Plastic makes the Switch to cyberspace

Debit cards are set to become even more popular, says Faith Glasgow
Think back to the last time you queued in the bank to cash a cheque rather than using your card to withdraw money from a cashpoint. Was it months or even years ago?

Running out of cash is no longer a disaster now that you can use a Switch card in supermarkets, filling stations and restaurants. Many places also offer a "cash-back" option for those caught short. And what about booking cinema seats or travel tickets by phone? It takes a couple of minutes now - but a few years ago you would have put a cheque in the post and crossed your fingers to make sure it arrived safely.

The rise of plastic is gathering speed. And the biggest growth is in the use of debit cards. These take the cash straight out of your account rather than putting your debt on a separate account as a credit card does. Debit cards are known under the Switch brand name in the UK but we'll eventually be issued cards under the international brand name Maestro.

According to Europay (which has 80 per cent of the European debit card market share) the number of purchases made using debit cards has shot up by almost 40 per cent in the last 12 months. Globally, the debit card revolution is even more marked - transactions have roughly doubled each year since 1996.

Debit cards are convenient and give you instant access to the money in your own account. They are particularly useful for those who don't have access to credit cards but need to pay with plastic. And they are very handy for lower value purchases, which you'd expect to pay for from your current account.

But there are drawbacks, and these are mostly debt related. It's very hard to keep track of expenditure when you use your debit card all the time, and casual card purchases or a forgotten cashpoint withdrawal could tip your precarious current account over into the red. Make a point of keeping all your receipts - this is useful for checking against your statement and in case someone uses your card number fraudulently.

Within the UK you can use Switch cards to order goods or services over the phone. But Brian Morris, electronic commerce manager at Europay, says that there are no plans to allow international transactions. "We don't feel there's high enough security; we don't want anyone who finds a card to be able to make purchases by phone around the world."

The internet has also posed a hurdle for card issuers. So-called e-commerce transactions are doubling every 12 months and set to continue to grow exponentially; cards account for around 88 per cent of those purchases. But in the UK at the moment only credit cards are accepted by internet merchants. Because debit cards involve payment straight from a customer's account they have been seen as too much of a security risk, Mr Morris explains.

That has now been sorted out in the form of a software system, SET, which is installed on your computer. It ensures both your authenticity as the purchaser and that of the firm selling to you. It is already possible to use debit cards for internet purchases in Holland, and Mr Morris says that other European countries, including the UK, will be set up for SET by the middle of next year.

But it looks like the security problem will be solved anyway by embedding microchips in new debit cards. This process will mean that all the necessary data on you and your account is held securely in a microchip in the card, rather than on the old-fashioned and easily accessed magnetic strip.

Over the next few years chip cards will open up internet shopping and also herald the arrival of multi-functional cards (for example incorporating loyalty schemes and electronic small change as well as access to your bank account). Plastic has never been so flexible.