Credit-Card Companies Try to Coat the World in Plastic

mi juz luv these latest technologies...IR, Bluetooth, fingervein scanning, wat next? implanted chip mayb

and i hate writing cheques. but the 2FA is making internet banking is such a chore tat it makes mi dread internet banking too.



Credit-card companies go downmarket to take on the last domain of cash

Picture a world where consumers pay for everything—from hamburgers to houses—with plastic. Sound far-fetched? Not to credit-card companies like Visa, MasterCard and American Express. Ten years ago, American consumers paid cash or cheques for 71% of their purchases. Today, according to Nilson Report, a trade publication, more than half are charged to cards. Cash tills—and trouser pockets— are in danger of becoming redundant.

That, of course, will not be unalloyed good news to consumers—or panhandlers. Already, the average American household has over ten cards of one sort or another, and many people are swimming in debt.

But the credit-card companies have realised that the last holdout of cash is the small purchase—newspapers, bus tickets, cigarettes. So MasterCard, Visa and others have introduced “contactless cards” for purchases under $25. With a tap or a wave, the cards wirelessly beam data to a receiving device on the shopkeeper's counter. The process takes less than two seconds, meaning fewer queues. Retailers like them because there is a lower risk of theft and fewer notes and coins to be totted up and trundled to the bank each day. Also research shows that people tend to spend more when they pay with plastic.

The market for such cards is still tiny. According to Nilson Report, there are 21m contactless cards in America, compared with 1.5 billion credit cards. But it is early days. Already, fast-food chains, cinemas and sports venues, such as Yankee Stadium in New York, are welcoming them. The next step is the prospect of embedding contactless chips into mobile-phone SIM cards. Such systems are being tested, though there are tensions over whether the phone company or the credit-card company would get the bulk of the spoils.

Card companies are also taking aim at bigger transactions where cheque-writing is customary. In America they have signed deals with property-management companies to allow residents to use credit cards for rent, mortgage instalments and even the down-payment on a house.

Another gaping hole in the card-carrying firmament is among those who do not have bank accounts, especially new immigrants and the poor. So card companies are offering “prepaid” cards—in effect, debit cards that can be loaded with money (at petrol stations, convenience stores and the like) without a bank account. Visa estimates that there are 80m “unbanked” consumers in America and that they pay $1.5 billion in cheque-cashing fees a year.

Dozens of state governments—among them Texas, Colorado and Georgia—are using Visa- and MasterCard-branded prepaid cards to provide child-support and other government benefits. This cuts fraud and saves governments money. Ohio, which uses a Visa-branded card to disburse unemployment benefits, reckons it saves nearly $2m a year since it switched to plastic. Some employers, too, are depositing salaries for staff without bank accounts directly onto pre-paid cards. Cash, once king, may in time be dethroned.