Looking Forward to 2012: The Continued Demise of Cash

How mobile payments, NFC and person-to-person apps will change the way that people pay each other in the coming year.

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Okay, so cash isn’t going to disappear anytime soon, but 2012 looks to be a pivotal year in the transition towards a world where we have options besides just cash and credit.

What’s wrong with the way things are? Let’s start with cash. It’s dirty, it costs a lot to withdraw from the ATM, nobody will reimburse you if it’s stolen, not to mention that walking around with a bulging wallet seems strangely anachronistic in a world where super-slim smartphones do everything from recording video to telling you where your friends are eating dinner.

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Credit cards might be convenient for consumers but they aren’t always great for businesses. That’s because each time you swipe your Visa or Mastercard, the merchant has to pay an interchange fee ranging between 1% to 2% of every transaction. That’s no big deal for large retailers such as Best Buy and Target, but it can cut into the already slim profit margins of small businesses.

Even if you are willing to fork over a percentage of each sale, the rise of tiny DIY businesses — from Etsy shops to foodies selling homemade pickles at farmer’s markets — demands that bulky credit card readers and old-school shopping cart applications become things of the past.

So, what’s going to happen in 2012?

As Google Wallet becomes more common, expect people to lose their fear of paying for products via smartphones. The biggest obstacle here isn’t technology, it’s competing financial interests, as carriers and banks fight for their cuts while merchants, as usual, feel the pinch. It would be nice to see the product extended to more banks and credit unions instead of just a handful of financial institutions, but hey, you have to start somewhere.

If anything, it’s companies’ eagerness for a piece of of the mobile payments pie that’s keeping NFC (near field communication) technology from really taking off, as evidenced by Google and Verizon’s spat over putting Google Wallet on the new Galaxy Nexus. Yes, it’s a painful delay, but it also legitimizes the entire market — giant corporations don’t fight tooth and nail over something that they don’t think is going to be profitable.

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