Smartphone = electronic purse

Cash and cheques continue to be used less and less frequently, but even credit cards are being gradually replaced by simpler, quicker and more direct payments made via smartphone.

March 2015

Smartphone = electronic purse. Cash and cheques continue to be used less and less frequently, but even credit cards are being gradually replaced by simpler, quicker and more direct payments made via smartphone. IMA LAB


Among the countless “revolutions” of recent decades, the decline of cash transactions may be one of the less spectacular, but it is certainly changing our purchase procedures in no small way.

The transition from cash to cheques and then from cheques to credit cards has been part and parcel of transitions from one generation to another and one culture to another. Even in economically advanced nations there are still numerous elderly people who use only cash and distrust credit cards, but the vast majority now mostly uses electronic cards to pay for their purchases, both in sales points and online.

In recent years a lot of effort has been applied – and successfully – to improving security systems in order to prevent fraud and theft, especially online. But the fact remains that there are still numerous contexts when cash is much more convenient than credits cards: paying for purchases in open air markets, having a snack and a coffee in a bar, buying flowers from a street stall, paying back a friend who bought our tickets for a film, and so on. The availability of cash machines can help reduce the amount of cash we carry, and the amount of time we carry it for, but they’re not always nearby when we need them, and some people would prefer just never to have cash in their pockets, full stop.

There are also numerous situations such as restaurants, country guest houses or house cleaners which accept only cash or cheques because it’s not practical for them to install credit card terminals, or because they have no wish to enter into what they see as complicated long-term relationships with credit card companies.

One solution which is being applied is the development of small credit card scanners which plug into a cellphone and for a minimal fee enable any individual or small business to turn a smartphone into a credit card processing terminal. This makes it possible to accept credit card payments in situations of mobility or other previously impracticable situations. Example: the case of a street painter in the USA who recently saw his income from on-the-spot portraits rise dramatically when he started accepting payments in this form.

The battle for supremacy in this new field has begun, and predictably involves colossuses such as eBay, Google and Apple, who are all aiming to supersede credit cards.

Google Wallet is a service that Google has been running for several years now. It is based on the idea of transforming our cellphones into wallets using NFC technology to transmit data to a sensor connected to a cash register in a point of sale.

NFC stands for Near Field Communication, and is a technology that makes it possible for two devices to communicate reciprocally on a specific frequency at distances of no more than 10 cm.

PayPal, a company controlled by eBay since 2002 and which counts 150 million active accounts, has developed an app which enables two people to conclude a transaction with a simple bump of their two cellphones.

Since October 2014, owners of iPhone 6 and iWatches can pay in 200,000 shops across the USA simply by bringing their device close to an NFC sensor next to the cash desk. The payment arrives directly from the user’s credit card, registered on the Passbook app. The security of the transaction is guaranteed by the device’s fingerprint sensor.

Beacon is another system of digital payment, which instead of NFC uses a new type of low consumption Bluetooth connection, the BLE (Bluetooth Low Energy). When a smartphone comes within range of a Beacon device, a “spontaneous” connection is established, at which point payments can be made. Among the supporters of this system is Paypal, and Apple is also interested, launching its own iBeacon device. One feature which can be seen either as an advantage or a disadvantage, depending on your point of view, is that Beacon devices can be used by sales points not only to receive payments but also to communicate special offers and discounts to any cellphone within range.

Another interesting new system, not yet active in Italy, is Venmo, which allows users to quickly transfer money from their Venmo account (based on a credit card) to another account, with only a few actions and without paying commission. It can be used via web or via an app, but it only works within the limits of the user’s contacts… as though it were a social network. Venmo has been bought by Paypal and has agreements with Facebook.

While these new technologies are developing, a San Francisco startup has invented “Coin”, a card designed to contain all the data from all our multiple credit cards, ATM cards and gift cards. In order to pay, you quickly select the desired account from Coin’s display window, previously swiped onto your Coincard from your smartphone.

The system is made more secure by a connection between your phone and your card: if they’re more than a meter apart, the card won’t work… and your phone will let you know.

There is, however, still one thing about “physical money” that wins our sympathy: it has no need of connections or energy, and so it always works!