02/10/2013 08:47 BST | Updated 23/01/2014 18:58 GMT

The Cashless Society - Is Hard Currency Ready to Cash its Chips?

When it comes to the way you make your everyday purchases, change is most definitely afoot. Just last week the Bank of England announced plans to introduce plastic money - a move that some say doesn't just mark the end of paper notes, it is one more indication that we may soon see the end for cash in general.

We've been using paper currencies for 300 years - and while industry, the economy and society have undergone multiple transformations during that time, the primary payment mechanism, cash, has remained the same.

In the past, the majority of low value purchases would have been paid for in cash. Today, we have a much wider range of options and are increasingly choosing to use electronic payment methods for transactions of all sizes.

The growing popularity of internet shopping, and the introduction of new contactless payment technologies, such as Near Field Communication (NFC), have led to a situation where electronic payments are soon to surpass those made using cash. The Payments Council, the body responsible for ensuring UK payments services work, has published figures showing cash accounted for 71 per cent of payments in 2003 but that by 2012 this had dropped to just 54 per cent.

With the cheque likely to be phased out by 2018, there is a real chance that cash might follow, leading to a cashless society where all transactions are made electronically. So, what would a cashless society look like? Many of us will get a chance to experience it for ourselves as a growing number of organisations decide there is an advantage to removing cash from their day to day business. Following the Bank of England's recognition that physical currency is no longer fit for purpose, Transport For London has gone a step further, announcing the launch of a public consultation into the possibility of removing cash payments from buses, a move it says will save £24m.

Other companies are providing innovative cash-free solutions to the payment related problems we encounter in day to day life. For example, WisePay, a provider of e-payments services, is deploying technologies that ensure parents no longer have to worry about sending their children to school with cash to pay for meals, excursions and other fees. Many parents will be familiar with the worry associated with sending kids off to school with an envelope full of cash, or the stress of having to hunt around for cash 'that morning' when their child presented them with a field trip bill on the day it had to be paid. Working closely with schools and colleges, WisePay is developing, implementing and operating electronic payment systems that remove the possibility of being caught short for cash or children losing the money.

It is these kinds of practicalities that make the prospect of a cashless society so appealing - removing cash reduces the chances of becoming a target of crime, while using electronic payments provides a traceable audit trail that can help to manage your finances. As NFC chips make their way into more payments cards and mobile handsets, it will also be faster to use electronic payments than cash. Credit card users are already afforded additional consumer protection not applicable to purchases made using cash.

While these are convincing reasons from the individual's perspective, businesses have their own for encouraging customers to go cashless. It may feel like a counter-intuitive idea, but cash is not free to process. There are overheads associated with storage, transport and security. In addition, dealing in cash means that customers remain anonymous - using cards and other forms of electronic payment enables businesses to build better customer relationships via personalised marketing campaigns.

The Government also has good reasons why it might consider turning away from cash. Printing and distributing cash, not to mention ensuring the economy is free from forgeries, are all costly endeavours - it is estimated that the cost to society of using cash is between 0.5 and 1.5% of GDP annually.

There are many technological innovations that suggest there is a real appetite for an alternative to cash - the rise of digital currencies like Bitcoin and new Gmail features that allow cash to be sent as an email attachment are just two. However, the move towards a cashless society will be heavily influenced by a technology that has had a deeper impact on society than any other since its introduction - mobile. Today younger consumers are already conducting much of their lives via mobile and are significantly less likely to carry cash than their parents. The continuing evolution of these social trends, and the technologies facilitating them, may yet result in the reign of cash coming to an end.