Reports of the death of cash have long been exaggerated; despite years of talk, a cashless society eludes us. Yet it is slowly edging closer with debit card spending set to overtake cash spending, by value, for the first time in 2010 — internet payments accounted for one in four card transactions over Christmas.

Reports of the death of cash have long been exaggerated; despite years of talk, a cashless society eludes us. Yet it is slowly edging closer with debit card spending set to overtake cash spending, by value, for the first time in 2010 — internet payments accounted for one in four card transactions over Christmas.

Contactless payment, in which cards are waved across a reader to pay instantly for small items, is perhaps the most plausible threat to cash yet. The two main products, Visa’s PayWave and Mastercard’s PayPass, are gaining in popularity. Visa believes that this year will be a “tipping point” for contactless payment and predicts that the number of cards in use will rise from 5 million to 15 million this year. This kind of payment will also start to be used for small purchases — a bottle of water or a newspaper — usually reserved for cash transactions.

“Contactless is as revolutionary as the shift to internet payments was five years ago,” says Steve Perry, executive vice-president of Visa Europe. “It will mean having no notes and coins — it will certainly mean having no coins. It will move us almost to a cashless society.”

Contactless payment is being heavily backed by credit card companies, which are frustrated that plastic has failed to make real inroads into the cash arena; consumers still feel uncomfortable using debit or credit cards for purchases of less than £5, even though many retailers welcome the opportunity to take cash out of their system. Mr Perry says: “Slowly, slowly. We have to get consumers used to it.”

Yet many think that the real contactless revolution may not happen in cards but in mobile phones. Contactless cards are the precursor to mobile phone “wallets” with Near Field Communication (NFC) technology embedded, allowing you to pay by waving a phone instead of a card. Visa already has trials under way and believes that within two to three years the technology will migrate to mobile phones. Barclaycard and Orange are partnering to develop mobile payments. Meanwhile Nokia is believed to be developing a range of NFC handsets.