Why emoney still fails – Chances of e-money within a competitive payment instrument market

After a period of euphoria the future of e-money looks much less promising today than even two years ago: No significant market volume, little innovation, hardly any non-bank activities and premature regulation by supervisory authorities. The focus of this analysis are two basic parameters of the current lack of success and the future chances of e-money: market issues (supply, demand, cost-benefit-relation to all players, competitive environment of other payment instruments, etc.) and regulatory issues (degree of regulative restrictions to the suppliers, to the product itself, to its usage, etc.). The birthplace of e-money was a non-bank environment. It is shown that massive reactions of the banking community (central banks included) deeply influenced the market development of this new money. Focussing on market issues, the business case for e-money is analysed. On the issuer side particular attention is paid to the problem of counterfeiting and systemic risk. On the user side, it is shown that the choice of medium of payment is heavily influenced by the type of underlying transaction