The race is on for a cashless society

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The Independent Online
Athletes are packing their bags for the Olympic Games, which open later this month in Atlanta in the US. But, arguably, cash is one of the things they can leave behind, because the venue is a prototype for the cashless society.

Visa, one of the Olympic Games' official sponsors, is using the opportunity to develop its electronic cash system. Visa expects to issue more than 1.5 million "cashcards" at Atlanta to athletes and spectators.

The cards, also known as "electronic purses", resemble traditional plastic credit and debit cards. They replace notes and coins, paying for the goods too low in value for debit or credit cards, which are typically only used for transactions over pounds 10. Nothing is too cheap for a cashcard, whether it is a newspaper or a box of matches. Using a point-of-sale terminal, a transaction with a cashcard is even easier than paying by cash because there is no worry about change.

Visitors to Atlanta will still be able to use traditional cash, but 1,500 Atlanta retailers will accept the cashcards, called Visa Cash, including fast-food outlets, cinemas and public transport operators.

The move is one of a number of developments towards encouraging us to give up cash even for small transactions.

One of Visa Cash's competitors, Mondex, which is backed by the Midland and NatWest banks and British Telecom, has been on trial in Swindon for the past year. Although the results have been widely reported as disappointing, Mondex maintains that more consumers and retailers than expected have signed up to the system and that 85 per cent of them have been pleased with it.

Another Mondex pilot has just been launched for students at Exeter University. They can use their cards not only for payments on the campus but also to vote in student union elections, to take out library books, and to gain entry to university buildings.

Such cards carry a pre-paid float, and most can be topped up through visits to a cash machine, although at Atlanta some will be disposable and non-recharge-able. The cards contain their own computer chip in place of the magnetic strip on the reverse of a credit or debit card. Cash withdrawals and high-value purchases are confirmed by use of a PIN number, and some cashcard systems use random personal questions, such as asking your mother's maiden name, as an additional security check.

Certain cashcards offer security for users. If your card is stolen you ring up the issuer, who cancels the card and gives you a new one carrying your lost balance. Consequently, Russia and Nigeria, two countries where violent robberies on shoppers and retailers are common, have taken up electronic cash enthusiastically.

Arguably, international travellers stand to gain the most from the development of electronic purses because the cards can hold dozens of separate purses of money. Using a cash machine, the card holder can transfer money into foreign currencies, eliminating the need for travellers' cheques and reducing the cost of currency conversion. Some cards will be multiple-use, with credit, debit and cash functions on one piece of plastic.

Banks and retailers are keen on the cards because fewer cash-handling and security staff will be needed and costs can be cut. Moreover, floats held on the cashcards will not normally earn the holder interest and can be invested by the bank.

Visa will make its cashcard available in Britain from next year, and Mondex the year after. Another version, Europay's Clip card, will be introduced in a range of European countries from next year, beginning with Italy and the Czech Republic. However, it will be longer before the card is accepted in the UK.

The Mondex system has an advantage over its competitors in that Midland's owner, the Hongkong and Shanghai Banking Corporation (HSBC), has sold the system for use in the potentially massive markets of China and India.

Mondex lets users pass money between card holders, while cards issued by Europay, MasterCard and Visa adopt the EMV standard, which prevents transfers between cards. But holders of EMV cards can be reimbursed if cards are lost or stolen, unlike Mondex card holders.

The idea is here to stay in some form, but there are worries. Through the EMV standard, banks could learn much more about our spending habits, allowing them to build up highly effective consumer databases that might be sold to big retailers. "There is the spectre of Big Brother - the privacy debate is very active in the US," says Duncan Brown, a senior consultant at Ovum researchers and co-author of a forthcoming report on electronic cash. "The key is who would own the information."

q Mondex cards for use in Swindon can be obtained by phoning 01793 532110.

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