the Visa Debit card...
. Banks and credit institutions who issue these cards often pair EC debit cards with Maestro functionality. These combined cards, recognizable by an additional Maestro logo, are referred to as “EC/Maestro cards”.
Providers
All of Germany's providers registered with the Central Credit Committee are connected in the working group Arbeitskreis der electronic cash-Netzbetreiber. According to the Federal Cartel Office of Germany, the following providers have considerable market shares:- easycash – easycash GmbH, RatingenRatingenRatingen is a town in the district of Mettmann, in North Rhine-Westphalia, Germany, in the northwestern part of Berg - about 12 km northeast of Düsseldorf...
, with a market share of 40% (as recorded in 2007)
- TeleCash GmbH & Co. KG, StuttgartStuttgartStuttgart is the capital of the state of Baden-Württemberg in southern Germany. The sixth-largest city in Germany, Stuttgart has a population of 600,038 while the metropolitan area has a population of 5.3 million ....
, with a market share of more than 20%
- B+S – B+S Card Service GmbH, Frankfurt am Main, with a market share of 10 to 15%
- WEAT – WEAT Electronic Datenservice GmbH, DüsseldorfDüsseldorfDüsseldorf is the capital city of the German state of North Rhine-Westphalia and centre of the Rhine-Ruhr metropolitan region.Düsseldorf is an important international business and financial centre and renowned for its fashion and trade fairs. Located centrally within the European Megalopolis, the...
, with a market share of less than 10%
- montrada – montrada GmbH, Bad Vilbel, with a market share of less than 10% (as recorded in 2006); in 2010 they claimed they were now Germany's third most important provider
- InterCard – InterCard AG, Taufkirchen b., with a market share of less than 10%
In 2006, the following companies had market shares of less than 3% each:
DVB Processing, CardProcess, Tyco/ADT, Bank-Verlag, CardTech, CCV Allcash, EKS, Alphyra, Experian, Paycom, Lavego, Telekurs.
In 2010, only CardTech and Lavego remain from the 2006 list (as well as the six top dogs), with AGES, BCB Processing, CardProcess, Deutsche Bahn
Deutsche Bahn
Deutsche Bahn AG is the German national railway company, a private joint stock company . Headquartered in Berlin, it came into existence in 1994 as the successor to the former state railways of Germany, the Deutsche Bundesbahn of West Germany and the Deutsche Reichsbahn of East Germany...
, Deutsche BP, Douglas Informatik & Service, Elavon, ESSO Deutschland, ICP International Cash Processing GmbH, Postbank
Deutsche Postbank
Deutsche Postbank AG is a German retail bank with headquarters in Bonn. Postbank was formed from the demerger of the postal savings division of Deutsche Bundespost in 1990. It became a wholly owned subsidiary of Deutsche Post in 1999, and was partially spun out on the Frankfurt Stock Exchange in 2004...
, Shell and transact also offering services now.
Acceptance marks
At the moment, there are two valid acceptance markAcceptance mark
An acceptance mark, in the world of credit cards, is a logo or design that indicates that a merchant accepts one or more credit card types. Common uses include decals and signs at merchant locations or in merchant advertisements. The purpose of the mark is to provide the card holder with...
s for electronic cash: the pictogram
Pictogram
A pictograph, also called pictogram or pictogramme is an ideogram that conveys its meaning through its pictorial resemblance to a physical object. Pictographs are often used in writing and graphic systems in which the characters are to considerable extent pictorial in appearance.Pictography is a...
s “electronic cash PIN-Pad” and “girocard”. The technical attachment to the eligibility requirements for participation in the electronic cash system of the German credit services sector (retaling requirements) includes the retailer's obligation to use both the acceptance marks “electronic cash PIN-Pad” and “girocard” simultaneously for newly set up points of sale for the time being. Furthermore, the acceptance marks are printed onto the debit cards of German financial institutions.
The trademark on the acceptance marks (girocard and electronic-cash-PIN-pad) are held for the Central Credit Committee
Central Credit Committee
The Central Credit Committee is an industry association of the German banking industry. Its decisions are held normative for the national banking sector – either directly by interbank treaties or indirectly by preparing a corresponding ministerial or Bundesbank decision.- Structure :The Central...
by the EURO Kartensysteme GmbH
Gesellschaft mit beschränkter Haftung
Gesellschaft mit beschränkter Haftung is a type of legal entityvery common in Germany, Austria, Switzerland, and other Central European countries...
.
In a transitional period the pictogram “ec electronic cash” is still to be found as an acceptance mark on debit cards of the German credit services sector and on POS-terminals. This mark was used in the transitional period from Eurocheque (payment via certified cheque) to payment via ec-card (card based payment with PIN). After the abolishment of the Eurocheque, the allocation of ec-cards by the German credit services sector was suspended and the trademarks for Eurocheque were sold to Mastercard.
