The Way We Pay Now

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by: bythesea
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Date: Thu, 3 Jun 2010 Time: 5:49 PM
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If you like the feel of cash in your hands, enjoy it now because its days could be numbered. Confused.com's Carl Chambers ponders the decline of paper currency and previews things to come.

The Payments Council - the organisation that sets strategy for UK payments - recently released The Way We Pay 2010. The report highlights the payment revolution that occurred during the noughties, and which is still going on now. It shows how plastic and electronic payments exploded over the past decade, and paints a grim future for cash and cheques.

Even though the Payment Council reckons cash won't disappear in our lifetime, it's already becoming less familiar to me. For instance, I hardly recognise the people on notes these days. Apart from that regal-looking lady in the crown, who exactly are Elizabeth Fry (£5), Adam Smith (£20) and Sir John Houblon (£50)? Bring back Isaac Newton (inventor of gravity/Shaft theme composer), I say.

I remember being paid in cash right up until the mid 90s, when every Friday I'd get a small envelope stuffed with notes. These days, the only people who get paid like that are politicians. Now my wages take an electronic route: work → my bank → my mortgage provider, thus bypassing me completely with true electronic efficiency.

Future Spending

So with cheques on the way out (termination date: 2018), and cash in decline, what does the future hold for transacting payments?

Debit Cards

Debit card spending is set to nearly double by 2018 as we continue to rely less on cash and cheques. And although the table has debit card payments accounting for a quarter of all 2018 transactions, the Payment Council Report says this could be an underestimate as contactless technology takes hold.

What is Contactless Technology? Already being trialed here, the system pairs a special debit card with a card reader installed at the point of purchase. After a checkout assistant has scanned your goods, you simply hold the card near the reader until payment is approved.

However, the fact that no PIN is required is a concern. This is one reason why the current contactless transaction limit is set at £15. But with contactless payments now available in some retailers, and with three million Barclays customers being sent upgraded debit cards this year, it's set to become commonplace. In fact, it's estimated that one in seven UK people will be contactless-enabled by the year's end.

Online

Faster Payments is a form of electronic transfer that reduces payment times between accounts from three working days (using BACS) to almost real time. Faster Payments has had a gradual roll out since being introduced in 2008, but it has already exceeded its target of assuming 8% of BACS online (and phone) banking payments and standing orders. As roll out and interest increases, Faster Payments is expected to keep on growing.

PayPal has been going strong since 1998, largely thanks to eBay, which now owns the service. After setting up an account, it allows for instant money transactions across the internet. The next evolution of this is Twitpay, which allows Twitter users to use PayPal accounts to make payments between each other. Will more social media jump on the online payments bandwagon?

Mobile Phone

The ‘Send Money' iPhone app is spearheading the use of mobile payments. iPhone users can literally ‘bump' phones together in order to make a connection. One party can then send the other money from a PayPal or bank account.

The convenience of this payment method could really catch on, providing people's security concerns can be satisfied. However, that hasn't stopped a million iPhone users from already downloading the app, nor has it stopped Nokia from investing in a similar idea. Furthermore, Mastercard has also announced its intention to let customers pay their bills through messages on their mobile phones.

Biometrics

I don't have much to report on biometric payments, to be honest, I just like the word ‘biometrics'. However, fingerprint recognition is already in use at some schools, where children can smudge a sensor with their finger to register when they've had a school dinner. This sort of thing, maybe broadened to use eye or facial recognition, is surely on the cards as a way to pay in the future.

About the Author

Interested in innovative payment methods? Have security concerns? Check out what each of the savings providers and credit cards offer at Confused.com