By Bob Howard BBC Radio 4's Money Box

Recent innovations could mean the beginning of the end for cash

A new type of card could replace cash for small payments if a trial in Scotland proves successful.

The contactless payment card requires neither a pin nor a signature and works by placing it over a reader which automatically debits the owner's account.

The trial is being conducted by Mastercard and the Royal Bank of Scotland by 1,000 employees of the bank at its headquarters outside Edinburgh.

It is estimated that using cash costs UK banks and retailers up to �4bn a year, so replacing it has the potential to be cheaper and quicker for all concerned.

You don't end up with a pocket full of change, you don't have to queue at ATMs... and you can run it straight from your bank account David Rockcliff, RBS

The card being used is a normal debit card which in addition can make contactless payments of up to �10 to buy small items like coffees or meals.

David Rockcliff, head of commercial development for the Royal Bank of Scotland (RBS) was clear about the advantages.

"The big benefit over cash is you don't end up with a pocket full of change, you don't have to queue at ATMs to get the cash out and you can run it straight from your bank account," he told BBC Radio 4's Money Box.

Most transactions are authorized simply via communication between the reader and the card.

Random checks

To prevent fraud, there is a random security check so after a certain number of purchases you are asked to put in a pin number as you would with a normal debit card.

If it is lost or stolen then Mr Rockcliff said that as with other cards the issuer would bear the liability: "Once we introduced this concept of the random security check being a chip and pin transaction then people are pretty comfortable with it."

Last year was the first when consumers spent more on debit cards than they paid in cash.

And when they do pay in cash, more than half their purchases are under �5.

In the staff restaurant here the transaction time has probably halved James Monks, Compass Group

James Monks works for Compass Group which manages the Starbucks restaurants and the staff canteen based at the headquarters.

His outlets have been taking part in the RBS trial, although in this case the bank is not charging him for payments going through its system.

That will be different when and if the process is rolled out across the UK.

At the moment it is not clear how much it will cost retail outlets to install the technology and how much the banks will charge for processing the payments.

Mr Monks said that despite this uncertainty, he is impressed with what he has seen:

"In the staff restaurant here the transaction time has probably halved."

'So convenient'

RBS employee Sarah Newton has been using the system for a couple of weeks.

She was a little worried about how secure the system was at first, but was reassured by the random security checks and she now uses it every day.

"It's brilliant, I find it difficult not to use it everywhere now, it's just so convenient," she said.

This is very exciting. The contactless infrastructure lays the foundation for a lot of new innovation over the next few years Brian Triplett, Visa Have Your Say

RBS and Mastercard are planning to extend the trial across a UK town or city next year.

Meanwhile, Visa is set to start its own trial in the UK this autumn.

In the US, the company has issued five million contactless debit cards and around 30,000 retailers accept them.

It is also looking at installing the technology into key fobs and mobile phones.

Brian Triplett, senior vice president for emerging products for Visa in the US said: "This is very exciting. The contactless infrastructure lays the foundation for a lot of new innovation over the next few years."

The programme has learned that Britain's biggest retailer - Tesco - is looking at a wide range of new payment schemes.

That includes contactless payment cards, club cards and staff cards, through to paying, using your mobile phone or via an oyster card system, like the one currently used on the London underground.

BBC Radio 4's Money Box was broadcast on Saturday, 1 July, at 1204 BST and was repeated on Sunday, 2 July at 2102 BST.