The German banking sector no longer uses the „ec electronic cash“ sign as an official acceptance mark for electronic cash. Newly issued debit cards use the „electronic cash PINPad“ and/or the „girocard“ pictogram. However, the old „ec electronic cash“ sign can still be found on some
of the debit cards in circulation. These cards, which were issued before the new pictograms were introduced, remain valid, but will gradually be replaced by the new cards in the course of the regular card exchange. Newly installed electronic-cash-POS terminals also bear the new pictograms.
Hardware and software
A card terminal, also called EFT-POSEFTPOS
EFTPOS is the general term used for debit card based systems used for processing transactions through terminals at points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments...
terminal, consists of hardware
Hardware
Hardware is a general term for equipment such as keys, locks, hinges, latches, handles, wire, chains, plumbing supplies, tools, utensils, cutlery and machine parts. Household hardware is typically sold in hardware stores....
and software
Computer software
Computer software, or just software, is a collection of computer programs and related data that provide the instructions for telling a computer what to do and how to do it....
components. The main hardware components are the security module
Hardware Security Module
A hardware security module is a type of secure cryptoprocessor targeted at managing digital keys, accelerating cryptoprocesses in terms of digital signings/second and for providing strong authentication to access critical keys for server applications...
, the PIN pad, the printer, the display, the magnetic card reader, the chip-card reader, the communication module and the power supply.
The software mainly consists of the operating system, the communication software, the software of the security module and various software modules for OPT (Online-Personalization of Terminals), EMV
EMV
EMV stands for Europay, MasterCard and VISA, a global standard for inter-operation of integrated circuit cards and IC card capable point of sale terminals and automated teller machines , for authenticating credit and debit card transactions.It is a joint effort between Europay, MasterCard and...
as well as additional applications such as prepayment, customer loyalty systems and remote administration. The most important element is the so-called security module, without which the terminal can only be used for electronic direct debit
Direct debit
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...
(EDD) transactions.
All card terminals working with the electronic cash system have to be certified by the ZKA
Central Credit Committee
The Central Credit Committee is an industry association of the German banking industry. Its decisions are held normative for the national banking sector – either directly by interbank treaties or indirectly by preparing a corresponding ministerial or Bundesbank decision.- Structure :The Central...
(the German Central Credit Committee) in order to take part in cashless payment transactions. Terminals working exclusively with EDD do not require a ZKA certificate. Operating a card terminal requires a provider contract with the network operator. The data collected by the terminal is processed by the provider. For the time the terminal is in use the user (for example, the retailer) can contact the service provider. He can call a hotline and is guaranteed on-site technical support by a technician. He has a contact person who helps with questions about the account, transaction control, managing the contract, etc.
Chip card vs magnetic stripe card
Every ec-card is equipped with a magnetic stripeMagnetic stripe card
A magnetic stripe card is a type of card capable of storing data by modifying the magnetism of tiny iron-based magnetic particles on a band of magnetic material on the card...
. This magnetic stripe is read-only and thus only contains static information. In addition, since the year 2000, more and more banks have started to add the EMV
EMV
EMV stands for Europay, MasterCard and VISA, a global standard for inter-operation of integrated circuit cards and IC card capable point of sale terminals and automated teller machines , for authenticating credit and debit card transactions.It is a joint effort between Europay, MasterCard and...
chip to newly issued cards. By 2008, 70% of the cards issued had that chip. The new chip is capable of processing data like a small computer and can respond to requests without the entire contents being read. In contrast to magnetic stripes, the chips cannot be copied easily. To maintain downward compatibility
Backward compatibility
In the context of telecommunications and computing, a device or technology is said to be backward or downward compatible if it can work with input generated by an older device...
, especially with the Maestro card, which is most often integrated, the cards are still equipped with magnetic stripes. However, usually the chip as the more secure option is chosen wherever both means of communication are technically possible.
The magnetic stripe on a card has three paths. Until 30/9/2009, path 3 of the magnetic stripe was read for payments in Germany. Since then, the internationally customary path 2 is being read.
Electronic cash with a magnetic stripe card
Paying at a POS-Terminal (Point Of SalesPoint of sale
Point of sale or checkout is the location where a transaction occurs...
) works as follows:
Online authorization is a key feature of this payment method. Online authorization
Online Authorisation
Online Authorization is a system used to verify a transaction on a payment card . The term 'on-line' refers to the real-time nature of the verification...
validates the card against the list of blocked account numbers and checks the given PIN. Finally, it verifies whether the amount due is covered by the account balance (balance plus overdraft facility minus pending debits). Payment is rejected if any of the criteria listed above are not met. The authorization as well as the validation regarding sufficient funds and the daily limit is carried out by the headquarters of the institute from which the card is issued.
General procedure for electronic cash payment using the magnetic stripe:
- Amount is entered.
- Card is asked for in order to be read by a card reader
- Security module is activated and requires the input of the PIN
- The communication module connects to the provider and logs in for the exchange of data
- The exchange of data operates the plausibility check
- The online connection to the bank verifies:
a) if the card is blocked
b) if the PIN is correct
c) if the amount is covered
The payment is rejected if any of the criteria listed above is not fulfilled.
- The communication module logs out of the system and terminates the connection.
