Mobiles pushing credit cards out
SCIENCE CORRESPONDENT
NEW DELHI, APRIL 29
It is happening in the United States and the Europe and the day is not far away when it happens in India when people start paying for goods and services using cell phones and the wallet looks old-fashioned. It will also put an end to days of flashing credit cards instead of paying in cash may be over as there will be no need to carry thick wallet with plenty of credit cards to show off.
Several companies in the US have developed small credit card scanners that plug into a cell phone and for a small fee enable any individual or small business to turn a phone into a credit card processing terminal.
PayPal’s cell phone application calls for only a simple bump of two cell phones to transfer money. Apple has submitted a patent application for a cell phone payment system.
When Brian Kusler, a software engineer, had a dinner recently in a San Francisco restaurant, his companion paid the bill and sought his share. Instead of hunting down an ATM, the two bumped their iPhones together, and Kusler wirelessly transferred his part of the bill, about $100.
Federal Reserve has enough evidence of paper money being used less often in the US though cash payments are difficult to track, the number of non-cash transactions in the United States grew from fewer than 250 a person in 1995 to more than 300 in 2006.
Data on the stock of small-denomination bills and destroyed bills indicates that the use of cash peaked in the mid-1990s and has been declining since, two economists at the Federal Reserve Bank of Cleveland found.
“When debit cards were introduced in the early ’90s, that was the beginning of the slow and gradual decline of paper cheques and cash,” Red Gillen, a senior analyst in a financial firm in Boston told The New York Times. Credit cards solved the problem of the bounced cheques.
Still, cash has remained essential in certain instances, like paying back a colleague for lunch, buying fruit at a farmers’ market or buying a beer at a cash-only bar. These new mobile payment technologies could finally change that.
The new services could have the biggest impact on the smallest businesses, like farm stands or house cleaners that accept only cash because they do not have stores to house credit card terminals and do not want to enter into complicated, long-term relationships with credit card companies.
Fraud protection offered by the credit card companies is the same as when the card is used at a cash register. Some of the new companies say security against fraud might even be improved because they provide e-mail receipts, and those from Square include photos and a map of where the transactions were made.
The death of cash has been predicted since the 1970s, when electronic transactions like direct deposit of cheques were introduced. But most digital payment experiments, like one in 2006 by Visa, have focused on swiping cell phones, as is popular in countries like Japan, instead of credit cards. Mobile payments have not taken off in the United States because Americans are just as happy to reach into their pockets for a plastic card as for a cell phone.
Instead of replacing credit cards, technologies like Square and GoPayment rely on them. Credit card companies stay in the middle, extracting a fee with each swipe or bump.
Though people will use cash less, it is not nearly extinct, said Wayne Abernathy, executive vice president for financial institutions policy at the American Bankers Association. But a cashless society could become a reality as the younger generation, accustomed to buying music on iTunes and virtual gifts on Facebook, grows up.
“Older people still tend to like to use cash or checks,” Mr. Abernathy said. “Younger people don’t want to touch a piece of paper. They want to do it all electronically.”
