Sorry, we don't take cash. Have you an arm or a leg?

Conrad Chase, British co-owner of the VIP Baja Beach Club in Barcelona, makes an unlikely human debit card.

Mr Chase and almost 100 other clubbers have opted to have tiny data chips implanted surgically under their skin. When they want to buy a drink, they simply wave their techno-enabled arms across the counter.

The chip, made by the VeriChip Corporation, is only the size of a grain of rice but can transmit an ID number to a scanner allowing money to be taken from clubbers' bank accounts.

Mr Chase may be an extreme example but he demonstrates a wider point: Britons are rapidly embracing the cashless society. The Association for Payment Clearing Services, the UK industry body, forecasts that in less than a decade fewer than half of all payments will be made by cash.

Banks, including HBOS, HSBC, Barclays and Royal Bank of Scotland, are surfing the cash-free wave by introducing new credit and debit cards. Customers will be able to pay for items under 10 by tapping the cards on a terminal at the till - much as they would a transport fare card.

Sandra Alzetta, head of innovation and acceptance at Visa Europe, says this will speed transactions:.

"Until now, cash has been king. Other methods have been too slow or too expensive for small ticket items with values of less than 10," she said. "But contactless payments are much quicker than cash. If you're buying a coffee or doing a grocery top-up, speed matters a lot."

Payment by mobile phone is also starting to take off.

This week, the Post Office announced an electronic money-transfer service that allows recipients to receive funds using a bar code sent to a mobile or email address.

The service is intended to allow companies to distribute promotional incentives and cash payments for less than the cost of a cheque. Companies send a reference code by text message or email, which customers take to any UK post office to receive instant payment.

Visa is already testing a system in France that will allow consumers to pay for goods via mobile phone. In Britain, items such as parking and London's traffic congestion charge can already be paid in this fashion.

Another way cash is being edged out is through pre-paid cards that can be loaded up with cash and used like a credit card. PSE Consulting, the European payment consultancy, estimates that the total number of pre-paid cards issued in the UK will rise from 2m currently to 44m by 2010.

Those who cling stubbornly to pounds and pence may even pay a price for their intransigence. Some utility companies have already started to penalise households who settle their bills by cash or cheque. BT has introduced a 4.50 charge for the millions who do not pay by direct debit.

But the international experience suggests that Britain can expect even more striking developments in the future. A "pay-by-mobile" system already operates in Japan. In Texas, 500 people are taking part in a trial using a MasterCard PayPass to buy items from 7-Eleven stores via Nokia mobiles. Customers tap their pass or phone on to a specially equipped merchant terminal.

But not everyone believes that cash has had its day.

Jonathan Charley, vice-president of financial services at the business and technology company EDS, questions whether retailers will be willing to join the "tap and go" revolution if they have to bear the costs of rolling out the system.

Commenting on Visa's declared wish to turn the 2012 London Olympics into a cashless event, he said: "I think a cashless Olympics is a good vision but will not be achieved unless retailers and small businesses have the devices to read cards. Who is going to be paying for the devices and using the service - the consumer, retailer or the banks?"

He added that the contactless card scheme also assumed that consumers had a bank account. "The challenge is that the contactless scheme [in London] can't be used by those who don't have a bank account. A whole swathe of people could be excluded from being able to take advantage of these new services."

Nicola O'Reilly of the National Consumer Council said: "We have concerns around security and the ability of consumers to keep track of what they're spending, which is an essential part of budgeting. If any of these systems are only available to credit-card holders that would be unfair to those who do not have cards."

Matthew Knowles, from the Federation of Small Businesses, pointed out: "Small businesses would need to know that the systems were secure and they would not be liable if there was fraud in the system. We would also need to make sure small companies were not disadvantaged if they didn't have the technology."

In 2006 the UK made 23.1bn cash transactions, which works out at nineper adult a week, writes Jane Croft.

Two-thirds of the 23bn cash transactions are for less than 5. Use of cash has fallen by 14 per cent in the past five years and even in the past year consumers have started to use debit cards for low value transactions.

Six in 10 of all cash payments are in the retail sector. Cash remains the main payment method on public transport, in pubs, clubs, restaurants and cinemas. By 2014 fewer than half of all payments will be made by cash.

Mobile phone banking is taking off. Mobile operators are supporting an initiative to enable people who work abroad to use their phones to send money home. The GSM Association, the global trade body for mobile operators, and MasterCard Worldwide, the US payment processing company, have announced a pilot programme whereby migrant workers will use mobile phones for international remittances. The initiative is led by Sunil Mittal, chairman of Bharti Airtel, the largest mobile operator in India, which is the biggest recipient of overseas remittances. It is backed by Vodafone, Cingular and Telecom Italia.

This year HSBC began a mobile phone pilot project with MasterCard and ViVOtech. The six-month trial will test the use of mobile phones to make contactless, secure credit card purchases for low-value transactions. (5.19.2007, Jane Croft Retail Banking Correspondent)