Three years ago, my friend proudly boasted to me that his new phone could check his Facebook messages. A year later, as he danced around, he demonstrated his exciting new phone could play music. This year it was videos.
His exuberance for technology he barely uses never ceases to entertain me. But the other day, when I heard about a cell phone being used as a debit card, my interest was piqued, and not just because I thought I could get a leg up on my friend. Looking at the slew of new services cell phones can offer, it is clear that in the next few years, we will see more than just the slick intermingling of visual graphics and wireless technology. We will begin to see a new era of electronic transactions marked by the transformation of cell phones and other wireless technology into digital wallets. It’s high time businesses started incorporating this new technology, the UA included.
Electronic cash, sometimes called e-cash, is slowly making headway into our small-scale purchasing. The idea of a cell-phone-turned-credit-card hit the world’s newsstands several years ago when a new Japanese generation of cell phones offered capabilities to upload not just mp3 files, but electronic cash as well. Other foreign countries are embracing the future of this digital wallet. Worldwide payments using mobile phones were $3.2 billion in 2003, and analysts expect the number to rise to more than $37 billion by 2008. Several cell phone providers have launched services to facilitate money transfers to other countries. The largest cell phone company in the Philippines recently launched a phone-based remittance service that allows Filipinos working abroad to send money home more quickly and at a lower cost than through money-transfer companies. With remittances from the U.S. supplying major portions of national income across the world, this will undoubtedly prove to be a popular service in the years to come.
Yet, despite this technology, I still can’t use my credit for purchases under $3 and I’m still paying a $2 surcharge to get cash out of the ATM.
Spread of this new e-cash technology has been slow in the U.S. and in the university community. Surveys have shown that while debit and credit cards are accepted at more than 6 million locations in the U.S., only 1 million businesses accept contactless technology like the new Japanese cell phone. Businesses suffer from the classic chicken-and-egg problem: Due to high start-up costs, business won’t invest in new e-cash technology, but consumers won’t demand the technology until most stores and companies start offering the services.
The switch to e-cash faces other obstacles. Electronic transactions are hindered by the enormous fees levied by credit corporations. When a credit card is used, most companies charge a 2 percent fee that businesses must either absorb or pass on as a surcharge to customers. Charges act as a tax to consumers. Yet, credit cards still remain the favorite method for purchases, outpacing debit cards in 2003 by $1.1 trillion.
However, competition is increasing for low-spending cards with smaller commission fees. Steve Case, co-founder of AOL, has recently launched a new credit card called Gratiscard, which uses the Internet to lower transaction fees paid by retailers. In response to this competition and others, both MasterCard and Visa have introduced plastic cards in America that do not have to be swiped for purchases under $25. As credit card providers race to the bottom, more consumers and businesses will be able to afford to this technology.
Cards incorporating e-cash technology speed up purchasing, and in doing so provide a boon to businesses. More electronic payment options will ultimately benefit the consumer. Aside from reducing transaction time, e-cash provides consumer protections that don’t exist for other forms of payment. Under the Fair Credit Billing Act, if you buy a defective item of more than $50 from a business in your home state, you have a right to return it to the merchant and get the charges reversed. Electronic technology also allows for more effective pricing in transportation, ensuring passengers don’t pay for more than they have to.
To see the power of electronic cash in action, look no further than the most successful restaurants on University Boulevard: Chipotle, No Anchovies, Pei Wei, Jimmy Johns. What do they all have in common? Yes, good, speedy food. But this speed comes from both quick food preparation and fast simplified payment systems. Yesterday, I was able to walk into Chipotle, order a burrito, pay for it and chow down within four minutes of walking into the restaurant. Talk about instant gratification.
Campus life has benefited enormously from e-Cash and credit card changes. Adding the smart chip to CatCards and providing an online accounting system for meal plans has been a huge gain for students. Unlike ASU’s Sun Card, however, the CatCard is accepted at a paltry few off-campus locations. Students have long lobbied for more flexibility and freedom in their meal plans. With the technology readily available, the UA should be prepared to take the next step in keeping up with changes in electronic transactions.
Matt Rolland is a junior majoring in economics and international studies. He can be reached at letters@wildcat.arizona.edu.
