Electronic cash 'purse' scheme

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Science Correspondent

Electronic cash could become widespread in the UK from next year, after the credit card giant Visa confirmed it was talking to banks about introducing "electronic purses" to the high street.

Retailers warned that the new system would have to be both cheap and cause the minimum of disruption. But the news was seen as a welcome boost by those in the "electronic cash" industry, which has been gaining momentum in the past few years.

The "purses" would consist of a microchip embedded in a credit card-sized mount, known as a "stored value card". These store money in the form of encrypted electronic digits in the chip's memory, and can be used like cash to make purchases. The transaction is completed by swiping them through a card-reader in a store, which transfers the "cash" to the store's computer.

Visa is understood to be talking to Barclays, Lloyds, the Halifax, Abbey National and a number of other high street banks. "Six members of the Visa consortium in the UK have asked to evaluate a stored value card programme," said a Visa spokesman yesterday.

"It's early days, but if they give the go-ahead we could have them operating in Britain next year."

The new system would be a direct challenge to the Mondex electronic cash scheme, which has been tested in a public pilot scheme in Swindon, Wiltshire, since last July. Mondex is backed by the National Westminster and Midland banks and British Telecom..

But retailers are worried that the two systems might not be compatible. "Shops never want more than one box on the till," said Elizabeth Stanton Jones, director of financial services at the British Retail Consortium. "We are not against competition, but when it comes to operating them, there has to be consistency between them."

David Birch, of the consultancy Hyperion, said: "There are international standards, so it doesn't necessarily follow that the Visa and Mondex systems would be incompatible."

Visa presently has trials running in a number of countries, including Australia, the US, Canada, and Latin America. It is testing a number of different formats, including disposable cards which, like BT phonecards, would be thrown away once used; "rechargeable" cards, which could be "refilled" with cash from the holder's account; and "combined function" cards, adding cash to an existing credit or debit card.