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Is the death of cash at hand?

As a wave of new contactless and mobile banking services begin to make inroads into retail business, the gradual death of cash will improve the efficiency of business enormously, says Tony Virdi, head of banking and financial services UK at consultancy Cognizant.

“The death of cash will take a long time – but it will make life easier both for businesses and for the consumer,” he said. “As phones come to include NFC and location technology, security becomes easier to validate, while offerings that solve problems one at a time will gradually overcome the barriers. This is only going to grow in pace and breadth from here on in.”

Mobile payments technology has been in development for years. Already, firms such as Barclays offer services that enable users to send and receive money using just a mobile phone number. Pingit is available as an app at the Apple store, and is currently rated 4.5 stars out of 5, based on 8,634 user reviews posted on its official product page. In developing markets such as Kenya, home of the M-PESA service, mobile banking reaches customers that have no access to traditional bank branches and bank accounts at all. Meanwhile, NFC technology has also gained increasing acceptance in recent years, although it was not included in the recent iPhone 5 launch.

However, a new service called Square, which was developed and pioneered in the US by twitter co-founder Jack Dorsey, illustrates the benefits of both mobile and contactless technology, according to Virdi. Square works as a free app, downloaded by retailers onto their iPads, which turns the device into a digital cash register. Customers also download the app and create an account, uploading their photo and their bank details. Once they have registered, users can use their mobile device to pay for retail goods and services.

“You can walk in to get a cup of coffee and the name and photograph will automatically appear on the retailer’s iPad,” said Virdi. “It’s phenomenally simple – you do nothing more than say two words to buy what you want. The transaction is automatically approved and the payment is made through credit card. The retailer doesn’t need a till, nor does the customer need cash.”

Recent research by financial services specialist Gartner suggests that global mobile payments values are likely to increase from a current US$172 billion per annum to around US$617 billion by 2016. Already, studies in the UK are reporting that two-thirds of banks expect everyone to be using mobile banking in some capacity by 2017, while one-third of UK consumers expect to be using smartphones to do all their banking by 2020 according to statistics gathered by business technology provider Avanade. To Virdi, that suggests a great opportunity to expand on offerings such as the Google Wallet, an app that is designed to turn users’ phones into their wallets, and the success of contactless technology such as London’s Oyster card, which allows users to travel freely by topping up a card fitted with NFC technology.

“In Europe and North America, nearly everyone has a phone and around half have a smartphone,” said Virdi. “Around 10% are using mobile payment technology. At the same time, the Oyster card was phenomenally advantageous in removing queues and improving efficiency. Bringing together these two advances presents a huge advantage.”

Square is tentatively expected to launch in the UK early next year.


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