E-payments: Cheap as chips

E-payments may be convenient for shoppers and retailers - but it has been suggested they also boost the amount of money you have to spend.

Andy Kyte, VP of analyst firm Gartner, said at the Gartner Symposium: "All consumers pay between three to five per cent more on goods purely to fund payment systems."

Security from A to Z

Click on the links below to find out more...

A is for Antivirus
B is for Botnets
C is for CMA
D is for DDoS
E is for Extradition
F is for Federated identity
G is for Google
H is for Hackers
I is for IM
J is for Jaschan (Sven)
K is for Kids
L is for Love Bug
M is for Microsoft
N is for Neologisms
O is for Orange
P is for Passwords
Q is for Questions
R is for Rootkits
S is for Spyware
T is for Two-factor authentication
U is for USB sticks/devices
V is for Virus variants
W is for Wi-fi
X is for OS X
Y is for You
Z is for Zero-day

This is not only due to the money credit and debit card systems cost retailers, it also comes from processing the cash in everyone's pockets. Kyte said: "Cash processing is unbelievably expensive."

Singapore decided long ago it was too expensive to process cash, according to Kyte. In 1998, the Board of Commissioners of Currency in Singapore proposed to create an electronic currency - Singapore Electronic Legal Tender (Selt) - which Kyte said will go live at the end of next year.

According to the Organisation for Economic Co-operation and Development's 2002 publication The Future of Money, Selt would be issued in Singaporean dollars. Banks could then draw Selt from the Board of Commissioners of Currency and load it onto their computers.

Any person requiring money could then draw electronic funds onto devices including mobile phones or smart cards. Last year, Singapore unveiled a standard contactless e-purse application (Cepas), which allows merchants to only have one system to deal with multiple cards.

The implications for the rest of the world are huge, said Kyte: "Lots of countries in the world are looking very, very closely at what is happening in Singapore."

E-payments also cost both shoppers and retailers money, Kyte said, but the amounts are typically lower than existing payment systems.

The e-payment push is not only coming from the price of payment processing: virtual worlds are contributing to the drive to use electronic currencies such as Second Life's Linden dollar, with some unwanted consequences. Virtual worlds with e-currencies create phenomenal opportunities for money laundering and tax evasion, said Kyte.

Kyte said: "Most of the issues [of electronic money] are around the idea of security." Once this is worked out, it will only be a matter of convincing consumers of the technology.

Consumers are wary of currencies such as Linden dollars because they are unsure of their permanence, Kyte said. He likened the current e-money situation to a "primal soup" - a lot of ideas floating around that will eventually consolidate into the type of services consumers want to use.

Banks, he said, are likely to be the losers unless they jump on the trend. "Smart banks will buy into it and overwhelm," he said and advised banks to "go and get a few teenagers" and run a research project.

Suzanne Tindal writes for ZDNet Australia