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Goodbye cash ?
by Marija BARIC

Why coins and bank notes are becoming an endangered species.

If you do not have a mobile phone yet, it is high time you get one since these devices are about to revolutionise our daily life. Soon the day might come when you will need one to buy a loaf of bread or a pint of milk.

Credit and debit card use has increased dramatically over the last 20 years, while cash transactions have been declining. However, UK banks and retailers still spend an estimated £4bn a year on running cash transactions. It should come as no surprise that they should try to find cheaper alternatives.
This is why mobile phones are now encroaching on the traditional territory of credit cards. In London, the daily Congestion Charge, a train ticket, a newspaper, or a cup of coffee can now be purchased via a mobile phone. And the list is about to expand. No need to queue in front of a cash machine, and definitely no need to carry a cheque book around. Soon all you will need for a day out will be your mobile phone.

Later this year, mobile phones companies will launch the so-called smart-card technology on the British market. Based on the "the nearfield communication" technology (the NFC) which, once inbuilt into a mobile phone, the "smart-card" reacts when it is near or in contact with a reader. The NFC device is then activated and enables the transaction. The NFC technology can be placed into all kinds of mobile phones at a very small cost. When the customer is about to pay, he or she receives a SMS text message sent by a separate payment system. The customer must then reply by typing in his or her personal PIN number-- is all that is needed before the account is automatically debited. This technology is much cheaper to operate than credit cards and cash, and according to analysts, more consumer- friendly.

Such contactless card payments have been on trial in Scandinavia and Asia. Consumers will eventually decide if they feel comfortable and safe using them. Specialists are optimistic; according to Jemma Smith of Apacs, the UK payments association , : "Two-thirds of all personal payments are still made in cash, but that's in terms of volume, not value. There's a huge gap in the market for new ways of paying for things, and there are a number of ways that the gap is being filled," according to Jemma Smith of Apacs, the UK payments association.*

Sources : "A cash call," The Economist 17-23 February 2007.
* "How chips and cards will put paid to coins," The Independent 11 April 2007.

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