E-money is a monetary value stored in electronic (including magnetic) form which is provided against payment of an amount of money. In legal terms, the value represents a claim against the issuer and can, for instance, be stored on the chip of a prepaid card or on a server. However, e-money is only considered as such if it is accepted as a means of payment by natural or legal persons other than the issuer. This implies that, for example, electronic gift cards, which can only be redeemed where they were issued, do not fall under the definition of e-money.
The corresponding legal provisions applicable to e-money and e-money business in Germany can be found in the Payment Services Oversight Act.
From a technical point of view, when a payment is made using e-money, the corresponding monetary value is electronically transferred from the payer’s storage medium to the payee. For payments using prepaid cards (such as the GeldKarte) at the point of sale, the e-money amount is deducted from the credit balance stored on the card and in most cases temporarily saved on the terminal or the retailer’s cash register system. Subsequently, several transactions are bundled and the amounts transferred to the payee using the corresponding payment systems.