A Payment Revolution – The First Viable Alternative to Small Change - Securities and Banking Update May 2005

Commentators have been talking about the end of cash and its replacement with an "e-purse" for years but now, finally, some schemes are actually delivering on the hype. Louise Brett and Peter Simon examine what it takes to make chips do the work of coins.

A tiny chip is set to replace a fistful of coins and notes for many everyday low-value payment transactions. Demand for the latest generation of contactless payment solutions is likely to be driven by consumers and retailers. Widespread consumer adoption will not just depend on maximising ease of use; creating contagion requires ubiquitous merchant take-up and a profitable business model.

Industry commentators, technology companies and banks have been talking up the possibility of universally accepted "e-purse" systems for small transactions for almost two decades now. So far the reality has never lived up to the hype.