ARTICLE: THE DEATH OF CASH

"Charge it to Miguel," I told the barista after ordering a cappuccino, and charge it he did -- to my phone. Not that I ever pulled my iPhone from my pocket. Seconds after the barista tapped my order on Grumpy's minimalist register -- an iPad mounted on a stylish countertop stand -- my phone vibrated in my coat pocket, signaling that our transaction was complete. I couldn't wait to check that everything had worked as promised. (It had.) For the first time ever I was tickled by the act of paying for something.

Perhaps you, too, have experienced a gee-whiz moment at the checkout counter when you used your phone to pay for a Starbucks latte, a blouse at Macy's, or a box of screws at Home Depot. Perhaps you've read how smartphone payments, already popular in parts of Asia and Europe, are coming to the U.S. in a big way. Or you may have read about Jack Dorsey, the Twitter co-founder, who is now disrupting the byzantine world of payments with his new company, Square. The white-hot San Francisco startup is already responsible for many breakthrough products, including the so-called digital wallet app I used for my touchless, cashless cappuccino purchase at Grumpy. (The café is a Dorsey favorite, and he steered me there. The coffee's good too.)

These are telltale signs that the mobile-payments revolution has arrived. But what the glowing profiles of Dorsey -- he's often compared to Steve Jobs -- and the breathless predictions about your phone replacing your wallet don't tell you is this: Changing the way Americans pay for stuff is going to be really hard work. For starters, retailers and their partners will have to offer mainstream shoppers some pretty sweet perks to get them to replace a swipe of a plastic card with a tap of a phone. Then there's the chicken-and-egg problem: Merchants don't want to upgrade pricey point-of-sale terminals so that they can work wirelessly with smartphones unless e-wallets become mainstream, and e-wallets won't become mainstream until consumers can use them just about everywhere.

And it's not just innovative startups like Square that hope to reinvent payments for the mobile era, but also everyone from mega-technology companies to financial institutions, giant telecoms, and national retailers. Until those companies agree on common technology standards and platforms, mobile payments won't work across devices, wireless networks, credit card types, and retailers. (Imagine if Target took only an American Express card that had to be triangular, Wal-Mart took only a round US Bank Visa and a square Citibank MasterCard, and Starbucks would let you pay only with a prepaid Starbucks card. It's that absurd.)

Yet once these issues are sorted out -- and with so many billions at stake, they will be -- cash will find itself on the endangered-species list. Paying by phone will be as transformative as the advent of the credit card in the 1950s.

One of my other interests is the history of science and technology, and what Helft says rings true. Technological revolutions always take much longer than their early proponents predict, and the landscape is littered with the corpses of good ideas that failed. People need to get used to new ways. Businesses and regulators have to work out the economics and rules. Whole new systems have to be built to accommodate the new ways. And nothing works smoothly. Until all of a sudden, it does.

As more and more pieces of the puzzle come into place, we are getting closer and closer to the ultimate tipping point. And when that day comes, change will happen seemingly overnight. Remember the deluge of America Online disks that heralded the arrival of the Internet? Well, the Internet had been around for a decade and average people paid no attention. Then all of a sudden everyone and their grandmother was on board. It will be the same with the cashless society. Coins and banknotes won't disappear overnight, but their fate will be as sealed as that of the U.S. Postal Service. Gradually, inexorably, the demand for them will shrink. Will the pants of the future even have pockets to jingle the remaining coins in?

But will coins and notes COMPLETELY disappear? Probably not, and readers have already made that point here in The E-Sylum. More likely, they'll be transformed. Books are farther along the digitization path, and our next story discusses what's becoming of the public library. -Editor

To read the complete article, see: The death of cash (tech.fortune.cnn.com/2012/07/09/dorsey-square-death-cash/)

Wayne Homren, Editor