Stephen Armstrong delves into a futuristic world of mobile phones in the form of jewellery, biometrics and cryptocurrencies. He discovers however that new trends will only catch on if there's enough to tempt both retailers and consumers.
Just about the only given when attempting to predict how the payments landscape will look like in decades' time is that things will be substantially different to what we're used to today, with even mobile payments and near field communication likely to seem anachronistic.
There's a scene in Minority Report - Steven Speilberg's 2002 sci-fi thriller - that's always discussed whenever people gather at conferences to discuss the future of money. Detective John Anderton, played by Tom Cruise, has had his eyes replaced by a dubious plastic surgeon to avoid his iris being recognised by security systems. He wanders into a branch of Gap and an animated Jennifer Aniston jumps up in front of him. "Good afternoon, Mr Yakamoto," she chirps, mistaking him for the guy whose eyes he's using. "How did you like that three-pack of tank-tops you bought last time you were in?"
"That's the problem with iris recognition," sighs futurologist Ian Pearson, who worked on biometric payments at BT. "It's quite easy to fake. I'd much prefer a system which combined fingerprints with tiny cellsized chips injected into the skin holding a 64-bit, one-use encryption code system. Speilberg asked Massachusetts Institute of Technology experts to imagine 2054 for Minority Report; they may be bang on with magnetic levitation cars and predicting crimes, but they were behind the times with payments."
This gives you some idea as to the level of debate at such conferences. Pretty much everything that's on the way to replace the humble cheque leaves most sci-fi authors standing. Right now, you can walk into an Apple store, scan the barcode for an iPod Nano with your iPhone's camera, pay for it there and then with your iTunes account and walk out of the store without speaking to a single shop assistant. It's called EasyPay and Wal-Mart, which owns Asda in the UK, will be using it soon.
In January 2009, meanwhile, a mysterious programmer called Satoshi Nakamoto pressed a button and created a new currency called Bitcoin: no paper, copper, or silver; just 31,000 lines of code and an announcement on the internet. Facebook credits are already trading as a currency, which is why PayPal president Scott Thompson believes that, by as early as 2015, "we will no longer need to carry a wallet".
Thompson has been putting his money where his mouth his; last summer PayPal spent $240 million buying mobile payments provider Zong. He's also convinced five loyal employees to try living for one week on digital currency alone. The results of the experiment aren't in yet, but the numbers prove he's on trend even if he's being optimistic. Card payments have tripled over the past 10 years and the industry expects cash payments to make up just 36 per cent of all transactions by 2020.
So what's going to take its place? Right now, contactless payments are spreading through stores and fastfood restaurants, while Transport for London is rolling out contactless payments on buses for the 2012 Olympics. Visa alone will have some 20 million contactless cards on UK high streets by the end of 2011, while MasterCard Labs is currently pushing contactless as far as it can; soft-trialling a new system that allows you to shop from your own sofa merely by waving.
Its QkR platform links your credit card account with your smartphone and an Xbox Kinect, reconfigured to understand specific gestures. Saturday evening sitting in front of X Factor you get hungry. You put your hand to your mouth, a pop-up menu comes up on your TV with food options. You wave your hands to control a cursor, order then sit back and wait for the pizza boy.
In the high street, meanwhile, shopping with your mobile starts next year and should reach the mainstream in around 10 years. "When you tap your phone to a till, that's a computer talking to a computer," explains Matt Rowsell, chief commercial officer at Streamline, which handles roughly half the credit card transactions on the high street. "Your phone can download loyalty points or offers in your area, make payments, scan barcodes or QR codes; pretty much everything.
With loyalty card information and discount vouchers on your handset, you've really got an electronic wallet."Mr Pearson, meanwhile, expects phone design to change enormously - with handsets thinning until they're essentially the size of a £20 note then designed into component pieces and worn as jewellery - becoming earrings or signet rings, for instance. In 15 years' time you could shake someone's hand and instantly credit their account with a tenner, should you wish to.
Connect that system to virtual reality-enabled contact lenses or glasses - five years away, Mr Pearson believes - and you'll literally see personally tailored special offers dancing outside your local retailer then wave your hands to accept the deal. The snags are, as ever, how much it will cost and how long it will take to hit the mainstream.
"Cost is key," explains Kieran Hines, who runs research company Datamonitor's global financial services group. "Cheques and cash are expensive for banks to handle and ultimately the consumer pays for that through retail prices and bank charges. What retailers need is something that guarantees payment by providing the customer's identity and ensuring access to some form of measurable stored value; a bank account or a prepaid card at its most basic. Whatever solutions there are on offer, they need to cost retailers less than current systems or there's no real incentive."
Facebook credits also offer peer-to-peer transaction possibilities, according to Mr Hines, allowing people to pay their friends, while Pearson thinks they may tap into antibank sentiment by offering a way of buying and selling goods and services without the banks earning a penny.
Most likely to succeed, however, is PayPal; if Thompson's jump into the real world can see PayPal units becoming a global unit of exchange. The 2112 Olympics, therefore, could see payments via fingerprints with cell-sized chips, via signet rings or even via telepathy chips. These currently exist, designed to help quadriplegics. You implant a chip, focus on a menu of thoughts - such as "open the curtains" or "switch on the light" - and Wi-Fi connections from chip to PC carry out your instructions.
Kevin Warwick, professor of cybernetics at the University of Reading, has chips wired into his brain and arm. He believes that in 100 years or even before you could be walking past a Coke machine at the Olympic stadium, think "get me a drink" and the can would spring into your hand. Whether your brain could be hacked is still unclear.
All of these ideas work on the assumption that Joe Public will embrace them wholeheartedly. Moves to phase out cheques by 2018, for instance, were cancelled recently after consumer protests and, of course, it was public unease that stopped Tom Cruise's pre-crime programme in Minority Report. Not that we should put too much store in a Speilberg movie. If he's so good at predicting the future, how come ET wasn't using a near field communication-enabled mobile to phone home?
This article originally appeared in a special report on "Future of Payments" - published by Raconteur Media and distributed with The Times (UK).