- The printer issues a record of the payment or the rejection, which can be viewed on the screen. The result "Successful payment" guarantees the retailer payment (if submitted on time).
Electronic cash with chip, chip offline
The general procedure for electronic cash-payment using a chip:- The amount is entered.
- The card is demanded, and is read with the help of the chip reader.
- The security module is activated, and demands the PIN.
- The accuracy of the PIN is checked in the chip. If the pin is entered correctly, the wrong entry counter is set to zero. If the PIN given is incorrect, the wrong entry count increases to one, and if it is entered incorrectly three times, the bank can block the card. The bank can unlock the card with the help of special bank terminals (BSFT).
- The demand for payment is sent to the card chip. If there is enough money and/or credit on the card, the amount will be deducted and the credit limit updated on the chip. Go to step 11.
- The communications module establishes the connection to the provider and logs the data exchange.
- Data exchanges are carried out via the communications link and plausibility checks.
- Via the online connection the bank verifies whether the card is on the blacklist, and whether payment lies withiin the available financial means.
- If one of these criteria is not met, payment will be rejected.
- A payment approval (authorization) is transmitted to the chip and stored there.
- The following information may, for example be saved: "Further payments to the total of 500 euros before the end of the month are allowed."
- The communication module logs off at the provider and terminates the connection.
- The printer creates a record of payment or rejection, which is shown on the screen. The resulting “payment success” guarantees the retailer payment (if submitted on time).
.
Steps three to six are not applicable if the credit limit has not been reached, thus resulting in no transaction costs. Additionally, the payment process is often accelerated because no online connection needs to be established. The bank thereby grants the customer additional credit.
Example
- You make a first withdrawal of 30 euros. The terminal sends a request to the bank and subsequently saves the payment permission. Further withdrawals up to a total amount of 500 euros are possible until the end of the month.
- In a nearby shop, you pay another 70 euros using electronic cash. Another request to the bank is unnecessary as the payment permission is already stored on the chip. A credit line of 430 euros is now left on the chip.
- The next day of the same month you want to pay 419 euros using electronic cash. Again, a request to the bank is unnecessary since the payment permission is already on the chip. Now, a credit line of 11 euros is left on the card.
- The last day of this month you want to make a payment of another 12 euros in another shop. Now, the credit line on the chip is too low. A connection to the bank is established. The bank states that 12 euros are immediately available and that the credit line is being raised by another 500 euros until the end of the next month.
Costs
The costs of an electronic cash transaction depend on the amount of money due for payment. They amount to 0.3% of the volume of sales but at least 8 cents. In the oil industry the basic amount is 0.2% of the volume of sales but at least 4 cents.Depending on the provider
Internet service provider
An Internet service provider is a company that provides access to the Internet. Access ISPs directly connect customers to the Internet using copper wires, wireless or fiber-optic connections. Hosting ISPs lease server space for smaller businesses and host other people servers...
, further costs such as for technical deployment may be incurred.
According to retailers' terms and conditions, shops have to accept electronic cash payments on the same conditions and at the same prices as with cash. Thus, they have to pay the charges and are not allowed to set a minimum sales amount.
Modes of payment with electronic cash debit cards
Many retailers provide the option of paying by card or electronic cash, as both payment systems include a guarantee of payment. The electronic direct debit (EDD) system offers no such guarantee and thus exposes the retailer to a default risk.- In 2005, 13.1% of all payments in Germany were made using electronic cash (payments included the entering of the PIN). In 2009, the percentage of payments using electronic cash went up to 19.4%; payments amounted to 71 billion euros.
- The electronic purse card or Geldkarte can also be used for payments. With an annual turnover of 0.1 billion euros its market share amounts to less than 0.04%.
- ELV (Elektronisches Lastschriftverfahren, electronic debit advice procedure) online or offline. 12% of 2005 turnover in commerce was processed using this method. The market share in 2009 was 12.2%, or 45 billion euros. The technology was introduced in 1984. When using ELV online (also called OLV) every online payment is checked against a credit rating score and a nationwide blacklist. When ELV takes place offline, there is no telephone line and no checking. It is the most inexpensive method for retailers. All procedures read only the account number, the bank code and the card number from the magnetic stripe or the chip. In contrast to the electronic cash method the customer authorises a direct withdrawal with his signature.
- POZ (Point of Sale ohne Zahlungsgarantie, point of sale without payment guarantee). Unlike OLV and ELV, which are procedures used in retail, POZ was a procedure used by the ZKA (Zentraler Kreditausschuss, the German Central Credit Committee) from its introduction in 1994 up to its abolition on December 31, 2006.
See also
- Automated teller machineAutomated teller machineAn automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
- Electronic moneyElectronic moneyElectronic money is money or scrip that is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems...
- EurochequeEurochequeThe Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies....
- Debit cardDebit cardA debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
- Stored-value cardStored-value cardA stored-value card refers to monetary value on a card not in an externally recorded account and differs from prepaid cards where money is on deposit with the issuer similar to a debit card...