Banks and credit card providers have been prophesying the imminent death of cash for several decades, claiming that it is only a matter of time before credit and debit cards, and online banking, do away with the need for banknotes and coins for ever. As yet, however, there has been no sign of even the mildest decline in the use of cash, with the amounts being withdrawn from ATMs continuing to rise every year.
But a new innovation in the card industry may well mark the beginning of the end for cash. Last month, Barclaycard became the first major bank to launch so-called "contactless" cards into the UK market, which allow you to complete transactions of less than £10 in a matter of seconds, by simply swiping your piece of plastic over a card reader at the till. Royal Bank of Scotland and Halifax Bank of Scotland are both on the verge of launching their own similar products – and by the end of next year Apacs, the card industry's trade body, predicts that there will be more than five million contactless cards in the UK, and over 100,000 stores and outlets where they can be used.
Sandra Alzetta of Visa, whose Paywave system is behind Barclaycard's OnePulse contactless card, says that the vast majority of cash transactions are currently under £10, suggesting that once contactless technology is widely available, most people will rarely need to keep cash in their wallet. "Ten pounds might not seem like much, but a lot of transactions do take place for less than that," she says. "It is estimated that consumers make some 27 billion cash transactions a year, of which 80 per cent are under £10."
The current UK rollout is only taking place in the Capital, where residents are already familiar with contactless technology on the London transport system – as Oyster cards work using exactly the same principle. Indeed Barclaycard's OnePulse combines a credit card and Oyster card into the same piece of plastic.
So far, there are about 2,500 places where you can use contactless cards to pay for goods and services – mostly around the City and Canary Wharf. Businesses such as McDonald's, Eat, Subway, Threshers and Pizza Hut are amongst the companies that have agreed to start introducing the technology. "We targeted London because we wanted an area that had a high density of people who want to move around quickly," says Alzetta. "We'll be focusing on London for the rest of this year and start of next year, but from next summer we expect to see banks rolling out the technology outside the London area."
Supermarkets and larger retailers are also looking at introducing the technology later down the line. Such an application is perfect for the express lane at your supermarket – keeping customers moving.
"You probably won't see contactless terminals in jewellery stores anytime soon, but you will see it in sandwich shops, convenience stores – anywhere that gets busy and where people resort to using cash because they think it's quicker," says Oliver Steely of Mastercard, whose Paypass technology will be behind several of the new contactless launches this winter.
Mastercard first launched Paypass out in the US around three years ago, licensing the technology on to Visa, to expedite the spread of contactless payments.
Steely admits that consumers' primary concern – both in the US and UK – has been security. However, he points out that if you lose your card, there are a handful of security elements built into contactless technology, to ensure that anyone else trying to use it would not get very far.
"Inside each contactless card, there's effectively a clock that will allow you to carry out a certain amount of consecutive contactless transactions – say five," he explains. "But every time you use a cashpoint, or make a chip and PIN transaction – where you have to use your PIN to identify yourself – that clock is reset to zero."
The banks can also impose random security checks on contactless cards – randomly asking for a PIN number from a few customers at each store every day.
"If someone pinches your card, they make a couple of transactions under £10 before it locks," says Sandra Quinn of Apacs. "But there's not much point. Fraudsters aren't interested in buying a couple of sandwiches. In the US, they've certainly not seen any increase in fraud."
Steely adds that customers would be protected against fraud on a contactless card in the same way as they would be on a regular debit or credit card, claiming that most banks would be likely to refund any fraudulent transactions.
Once contactless technology becomes accepted in the UK, Alzetta says it is likely that it will be rolled out in a range of different formats.
Steely says that Mastercard already sells watches which incorporate its contactless technology in Turkey, something that has appealed to runners who don't want to take cash out with them – but who might want to be able to buy a bottle of water or snack while they're out.
Alzetta says the card companies are also working with mobile phone companies so that eventually, customers will be able to pay for things simply by swiping their mobile phone over a contactless reader. If the transaction is worth more than £10, you could be asked to put in a PIN on your phone keypad.Reuse content