Why cash is out of fashion

2013-06-04 09:30

With the dramatic rise in smartphone use – and the growth of apps and other online services – grubby notes may soon be a thing of the past.

It’s 11am on a Wednesday and, laden with shopping bags, you’re scrabbling around for the R10 note you need to feed into the parking pay point.

Imagine you didn’t have to – and that a quick swipe of your cellphone did the trick for you instead? Bliss. Or imagine never having to deal with a bank – and the resultant headaches – ever again!

In this age of always-on mobile interconnectivity, there is renewed excitement for what is called the cashless society. And like all technology innovations, it is set to revolutionise our lives.

In the 70s and 80s we had credit cards. After the turn of the millennium it was internet banking, soon followed by ecommerce.

Now it’s the app economy – which refers to the ubiquitous smartphone and the applications that run on them.

First came simple banking apps, which are now increasingly sophisticated and offer more services than just straightforward banking.

Additionally, they provide an extra layer of security because they are linked to your particular handset. (Internet banking can be done from any computer, as long as you have the username and correct password.)

Other sophisticated ways to pay have also emerged – some that don’t even need a bank account.

FNB GeoPay allows you to make a payment to any other smartphone in your vicinity, even if the receiver doesn’t have a bank account.

Mxit Money was also launched last year, allowing the 10 million active users of this popular messaging service to send each other money for free. It also lets its users send money to anyone who isn’t on Mxit, but has a cellphone, for a nominal fee.

Money can be deposited into and withdrawn from each user’s Instant Money account, and it can also be used to buy airtime and electricity.

‘This is just the beginning. The future of banking is undoubtedly mobile and over time, cards and cash will reduce, if not disappear,’ says outgoing FNB CEO Michael Jordaan.

Further excitement about cashless services stems from a little piece of plastic that plugs into the headphone jack of an iPhone, called Square.

Made by Twitter co-founder Jack Dorsey, it circumnavigates the need for a point-of-sale credit card machine by letting anyone with the app (currently only in North America) swipe a card and accept payment.

The other side of the coin

We’re yet to see if the Bitcoin bubble will burst – the virtual currency isn’t backed by a traditional banking structure, which could be its saving grace, or downfall.

It’s the first practical implementation of a cryptocurrency and what makes it so interesting is that, unlike normal currencies, there is no authority, government or central bank that controls its value.

And because it is decentralised, it means that unlike other cashless payment options such as PayPal and credit cards, there is no middleman or bank taking care of (and possibly losing) your money.

Its legality is still up for debate in some countries and it does have weaknesses (eg, it can be used for money laundering, the taxman can’t see it and, because it’s software, it can be breached), but for now, it’s an example of what the future holds.

And apps don’t just focus on making payments easy, they’re also evolving into replicating window shopping. Or paying less.

PriceCheck won the BlackBerry international app of the year last month.

An extension of the PriceCheck website, it checks the prices of 30 million products in 6 000 categories in about 500 online stores for its 1.3 million users per month, 350 000 of which are on mobile.

Designed specifically for the South African and Nigerian markets, it compares prices of products and finds the cheapest deals.

While the downsides of this potentially cashless world are often thought to be security related (as anyone who has had their credit card cloned can tell you), there are also practical concerns.

For instance, if your phone battery runs flat, you won’t be able to pay for your groceries.

Even simple transactions like giving money to a car guard or the collection basket at church will be tricky without cash.

But on the plus side, what the future holds for life without cash is as open as every other industry that the rampant advance of technology has disrupted.

The power of the internet and the mobility of smartphones have changed how we communicate, interact and consume products and media – just look at the success of YouTube (with 100 hours of video uploaded every minute) and Amazon.com, the world’s largest online retailer.

But if you want to make real money out of a cashless world, make sure you launch the app before anyone else.

If you don’t have a smartphone…

M-Pesa, a Kenyan mobile payment service, allows even the most basic phones to handle transactions.

‘In Kenya, mobile money was the game-changer in bringing financial services to the middle class and the poor,’ says Nick Read, Vodafone’s regional CEO for Africa.

‘In 2006, only 20% of Kenyan adults had access to financial services, but by the end of 2010 that share had jumped to 75%.’

M-Pesa had 17.3 million active customers in Africa at the end of 2012.

Safaricom, the mobile network operator that developed M-Pesa, has 15.2 million registered customers, of which 9.7 million actively use M-Pesa at least once every 30 days.

M-Pesa is now available in eight countries, including Kenya, Tanzania, South Africa and the Democratic Republic of Congo.

It has failed to have the same kind of impact in South Africa, in part because our financial services infrastructure is more developed.

MTN partnered with Pick n Pay to create Tyme Capital, a more sophisticated mobile banking option.

Customers can withdraw and deposit cash at Pick n Pay stores, as well as Boxer stores, and do instant transfers to any local cellphone number. You don’t even need to visit a store to open an account – you can do it from a cellphone.

For smartphone users

FireID, a Stellenbosch-based company that has been involved in providing banking services for Standard Bank and Mxit, has released SnapScan, an app that allows iPhone and Android users to store their credit card details on their phones and pay at participating merchants.

Once the credit card has been stored in the app (not on online servers), you pay by scanning a QR code and entering a PIN.

In the United States, an app called Gyft (started by South African entrepreneur Vinny Lingham) hopes to capture the over $120 billion gift card business in America.

The preloaded gift cards – from Amazon to iTunes vouchers – can be scanned and stored in the app and used with more convenience.

Toby Shapshak is editor and publisher of Stuff magazine.

»Get your copy of iMag in City Press on Sundays.

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