“The writing looks to be on the wall for 1p and 2p coins,” wrote one personal finance analyst after the government published a call for evidence on the future of cash and digital payments in its Spring Statement.
Entitled Cash and Digital Payments in the New Economy, the government’s consultation, which also questions the future of £50 notes, seeks views on how the transition from cash to digital payments impacts on different sectors, regions and demographics.
So does this mean it’s time to go digital? The past decade has seen near-field communications (NFC) technology used to make payments not just by cards, but by smartphones, wristbands, key fobs and other gadgets too.
Garmin and Fitbit even offer wearable fitness trackers with contactless payment capability. You can be out for a run, stop to buy a bottle of water and pay for it with your watch.
A study by Visa found that just over a quarter (26%) of Brits have used a mobile device to make a contactless payment in a shop, rising to 36% for a contactless card. Kevin Jenkins, managing director of Visa UK & Ireland, says: “Our study shows the appetite for adopting new payment methods is greater than ever, and with mobile devices opening up myriad new ways to pay, the next 10 years looks set to see contactless payments become an even greater part of our day-to-day lives.”
Moneywise looks at the pros and cons of contactless payment methods.
Mobile phone payments
Smartphone users can make contactless payments with Apple Pay, Google Pay or Samsung Pay.
These systems allow you to store your credit or debit card details in a secure mobile wallet and make payments by holding your phone close to a contactless reader. The key advantages of paying with a mobile phone are speed and convenience.
Charlotte Ashton, 36, a PR agency director from south-west London, has been using Apple Pay on her iPhone for the past two years.
“I usually have my phone to hand so it’s super quick and easy to just pay through Apple Pay,” she says. “From my lunch to the weekly shop to the tube fare, I use it at least two or three times a day.”
Your ability to pay by smartphone depends on which phone you have and who your bank is. Apple Pay is only available on handsets from iPhone 6 onwards, while Samsung Pay is available on the Galaxy Note 8, S8/S8+, S7/S7 Edge and S6/S6 Edge/ S6 Edge+, as well as some versions of the A3, A5 and J5. It can also be used on the Samsung Gear Sport watch.
Google Pay works on any Android device with NFC technology and Android 4.4 KitKat software or above.
To set up mobile payments, you also need a debit or credit card from a supporting bank. Most UK banks support Apple Pay and Google Pay, although the latter is not supported by Barclays.
Samsung Pay is much more limited: only people with debit or credit cards from First Direct, HSBC, M&S Bank, MBNA, Nationwide and Santander can use it.
The biggest potential problem with relying on mobile phones to make payments is what happens when your phone breaks down or runs out of battery, leaving you unable to pay.
If you want to pay with a smartwatch, you need one that’s compatible with the payment wallet on your smartphone. For example, Apple Watch wearers will need an iPhone set up with Apple Pay.
Garmin Pay and Fitbit Pay are the two new players in this area. Like Google, Apple and Samsung, they both offer mobile wallets which can be linked to compatible devices.
Garmin Pay is currently only compatible with two smartwatches, the Vivoactive 3 and the Forerunner 645. In the UK it can only be used by Danske Bank customers, although it plans to add more banks in the future.
Fitbit Pay is available on the Fitbit Ionic and Fitbit Versa and can be used in the UK with Danske Bank and app-only bank Starling.
The limited number of supporting banks is an issue for people who want to pay with a Samsung watch, as only 11 banks work with Samsung Pay.
Will McClay, 44, a personal fitness trainer from south-east London, says: “I hardly carry my wallet any more as I use contactless payments on my phone using Google Pay – it’s great. But you need Samsung Pay to pay with a Samsung Gear watch and my bank isn’t supported. I’m with Lloyds and it’s not on Samsung Pay.”
bPay from Barclays offers a much cheaper way to make card-free contactless payments.
The portable and wearable payment system uses a chip built into four devices: wristbands, key fobs, stickers and bPay Loops. The bPay Loop slides on to the strap of any watch, fitness tracker or anything else you might buckle to your wrist, effectively making it a contactless payment method. The stickers do the same thing and can be stuck on to a smartphone or any object you like.
Fobs and stickers cost £7.99, loops £8.99 and wristbands £10.99, or you can get a family-pack bundle with a wristband, fob and sticker for £19.99.
Barclays has also partnered with DS Automobiles to offer the UK’s fi rst integrated contactless payment car key. The two-in-one key will initially be included with the DS3 Connected Chic, available up to December 2018.
You don’t need a Barclays account to top up a bPay device; you can add money to your wallet with any UK-registered Visa or MasterCard debit or credit card.
Where are contactless payments accepted?
You can make mobile phone and wearable payments anywhere you see the contactless ‘radio waves’ symbol (see left) at the checkout, in the UK and abroad. This includes shops, pubs and restaurants and on all Transport for London and national rail services in the capital.
Contactless card payments have a limit of £30 per transaction, and some retailers apply this limit to mobile phone and wearable payments too. Those that allow higher payments on Apple Pay and Google Pay normally require users to authenticate the payment using a PIN, password or fingerprint.
Finally, one issue with relying on any non-card contactless payment method is what happens if a retailer doesn’t have a contactless payment terminal. Contactless cards can, of course, also be used in regular chip and pin card readers, but if you’re entirely relying on your phone or watch to make a purchase, you could end up stuck.