Payment cards are first step towards making cash obsolete
If banks and major retailers have their way, notes and coins may soon be redundant, says David Prosser
Saturday 24 September 2005
On Wednesday, Mastercard launched Cashplus, the first UK version of the pre-paid plastic cards that are hugely popular in the US. You don't need a bank account to use a Cashplus card - Mastercard has a deal with the Post Office that enables people to charge up their cards with money at its 14,000 branches.
The launch is another step towards reducing people's reliance on cash. Although Cashplus cards can be used to withdraw money from ATMs, the £2 transaction fee is a disincentive. The fee for using Cashplus to pay for goods and services - in the same way as a debit card - is only £1.
If Cashplus proves successful, rival card issuers are likely to launch their own products. Visa is trialling the Gift card, launched as a replacement for paper gift vouchers; American Express is experimenting with a prepaid cashcard for use as a modern version of traveller's cheques.
The Cashplus card is also similar to an initiative from Oyster, the card that many Londoners use to pay for public transport. It is looking for banking and retail partners to help it expand the usage of Oyster, so that cards, once charged with cash, can be used in London shops, as well as to pay for bus or train fares.
Previous attempts to launch such products have not proved popular - card-issuers spent years trialling Mondex in the Nineties before shelving the project amid widespread disinterest from retailers and customers.
However, research from Apacs, the organisation that runs Britain's payment systems, shows cash is becoming less important. This month it revealed that the amount of money spent on plastic in 2004 outstripped the total spent using cash for the first time, chiefly thanks to the increased use of debit cards.
Apacs also warns that cash remains hugely popular with consumers. "Seven in 10 transactions last year were cash deals," says Apacs's Jemma Smith. "People like the safety of cash, particularly for small purchases, and we think cash will still represent 50 per cent of transactions in 10 years' time." Even so, Smith believes both the financial services industry and leading retailers are keen to reduce customers' reliance on cash. "I don't think they have a strategic plan to do away with cash, but there are clear reasons why retailers and banks like plastic."
The problem with Cashplus, however, is the cost. Customers must either pay £4.95 a month for the privilege of holding the plastic, or accept fees of £1 and £2 a time on spending and cash withdrawals. "It's hard to believe that the charges for opening and using the card reflect the real costs of delivering the service," says Claire Whyley, deputy director of policy at the National Consumer Council.
Rich Wagner, chief executive of Advanced Payment Solutions, which is introducing Cashplus in a joint initiative with Mastercard, points out that the card is primarily aimed at people who don't have access to traditional bank accounts. Although banks must now offer basic accounts to such customers, these are limited, Wagner argues.
"Our first target is the customer who has been disenfranchised by the financial community," says Wagner.
How everyone can save money online
"There is definitely a need to provide a payment option for people who want to shop online but are denied access to cheap credit," says Richard Mason, of price comparison service Moneysupermarket. He says 75 per cent of applications for the best credit deals are turned down, because borrowers' credit ratings aren't good enough.
At the extreme, financially excluded customers lose out twice over. "The internet is one of the best ways to save money because the best deals on so many things are now found online," says Mason. "But you need a card of some sort to pay for internet purchases."
Mastercard's Cashplus deal would extend the option of online shopping to people previously denied access, Mason admits. But he warns: "This is a very expensive option."
He suggests would-be internet shoppers apply for an uncompetitive credit card deal - Capital One's Classic card (29.9 per cent interest) is a good bet, he suggests - for which they are more likely to be accepted.
"People don't realise that you are allowed to put cash into your credit card account, so you never have to actually use the card to borrow and you never pay any interest," he says.
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village