Friday, January 14, 2011

Personal finance: Make way for a cashless lifestyle - Orlando Sentinel

Personal finance: Make way for a cashless lifestyle - Orlando Sentinel

Personal finance: Make way for a cashless lifestyle - Orlando Sentinel

Posted: 14 Jan 2011 11:05 AM PST

The phrase "Show me the money" is taking on a new meaning: By 2020, use of cash is likely to be a rarity.

It won't disappear entirely, of course. Individuals and businesses will still prefer to use bills for some transactions, if only in the underground economy for illicit activities or to escape paying taxes.

But electronic transfers will rule commerce. Imagine buying a cup of coffee using your fingerprint, or paying for groceries by scanning your own bar code. Already, only a quarter of retail transactions involve cash. In 2007, businesses paid 74 percent of their bills by check. Last year it was 57 percent, and the number keeps falling.

Strides in technology are clearing the way for even less use of cash. For example, use of near field communication chips, which can be used to make mobile payments, is set to explode. Some 40 million such chips will be shipped in 2011 for use by mobile phone and other equipment-makers serving the North American market, according to a forecast by the Mercator Advisory Group. That's up from hardly any in 2010.


And the number of terminals that accept the contactless payments will mushroom in coming years. About 150,000 point-of-sale systems can read near field communication chips now, and the number will grow by about 20 percent a year once the chips roll out.

Visa and Discover are working with merchants to develop systems to process the payments. Such cooperation among the many players — banks, telecommunications companies, retailers and others — will be necessary for businesses to adopt and benefit from the new systems.

Retailers like near field communication payments. For one thing, security is better than for regular transactions using cards because account information is encrypted directly in the chip rather than as part of the communication between the store and the credit card issuer. Plus, businesses can tie its use to loyalty programs to gain more and easier access to customers' buying habits. Retailers will be able to target frequent customers when they walk into a store, thanks to tracking technologies in the chips and smart phones.

The convenience will also appeal to consumers, especially with the advent of the e-wallet — phone software that allows users to pay from any of their bank or card accounts, plus automatically logs loyalty points and alerts users to electronic credits and coupons.

Smart phones are "the Swiss Army knives of today," said Mark Beccue, a senior analyst at ABI Research, a technology advisory firm. Google's next Android phone operating system will support an e-wallet. So will the coming iPhone 5.

Smart phones will also make use of bar codes, speeding the move away from cash. The minimal investment required means some retailers are adopting programs such as AisleBuyer, software that lets shoppers scan products as they pick them up, then complete the purchase with account information stored on their phones. Terminals with the Cimbal system produce a bar code that triggers a payment when scanned into a smart phone. And TabbedOut lets diners run tabs and pay using their phones.

Electronic peer-to-peer payments are gaining headway, too, with new services making it easy for individuals to transfer funds from their accounts to accounts held by others. Dwolla charges 25 cents per transfer. Payment giant Fiserv offers money transfers in a day. The ease of person-to-person transfers will be crucial in expanding the cashless network, said Brian Shniderman, director of the financial services, banking and payments practice at Deloitte Consulting.

The trend comes with challenges. Banks will have fewer branches and ATMs. Retailers will need new or updated systems at the point of sale. Customers face possible higher costs because electronic transactions will carry fees. And consumers lacking bank accounts may be left out.

Distributed by Tribune Media Services

Near field communication

Some 116 million smart phones equipped with near field communication, a short-range wireless connectivity technology, will be shipped globally in 2011, according to a forecast by Mercator Advisory Group. The number will hit about 260 million in 2012 and more than 510 million in 2015, the forecast says. The forecast added that most consumers probably won't see the value of technology until 2012, when related services and infrastructures are in place.

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