Paper shows cash the red card

The cashless, creditless society is here - at least in Swindon. A year ago a copy of the Swindon Evening Advertiser was bought using a Mondex "electronic purse", launching an experiment which has so far run for a year and seen more than pounds 250,000 change hands electronically.

The idea of electronic cash, which can be stored on credit-sized cards, has been an attractive one to banks and some retailers for years. It would end the problem of counting piles of notes and coins, and of physically transporting them from place to place - both processes which tempt mistakes, fraud and crime.

But there is a snag; all the signs are that people are unwilling to give up cash. After all, giving a friend pounds 5 is simple with cash; you hand them a piece of paper. With electronic cash, you both need the electronic purses, and also some means of transferring a sum between the two. The sheer capital investment required would never be justified.

However, stored value cards could find one niche. Buying items on the Internet requires the purchaser to send their credit card number to the company - which can be abused by unscrupulous companies or hackers. If the deal could be made by sending the "money" over the computer network, the risk of purchasing would be lessened - and the vendor would have the money at once. Some see this as the likeliest future for electronic cash.

Electronic cash can be stored as streams of 1s and 0s, held in an encrypted form in the memory of a computer chip mounted on the card. The memory can contain any amount of money. A swipe reader - like those now used for credit and debit cards - is used to transfer "money" (or, in the jargon of the growing industry, "stored value") to or from the card.

Furthermore, money in this form can be sent down a telephone line, meaning that to recharge your electronic purse you would not have to find a bank cash machine. You could even withdraw or deposit funds through a mobile phone.

The problem facing Mondex (a consortium of banks and telecom companies) and Visa, the credit card giant (which is talking to the Barclays, Lloyds and Abbey National banks and the Halifax building society about introducing rival "electronic purses") is that they cannot be sure how keen people are to live in a cashless world.

After all, debit cards such as Switch, Connect and Delta perform the same function. The cashless equivalent only becomes useful where a debit card would be too much trouble - for purchases under pounds 10.