Smartphone explosion speeds the end of cash

The long-heralded shift to a cashless society is happening faster than even companies like PayPal predicted.

By The Fiscal Times Jan 26, 2012 1:40PM
By Suzanne McGee, The Fiscal Times

The smartphone revolution -- just look at the gargantuan surge in the number of iPhones that Apple sold in the fourth quarter -- is finally starting to deliver on an old promise: Increasingly, those phones are doubling as our wallets.

PayPal, which is beginning to roll out in-store e-payment systems, starting with Home Depot (HD), will be one of those companies relying on smartphones as part of the new payment systems.

In fact, if you look around, smartphone "wallets" are suddenly everywhere. Get in line to board a flight, and odds are that you'll spot someone ahead of you offering up their smartphone with an image of their boarding card rather than an antediluvian paper boarding pass. A PayPal developers' conference even featured the demonstration of someone using a smartphone (along with Twitter and a PayPal account) to buy a gumball from a machine.

PayPal, a division of eBay (EBAY), is a big contributor to the auction site's growth. Even the departure of PayPal's former CEO for the top job at Yahoo (YHOO) isn't likely to change the fundamentals: Every year, more transactions are shifting from cash to credit cards or other non-cash methods of exchange. Even eBay and PayPal can't keep ahead of the curve. Last year, they forecast that mobile payments would reach $1.5 billion. Even after doubling that estimate, they still fell short of the actual total reported last week: $4 billion. They now are calling for that figure to hit $7 billion this year.

The shift to a cashless society is the focus of an upcoming book, The End of Money, by Wired contributing editor David Wolman. Due out on Feb. 14., the book is a love letter of sorts to PayPal and other disruptive technologies that Wolman believes will soon force the literal greenback (not to mention the dime and the penny) out of circulation. That day can't come soon enough for the author, an unabashed admirer of e-payments for their efficiency and ease of use. (He's also a bit of a germaphobe, worried about where those dollar bills have been and what they might have picked up along the way.)

Wolman's book is an entertaining and engaging canter through the world of money, both real and electronic, but it does prod a reader into pondering who will emerge as winners and losers if the book's central thesis proves correct. The last few days have shown that some are already benefiting, eBay and Apple among them. (Smartphone technology is proving key to seamless e-payment programs.)

Facebook is another contender. Facebook credits can be used to pay for all kinds of intriguing items, including gold on games developed by Zynga (ZNGA). What happens if someone opts to be paid for an item or service in Facebook credits? And if that's the "cash" they prefer, well, why not?

Other companies are also benefiting. MasterCard's (MA) stock was one of last year's winners, surging as cardholders steered more transactions online. The credit card company has been investing in new e-payment systems, such as its PayPass technology, which works on the Android Wallet app developed by Google (GOOG). Banks may also benefit, especially via fees on the use of debit cards and, in the near term, as "cashless" remains most closely linked to conventional payment methods such as credit and debit cards.

Going forward, keep an eye open for companies developing technologies that will maintain the security of all that cyber-cash as it flows through the air. Most of us have felt the pain and inconvenience of having a credit card hacked and getting a call inquiring whether we have just spent $1,800 on a new entertainment system on Walmart.com. Increased online transactions also raise the potential for more of this kind of fraud -- and snafus of all kinds. (One bank-to-bank transfer of my own recently vanished into cyberspace.)

Whether or not the transformation occurs as rapidly and completely as Wolman forecasts and hopes for, big companies are scanning the landscape looking for ways to position themselves for the change.

Related Links:
The 28-Year-Old Out to Kill Credit Cards and Paypal
The Two Questions on Apple Investors' Minds
Analysts Put Google in the ‘Penalty Box’
Will Samsung Buy RIM?

12Comments
Jan 26, 2012 2:11PM
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What happened to the paperless office? Did not happen. Will not happen. Today's offices use MORE  paper than ever before. Why? People have been predicting a cashless society for decades. Fact: the money presses are printing MORE cash then ever before. We may become checkless but we will NEVER be cashless. Any talk that says otherwise is silly.
Jan 27, 2012 11:36AM
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I'm so sorry I can't pay for that right now, I left my smartphone @ home, I lost my phone,

the battery is dead, etc. I can't afford a smartphone and the extra cost of the plan to

utilize it. Cash is King ! 

Jan 27, 2012 12:02AM
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haha, this article is awesome, my credit card did get hacked with someone ordering $1800 worth of stuff from walmart.com
Jan 27, 2012 2:47PM
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Well, electronic doesn't work too well when all the cell towers have been blown away by a hurricane or fallen due to an earthquake or fires or other natural disasters.

I personally, don't want to be without a way to communicate with people or purchase necessary supplies....land line & CASH!

And besides all that....there are still areas of this country that either has NO cell phone reception or has just spotty reception...we are spotty...reason for a land line!  And we have a tower just about 3 mi. down the road from us...it didn't help!

There are LOTS & LOTS of areas of the world that have NO cell reception nor even any towers.  I think it will be a few years before we are totally electronic....IF EVER!

Jan 27, 2012 4:19PM
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When I watch the Chase commercials I just marvel at the technology with the crooks following right behind.

 

You can't hack cash.

Jan 27, 2012 2:51PM
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I had another thought....a few years back, maybe in the late 80's or early 90's they were predicting that NO ONE would OWN a car.  Everyone would lease them.

 

That never happened either!  ((big grin))

Jan 27, 2012 4:17PM
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I still have a dumb phone. I have no bank account and work for cash. There is no way people can pay me unless it's with greenbacks or a check that the local bank will cash.
Jan 30, 2012 6:27PM
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In a cashless society, other forms of bartering will rise up. How else are people going to pay for illegal drugs? Garage sales will be a thing of the past, so will pocketing money without having to claim it as income. It sounds like a great idea when we envision Star Trek like utopias of the future, but that is fiction. In the real world it's not going to work, nor do people like feeling controlled. What seems right to man leads to death.
Jan 30, 2012 6:30PM
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For the ones who commented saying what happens when we lose our phone, or a hurricane wipes out the towers. Those are the excuses they'll use to want to chip everyone, after the system is in place.
Jan 27, 2012 8:31AM
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I think we're entering the age when money, as we know it, is being phased out.  It's inevitable, or maybe something to do with the period in history in which we live. Could it be that society is getting acclimated to change over to the "Mark", or "Image"? No one will be able to buy or sell lest they have it?  Seems like a logical next step.
Jan 27, 2012 2:53PM
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this is a step in the right direction, i'm not sure how it works and if some one could come up with a way to get Banks and Credit cards out of our pockets that would be even better. As long as we have to use banks or credit cards we will be slaves to there rules. The government used to control the CASH in this country then credit card companies came around and fools us all into not using cash and look where that got us, when the general population got used to overspending the government took the lead and look where the government is. Some one please figure out how to use all this new technology to get us back on track. That's where the real news is

Jan 27, 2012 4:46PM
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This definitely an interesting development and an evolving world as it keeps getting earsier to make payments. I came across an interesting site bloompage.com that seems to have a lot interesting stuff. Seems to be an evolving world with all the new technologies coming into place.

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