Taking another stride toward the cashless society

  • 2002-07-25
  • Sara Toth

A select group of Tallinn bank employees and businesses are using mobile phones in place of cash and credit cards. So far the payment system that allows mobile phones to access bank accounts is working well, and its creators hope to offer it to everyone by the end of the year.

Since June, about 1,000 employees of Hansapank, Eesti Uhispank and Pankade Kaardikeskus, the company that maintains Estonia's system for electronic transactions, have been paying with mobile phones at several Tallinn businesses, said Tea Trohov, head of the development and administration division at Hansabank.

The banks will decide in September if the test period has been successful enough to make the system permanent, she said.

"We picked small businesses and only 1,000 people to participate because when we started we weren't sure how long the transactions would take," Trohov said. "And we didn't want to create long lines at big businesses. But the test period is going extremely well."

Most mobile phone transactions take about two minutes to complete, she said. First the customer sends the name of the business location, the amount spent and a security code to the system's central computer. The computer then checks to see if there are adequate funds in the customer's bank account. If so, it transfers the money to the business, sends a confirmation call to the customer and a text message confirming the transaction to the business.

This system differs from Tallinn's SMS parking and transportation tickets because the money is deducted from ordinary bank accounts, not from mobile phone accounts, Trohov said.

Merchants say they have less work when customers pay with mobile phones.

"I think it's faster than a credit card, and easier for us," said Marion Tupits, a bar tender at Wall Street Pub, which was the first business involved in the test project. "The clients do some things with the phone, and we just get the message. That's all."

Businesses that accept mobile phone payments pay the same commission to banks as for card transactions, said Raivo Tinn, general manager of Pankade Kaardikes-kus, which worked with the banks to develop the system. This commission will cover the cost of maintaining the cyber system, he said.

Trohov said the mobile payment system would not replace debit cards, at least not any time soon.

"It's simply a second solution for small merchants because for this you only need a mobile phone, not a physical line or Internet connection like you do for credit cards," she said. "And it also suits taxis very well."

But Tinn said mobile phones could easily be a replacement for cash or credit cards.

"Basically in Estonia, when anyone goes out he has a mobile phone with him," Tinn said. "He doesn't always have a wallet, especially if he goes to the beach."

Mobile phone transactions are also safer because if people don't carry wallets, they can't have cash or credit cards stolen, Tinn said. Merchants said they liked the system because it could cut down the amount of money that piles up in their cash register drawers. And because a security code is required for every purchase, a stolen mobile phone would be useless for transactions.

Marina Neem, an employee at Almondi Apteek, which is testing mobile phone transactions, said she couldn't imagine customers older than 30 relying solely on the mobile transactions even though they may seem convenient.

"This will mostly be good for younger people because they are always in a rush," Neem said.