Comment: Cashless society will benefit the banks

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The Independent Online
Beware bankers promising wonderful Tomorrow's World gadgets that will change our financial lives for the better. There's usually an ulterior motive, and with the Mondex electronic purse, it is an obvious one.

Banknotes still make up 71 per cent of all financial transactions, by number. But they cost an awful lot of money to move around and count, they are insecure and they wear out. No wonder banks have put so much effort into finding a nice, tidy electronic alternative. It's self interest, whatever the marketing chaps say about the enormous benefits for customers. The electronic purse is the favoured answer, and Mondex, a NatWest invention, appears to have the edge among competing technologies.

Mondex allows you to deduct money from your bank account over the telephone or from a teller machine and load it, in the form of electronic data rather than paper, on to a highly secure computer chip. From the chip it can be transferred through a wallet-like gadget to other people's cards, just like handing over cash to make a payment. More commonly, the electronic cash will be downloaded directly into a shop's till.

But what is in it for the bank customer, since cash is so cheap and easy to use? The answer is, not much. There are advantages for travellers, since Mondex can operate in five different currencies at any one time. But the real beneficiaries of a wholesale switch away from cash are banks and retailers.

The problem is getting sufficient critical mass - a large enough number of users to make these novel payment methods worthwhile. That is why the arrival of a world-wide credit card company as majority shareholder in Mondex is such a significant development. The advantages of a cashless society for the large number of banks that own MasterCard are so great that they'll end up bribing us to use it if they have to.