The disappearance of cash came a step closer this week with the launch of bank cards that allow shoppers to pay for items worth less than £10 without having to use a PIN or signature.

The new contactless technology, backed by Visa and MasterCard, is designed to replace the need for loose change and speed electronic payments. You will not even receive a reciept, unless you ask for one.

A number of high street banks will issue the contactless cards in London over the next couple of months, after which the system is expected to be extended nationwide. By the end of next year Apacs, the UK payments association, expects five million contactless cards to have been issued in the UK.

Here Times Money answers your questions about the new way to pay for your morning coffee.

How does the contactless technology work? Contactless payment cards use short-range radio to exchange payment information with terminals at till points and do not need to be inserted or swiped. Consumers will not need to confirm their identity with a PIN or signature: they can simply tap their debit or credit cards on a reader to authorise a purchase. You will only be able to pay for items less than £10. For more expensive items, you will need to insert the card and key in your PIN.

Who is behind the new technology? Visa and MasterCard have both developed contactless infrastructure – Visa payWave and Mastercard PayPass – but cards with either brand or logo will work on any contactless reader. The cards and readers will carry a standard symbol.

MasterCard has suggested that the contactless technology will not be restricted to cards. The company has tested PayPass on key fobs, mobile phones and even wristwatches, which can be tapped or waved in front of a till-point reader in the same way as a card. For the moment, at least in the UK, it will be restricted to debit and credit cards.

A number of retailers in the capital have announced plans to install contactless card terminals, including McDonald’s, Coffee Republic, EAT, Books Etc, Chop’d, Krispy Kreme, Threshers and YO! Sushi.

How are contactless cards different from other cards in my wallet? Contactless cards are simply standard debit or credit cards that allow holders to pay for items less than £10 without a PIN or signature. The cards should not be confused with prepay cards, which are loaded with cash over the phone, or online, and come in either contactless or chip-and-PIN formats.

How safe is it? The £10 transaction limit is the first and most obvious safeguard. The second is a limit on the number of consecutive contactless transactions that cardholders can make before having to key in a PIN. The limit will vary between individual banks, but Apacs says that it will be capped at a “handful” of transactions.

Robert Kenly, of Money-supermarket.com, the comparison website, believes that some people will be wary of a payment card that does not require any proof of identity, but that many others will be won over by the convenience. He says: “There will be a number of checks in place and so long as cardholders remember to report lost cards immediately, they will always have any losses refunded. For some people it will perhaps seem too risky but, as with anything new, once people have tried it they may find that they actually like it.”

When will these cards be available? Over the next couple of months a number of high street banks, including Halifax and Bank of Scotland, will issue contactless cards to account holders who live, or shop, in Central London and Canary Wharf. HSBC plans to invite up to 50,000 of its customers to upgrade their plastic, while the Royal Bank of Scotland group, which includes NatWest and Mint, will distribute several thousand cards by the end of November.

However, Barclaycard, the credit card arm of Barclays Bank, has stolen a march on its rivals by issuing the first contactless card in London this week. The OnePulse credit card allows contactless or chip-and-PIN payments, and also includes an Oyster card, the electronic travel card used on public transport in London. The OnePulse card will be the only contactless card to include Oyster. It will also offer 0 per cent on purchases for six months and a 14.9 per cent APR.

When will contactless payments be available nationwide? Banks will watch to see how many retailers install the contactless readers before issuing the cards as standard. Likewise, retailers are likely to wait until enough customers have the cards before spending money to upgrade their equipment. However, Apacs expects banks and retailers to roll out the technology through the next year, and by the end of next year five million contactless cards are expected to be welcomed at more than 55,000 retail outlets.

Tried and tested worldwide

Consumers in the UK may have only just got used to chip and PIN, let alone the new contactless cards, but elsewhere in the world there are already 21 million of the new payment cards in circulation.

The rollout by Visa and MasterCard has focused mainly on the US and SouthEast Asia, but contactless cards are undergoing trials in Guatemala, Mexico and elsewhere in Latin America. The technology behind the cards is standardised across the world, with the same purchase limit of £10, so UK travellers will soon be able to use this new payment option while on holiday.

Banks in the US have been issuing contactless cards since 2003, with more than ten million now accepted by 30,000 shops and restaurants.

The technology has not been restricted to debit and credit cards. In September last year MasterCard handed out wristbands to 5,000 American football fans entering the Giants Stadium in New York. These cards were preloaded with cash that could be spent at the stadium’s food concessions by tapping the bands against card readers.

Meanwhile, Visa began a trial last November, allowing customers to make secure payments using their mobile phones. The phones, which were customised using a technology similar to that found in contactless cards, can be touched on cash machine sensors in a similar way, allowing customers to make small payments quickly without the need for a bank card.

Banks in Turkey were the first in Europe to issue contactless payment cards. In July last year 25,000 consumers were given the Tap and Go cards to buy coffee, burgers and cinema tickets.

A number of trials have been running across the Continent, including a German scheme in 2005 to allow contactless cards to pay for bus and train travel.

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