John D McGonagle: How to keep a firm grip on your digital wallet Published on Saturday 4 February 2012 06:27 E-MONEY is growing in currency. Whether paying for eBay purchases through PayPal or using Kindles to buy books on Amazon, an increasing number of us are dipping into our digital wallets and buying goods and services, without cash or credit cards ever changing hands. The increasing popularity of e-money - essentially currency which is exchanged using computer networks, the internet, mobile devices and/or digitally stored value systems such as prepaid store cards - is due, in large part, to the ease with which payments can be made and the steps that have been taken to safeguard our security when buying products online. According to the UK Cards Association - the trade organisation for the debit and credit card industry - more than 1.7 million people made so-called contactless transactions without the need to enter a PIN or sign anything last year. In-Stat, the analyst firm, estimates the number of people using mobile devices to carry out transactions will soar from 116 million to more than 375 million by 2015. By then, the Future Foundation think-tank predicts that the majority of Scots will be using their phones to buy goods, pay bills and manage bank accounts. The predicted growth in mobile payments is such that some of the world's biggest names have launched so-called "digital wallet" services. Google and Mastercard launched an eWallet application for smartphones last year and Visa is reportedly planning to introduce a similar service of its own. In response to the reservations that consumers had about using e-money for online transactions, UK institutions issuing e-money are now regulated by the Electronic Money Regulations 2011 (EMRs) which limits them to issuing relatively small amounts of disposable currency. Under the regulations, e-money issuers are also required to redeem the full value of any unused e-money if the consumer asks for it, and can only charge a "proportionate" fee for redemption. In addition to the EMRs, e-money issuers also have to comply with a raft of legislation designed to protect consumers, and data protection regulations. For consumers, the key concern is undoubtedly security and the regulations should ensure that, in theory at least, those wanting to use e-money should be well protected by the law. E-money should actually be more secure, and much harder to steal, than the banknotes in your wallet. For example, to discourage fraud there is currently a £15 cap on contactless card transactions in high street shops, and users are also required to enter their PINs from time to time. Nevertheless, in light of the steady stream of complaints being made to the Financial Ombudsman Service, consumers should be aware of the risks and their rights when paying for goods or services with e-money. n E-money issuers" terms and conditions do tend to allow them to reverse payments, in certain situations. This means that an e-money issuer may intervene (in a way which a bank probably wouldn't) if you are trying to withhold a refund to another individual. n Certain e-money issuers also have time limits on reversing transactions (PayPal's limit is 45 days), so if you are dissatisfied, you should complain sooner rather than later and if you have sold a product online, such as on eBay, you could be required to make a refund if the buyer is unhappy with their purchase. n E-money issuers may restrict access to accounts if there are unusual trading patterns and there may be restrictions on the type of services for which you can receive payments into your e-money account. A male stripper recently complained to the ombudsman about his account being closed down, but the complaint wasn't upheld because it was a matter for the e-money issuer's "own commercial judgment" to decide with whom it did business. n It is also worth remembering that transaction fees may be payable in relation to cross-border transactions where a currency conversion is required, and that if you fall victim to an online phishing scam and lose money, your bank may reimburse you, but an e-money issuer probably won't. Whether paying with e-money or hard cash, there is one tried and tested legal doctrine that always holds true - buyer beware. John D McGonagle is a solicitor at Brodies.