"Cashless society" means something different to law enforcement agencies, privacy advocates, consumer agencies, development consultants, retailers, and other constituencies. MasterCard has been in the news often lately, revealing what it thinks about the place of cash in a consumer society. Let's look at the evidence.
MasterCard is a powerhouse. In financial-year 2011, it processed over 27 billion transactions, totaling over $3 trillion dollars in gross value. Net income was close to $2 billion.
"A world beyond cash ..."
The title of its official Annual Report is "A world beyond cash: priceless", in part an echo of its widely-recognized "priceless" television advertisements. First, though, is the "beyond cash" theme, a consistent message that the company seems to be delivering through a variety of channels, both in its internal operations and to external customers and partners. Early this month, for instance, the company released an eye-catching Mobile Payments Readiness Index (MPRI) which purports to quantify the extent to which consumers in different countries are on the verge of adoption of "mobile payments". For the purpose of MPRI, mobile payment includes person-to-person, point-of-sale, and m-commerce use of cellular telephone handsets to transfer funds from one account to another.
Among the emphases of the MPRI: technology, including Internet ubiquity and NFC (near-field communication), is already in place; and leadership in at least some aspects of mobile payments is coming from parts of the world likely to surprise US audiences. Kenya, for example, "... has the world's highest rate of peer-to-peer payments familiarity at 89 percent."
The vision MasterCard and others promote is that ordinary consumers will get through their days without cash: routine transactions including purchases at a store, payment for small mundane items like a cup of coffee or morning pastry, mail-order from an Internet catalogue, or friends splitting the cost of re-fueling will all be as quick and "friction-free" as swiping a credit card or "tapping" a telephone handset against a reader.
Attitudes are tracking technology and behavior. In a poll of US consumers also released this month, MasterCard reported that even respondents older than 55 increasingly favor electronic payment, apparently because of growing frustration with cash's liabilities. MasterCard Worldwide's group executive of global debt, Carlos Menendez, clearly enunciated the company's stance: "... this survey underscores that Americans are already shifting toward a cashless society. It's clear that people want better ways to pay, and we're inventing them at MasterCard. As a technology company that's a key player in the payments industry, we're constantly coming up with new innovations--like mobile and contactless payments--that, simply put, are designed to make life easier."
Several more items are likely to appear in the news this summer that reinforce this message that m-payment, and MasterCard in particular, is the way of the future:
- The Isis joint venture is launching pilot programs in Salt Lake City and Austin of its NFC-based payment system.
- Many college and even public-school campuses are loading up student ID cards with payment capabilities. One explicit goal: eliminate the need to carry cash.
- The 2012 London Summer Olympics will be a major proving ground for a range of m-payment techniques. Sponsors including Barclays Bank are looking forward to the event as a breakthrough marketing and technologic opportunity.
- Studies from eDigitalResearch show that "9 of out 10 previous users of contactless mobile payments are likely to use the technology again ..." and 47% of those now carrying NFC-equipped handsets "have already used it to make a purchase."
- Many transit systems worldwide are going cashless.
- Clever inventions like Identive's tomPay™ provide low-cost "retrofits" to turn older devices, like handsets which lack NFC, into "gateways" to standardized payment technologies.
- Just before this column was published, MasterCard announced a joint project with technology provider C-SAM "to offer a white label mobile wallet ... to mobile operators ... in Asia Pacific, Middle East and Africa."
Which "electronic wallet" will win? That remains unclear. With MasterCard, Google, Apple, American Express, AT&T, and other major brands all pushing hard to make mobile payments attractive to consumers, however, aggregate m-payments will only grow, and I expect 2012 to be the year some form of "tap and pay" is accepted in the US as a normal part of business.