Ecash set to send teller machines into oblivion

The automated teller machine could become a thing of the past within a decade if, as predicted, electronic cash held on smart cards becomes normal currency.

A report from research company Ovum, Electronic Cash: Opportunities for Banks & IT Suppliers, foresees ecash being widely promoted by banks as a way of cutting down on the enormous costs of handling cash.

Ecash cards will become available in two forms. The first will be preloaded with a certain amount of money - #5 to #10 would be typical - which is then deducted each time the user makes a purchase.

The second card will belong to the user, who will be able to load it with cash using some kind of specialised terminal connected via a communications line to their bank.

The number of banks providing full-service banking over the Internet will increase from today's handful to about 300 by 2006, the report said.

Services will include the withdrawal and depositing of ecash from PCs or some other Internet terminal.

Ovum estimates that banks spend around $30bn (u19.2bn) a year worldwide on the handling of cash, which still accounts for the majority of transactions. There are 400 billion consumer transactions a year, and the value of cash transactions is around $4.5 trillion a year.

But that situation is likely to change as the amount of ecash in circulation worldwide rises to a predicted $8.63bn by 2006. Growth is still limited, however, by the lack of a common standard and interoperability between different existing ecash schemes.

Duncan Brown, lead author of the report, commented: 'Competing suppliers should put aside their differences and agree on common standards.' Without that interoperability, consumers will be unwilling to abandon traditional cash, he added.

The trend to ecash will be welcomed by suppliers of personal financial management software, such as Microsoft with Money, and Intuit, the maker of Quicken. The report forecasts that more than 42 million personal financial management packages will be installed by 2006, providing online access to users' funds.

Additional reporting by IDG News Wire staff.