January 30, 2006 7:00AM  |
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Creating a cashless society in the U.S. with either mobile phones or smart cards would require enormous effort by players in several industries, said the Yankee Group’s Joe Levine, including credit-card companies, mobile-phone service providers, manufacturers, and retailers.
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 Since the late 1990s, when the expansion and adoption of the Internet created a bona fide Mecca for retailers and shoppers, people have looked forward to the day when physical cash would no longer be the mainstay of payment transactions.When the Internet boom came to a screeching halt in 2000, some experts believed that it also marked the end of efforts to establish digital currencies. But the continuing success of the online payment service PayPal, as well as the recent adoption of so-called e-cash by 15 million people in Japan, has bought the electronic-money movement new momentum.
The push for electronic money became an integral part of the digital revolution during the mid to late ’90s. It was based on the premise that consumers would balk when asked to submit their credit-card numbers when making a purchase. Giving online customers a way to convert physical cash into digital coin seemed like the solution. This “e-money” would be stored offline on cards embedded with a chip — smart cards — or within a computer’s hard drive, and it could be used to make any kind of purchase. A bevy of private digital currency start-ups hit the Web. But these currencies amounted to little more than digital Green Stamps. Designed for use online only, the currencies that were created by companies such as Beenz.com, Flooz.com, and others were not connected to any government or central bank. While some promoters and consumers found the lack of government involvement a plus, most shoppers and merchants were hesitant to jump in to these online money schemes. Many companies folded as the dot-com boom began its downturn in 2000.
Today, however, for 15 million Japanese, paper money is a thing of the past, according to the Japan Research Institute. No longer solely used for online purchases, e-money, accessed via a smart card or mobile phone, has become a way of life for many consumers in Japan. The e-money trend began there roughly four years ago as a service for busy, on-the-go train commuters. Today, specially equipped mobile phones and smart cards are used to purchase items from convenience stores, department stores, restaurants, newsstands, supermarkets, and other retailers. The Japan Research Institute estimated that by 2008 some 40 million Japanese, roughly one-third of the country, will be using electronic money. Technologies such as FeliCa, from Sony, use integrated chips that enable devices to receive and emit electronic signals. These “contactless” or near-field communication (NFC) devices include mobile phones, transit cards, and prepaid e-money cards. (continued…)
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