How electronic payments are replacing money

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The new iPhone 5 may have spurned near field communication (NFC) for another year at least, but that doesn’t mean electronic payments won’t replace the notes and coins in your pocket. We look at three forms of electronic payment that could signal the end of cash

Pre-paid swipe cards

Pre-paid swipe cards have been around for a while. One of the first, the Octopus card, originated in 1997 as a contactless smart card for Hong Kong’s public transport system, but can now be used for payment at retail outlets and parking.

The technology, which speeds up payment by not requiring a PIN or signature – just slap it on the reader – is generally limited to small payments. Providers in the UK include Visa Cash, Barclays and sQuid.

Near-field communication (NFC)

NFC chips and readers can be embedded in mobile devices and credit cards. The technology works over a short range and supports encryption, making it more secure than existing pre-paid swipe-card technology. Barclays set up the first commercial NFC payment system last year, in conjunction with Orange, and has since launched PayTag, which glues an NFC chip to any mobile phone.

The Post Office intends to roll out contactless payment terminals, allowing NFC payments across its 11,500 branches by next month. Google has already launched its own NFC-based service, Google Wallet.

App-based payment systems

A growing market in the UK, application-based payments avoid the expense of chip and terminal infrastructure. Barclays has launched Pingit, which allows users to send money to another Pingit account by entering a PIN and the recipient’s phone number.

PayPal has launched an app that provides a personal bar code retailers can swipe using existing scanners. Despite these advantages, app-based technology is less secure than chip-based technologies.

Users are potentially vulnerable to phishing scams – attempts to acquire payment details by masquerading as a bona fide party in electronic transactions.

Is this really the end of cash? Some experts don’t think so. Read our exclusive post which explores why hard currency isn’t ready for the scrapheap just yet.

Steven Perryman is AAT Comment's former Content Editor.

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