Your money: Whatever happened to cash?

Virtual shopping, electronic banking and no meter men. Paul Gosling looks at the shape of things to come in finance

2005, at home. First thing after breakfast, whether she was working that day or not, Jill sorted out her finances. To tell the truth, she rather enjoyed it.

It was so much simpler to do these things in the morning when the kids were at school. In the evening they would be hogging the multimedia unit for themselves, for games, or videos, or watching one of those Australian soaps.

Jill logged on to her commercial Internet account and plugged in her smart card, which also acted as identification card (containing her DNA fingerprint) driving licence, rail chargecard, health card (with essential health records and membership details of her international health insurance scheme) and authority to use the on-list library she subscribed to, as well as her credit card, debit card and cash card.

The smart card controlled her access to the Internet and instantly debited her account for any purchases she bought on-line, or for using any of the fee-charging on-line services.

As an extra security check she had to place her fingers on a sensor that confirmed her iden-tity. In any case, the camera in the corner of her computer terminal had taken her picture and compared it with her smart card record, and would alert anyone she was dealing with if she was pretending to be someone else.

Many of the entertainment networks could only be watched through use of the smart card on a pay-per-view basis. These networks were like television used to be, only more interactive. They also gave access, if the smart card was valid, to sales networks selling everything from underwear to pensions.

You could even do a virtual test drive of a car, before arranging to try the real thing, or go for a virtual walk around homes you were interested in. But that day Jill was not interested in buying a car or a house. She had some groceries and presents to buy and a bill to pay. Not that many bills arrived by surface mail any more.

The one for servicing her car appeared in her electronic mail and she merely needed to approve it for payment. Jill would normally go out to buy her groceries, but she was on-call and did not have the time today.

Instead she used her favourite electronic shopping mall, where she was entitled to a 5 per cent loyalty discount for frequent use. She bought two bottles of wine and ordered a meal for four, the Greek menu including green side salad and ice cream for dessert, to be brought round at 7.00 when she was expecting guests. She ordered a music CD for delivery to her nephew Mark's electronic mail box, for the next morning at 7.30, so he could listen to it on his birthday before he went to school.

For the CD purchase Jill used a natty piece of software that scanned all the electronic marts on-line to tell which one sold the chosen CD at the lowest price.

When Jill examined her bank account she found that her quarterly gas bill would be deducted from her account the following day. Distance electronic scanning meant that her utility company, which supplied her phone service, water, gas and electricity - and which was also a division of her favourite retailer - knew how much her household had used, without having to visit the home to take a reading.

The company used the "distance-read" facility on the network in her home, which recorded use of gas, electricity and water. At the end of each quarter it deducted the bill from her account, giving a day's notice.

Better news was that she had been paid by two of her employers. Her immediate spending was mostly made from her cashcard, which she topped up while she was on-line, taking the money from her account.

If Jill had wanted, she could have done these things at her branch - her supermarket branch. There were not many bank branches now because there weren't any of the old-style banks. The big retail chains controlled most financial transactions. As well as groceries, that meant bank accounts, pensions, arranging holidays, or even paying for gas, electricity or cars.

Even the cashcard Jill was using had been issued by her retailer and doubled as a loyalty card. Every time Jill used it for buying products sold by the retailer, she got a 5 per cent discount. It was the value of these discounts that persuaded people to buy most of their daily needs from the one supplier. The strength of the loyalty system was such that people defined themselves, at least in part, according to their retailer. Each chain had its own type of customer and retailers boasted "you are where you shop".

One of the old banks had survived but it was too expensive for Jill because it charged customers for using its branches - only the retired rich could afford, or wanted, to use that service.

Of course, people still visited shops and while there used the in-store multimedia kiosks. These offered better holiday deals and gave extra "personal visit" discounts to get you into the store to buy on impulse.

Jill's experience of a futur- istic marketplace may turn out to be real as soon as 2005. It could happen before then; the technology is available now.

But while no one knows exactly what will happen (or when), some predictions are uttered more regularly than others.

One of these is that at least one of the largest banks will be driven out of the market in each of the major Western nations within a few years. In a few more years each country may be left with just one bank with a wide range of branches - its competitors offering niche services without the encumbrance of a large branch network.

We might even see the end of money as we know it. The electronic purse, a smart card that holds the equivalent of cash, is already in use. And other forms of electronic cash are being used for trading on the Internet.

Free book offer

This article has been adapted from Paul Gosling's book Financial Services in the Digital Age, published last week by Bowerdean Publishing (0181 788 0938) at pounds 12.95.

The Independent on Sunday has 10 free copies of the book to give away to the best suggestions on how you would like to see banking change by the year 2005 (or even before).

Send your entries to Steve Lodge, Personal Finance Editor, Independent on Sunday, One Canada Square, Canary Wharf, London E14 5DL.