A scruffy-looking guy strolls through a supermarket, stuffing groceries into his baggy trench coat. A security guard tails him as he heads toward the exit, passing through what looks like a metal detector. "Excuse me, sir," snarls the guard, snatching a piece of paper from the machine. "You forgot your receipt." It's a tantalizing fantasy of how easy shopping could be in a cash-free world, as envisioned in a TV ad by IBM. But while it may sound far-fetched, we're not that far off.
On a recent Thursday in Tokyo, I wedge my way through a crowded Sankus convenience store, picking out a magazine, toothpaste and a pack of gum. The line for the cash register is five people deep. When I reach the cashier, she runs my stuff through a bar-code scanner. Meanwhile, I wave a plastic card over an electronic terminal on the counter. If you overlook the six boring minutes I idled in line, the actual purchase — for which I neither had to fish for change nor scribble my signature — takes .2 seconds.
All day I tool around the Gate City Ohsaki shopping center, test site of a digital cash card — the Edy (short for euro, dollar and yen). I start out by inserting four 1,000-yen bills into an ATM-like machine, which loads the equivalent of about $34 on to the card. I then use the card to buy a rice-bowl lunch, a mug from Starbucks, cookies at a supermarket and a Hello Kitty pop-up picture book for my niece. As no purchase costs more than a few hundred yen, I wouldn't have bothered using a credit card. But because I didn't have to hand over hard cash either, no transaction took longer than a few seconds — again discounting the lunch-hour lines.
The key to a cashless economy is a wafer-thin chip embedded in the card, which is the product of e-money company Bit Wallet — a joint effort by Sony, NTT DoCoMo and Toyota. In the frantic and often frustrating race to replace bills and change, companies have focused on these so-called integrated circuit chips, which can record even the smallest transactions with a minimum of time and paperwork. The implications of an economy based on electronic money could be profound: countries could halt minting, commerce could accelerate, corporations could take a nice slice off the top. Global players the likes of Visa, Citibank and Microsoft have poured millions into pilot programs. Anticipation ran so high by the late 1990s that South Korea announced electronic money would supplant 20% of its bank notes by 2004.
The only obstacle is the consumer, who has refused to embrace e-money. Americans get ticked off with yet another piece of plastic for their wallets. In Japan — considered the No. 1 potential e-money market thanks to its stubborn devotion to cash — consumers equate the cards with credit cards, which they use sparingly. Credit accounts for 6% of consumer spending in Japan, while Americans wield plastic for 25% of purchases.
But the killer application may be around the corner. The Bit Wallet card is a test run for the next really big thing: e-money chips in everyday gadgets. In test programs elsewhere, consumers are beaming eBay payments from Palm Pilots and buying fast food with chip-embedded key chains. Some experts think Japan has a better approach: putting the chips in cell phones. Says Avivah Litan, a research director at Gartner Group, a global info-tech consulting firm: "With 192 million subscribers to mobile services worldwide and 49 million in Japan alone, my money is on cell phones."
Here's how it would work. The chip is placed inside a cell phone, which you hold up against a vending machine or an electronic reader at a cash register. The transaction would take seconds. The panel on the phone would tell you how much the item cost and how much you've got left in your Bit Wallet account. When the account runs low, it could be replenished via a wireless connection to your bank account. The phones could be on the market in a year.
With so many companies panting for a piece of the potential market, Bit Wallet is by no means the prospective winner. Mondex, partnered with Hitachi and Sanwa bank, is betting on a plastic card with credit, ATM and e-money capability. In Finland, phone providers allow consumers to dial in a code for vending machines, charging cans of soda to their phone bills. Nokia has high hopes for its removable, chip-embedded cell-phone covers, currently in tests. Waving phones with the "smart" covers near electronic readers, consumers can make instant payments at gas stations and ski slopes. It's secure because the chips are hard to replicate, says Martti Granberg, Nokia's director of business development. If reported lost, the covers are simply blacklisted. "It's the ultimate in ease of use," he says.
Now if they could only do something about the lines.