A cashless legacy for Steve Jobs

Steve Jobs’ death will not prevent his greatest achievement from being realised within two years – the death of cash as king of our economy.

In 2011 the use of cash is in sharp decline and it seems Jobs has laid the business groundwork for the killer payments app and hardware that will finally topple cash as king of payments. The time frame is the iPhone 5 or possibly the iPhone 6 – late next year.

Apple reportedly thinks the current payments landscape is too ‘fragmented’ and in true Jobs style, is working on fixing that.

In March this year, Steve Jobs announced that Apple had accumulated 200 million credit card details from customers, making it probably the biggest list of customers, with their card details, in the world.

Apple will use its huge iTunes customer database to underpin a universal cashless payments solution.

Your Apple iTunes username and password, with its stored credit, debit, stored value or gift card details, will be able to pay for just about anything in shops and online. You will give your family and friends money by sending a message or bumping your smart phone against theirs.

Head start for the competition  

In the meantime, Apple’s competitors are stealing a big head start on small payments.

This week, Google Wallet users on the US Sprint network with Samsung Galaxy S2 handset began paying for goods and services in shops equipped with Mastercard and Visa NFC readers. 

In Australia those Americans can use their phones in store if they choose to pay international roaming charges, but we will have to wait an unspecified number of months for the same privilege.

Apple released the new iPhone 4S today without contactless payments technology – like Mastercard’s TapNGo or Visa’s PayWave - built in.

Apple is instead working on its own universal cashless payments solution, not for the iPhone 5, but probably the one after that - the iPhone 6 – already under development and due in late 2012.

Moving away from cash

The trend away from cash has accelerated rapidly in 2011. Australians are making fewer ATM withdrawals now than they did three years ago and we have shed about 3,000 ATMs so far in 2011 according to the Australian Payments Clearing Association.

Eftpos, Visa and Mastercard transactions have surged almost 40 per cent in three years to almost 360 million per month.

This year, Australians are making five card transactions for every one time they visit an ATM according to data reported by APCA.

But growth in new credit accounts has slowed – from more than 500,000 new accounts per year in 2008 to at less than 300,000 now. There are 15 million credit cards now on issue in Australia.

Contactless TapNGo and PayWave payments are driving growth for the card schemes reported Mastercard Australia’s head of strategy David Masters this month .

Two and a half million new debit card accounts were opened in the last 12 months according to the Reserve Bank. There are 35 million debit cards now on issue in Australia.

And the number of Eftpos terminals in shops is rising – 734,000 nationally, 22,000 more Eftpos terminals than one year ago, according to the RBA.

Eftpos Payments Australia says it is working on contactless and internet payments so it can really compete in the cashless future, but first it has reversed the 20 year interchange fee regime.

Eftpos Payments Australia’s new fee structure that came into effect on October 1 is designed to encourage shoppers to use Eftpos instead of cash for small purchases under $15, for which there is no fee.

For larger purchases the Eftpos fee undercuts Visa and Mastercard’s merchant service fees.

Already restaurants and other merchants are beginning to charge for Eftpos transactions according to anecdotal reports says Ingrid Just from consumer group Choice.

In the short term shoppers face surcharges for Eftpos and credit card transactions as acquirers rollout contactless technology.

In the long term, Apple iTunes and Google Wallet are destined to become the dominant players in a largely cashless future, and toppling cash from its throne by 2012 may be Steve Jobs’ greatest legacy.