Singapore has just become the world's first country to announce a move away from boring old paper and metal money. Instead, the country is developing and promoting a range of electronic and card-based instruments that come under the category of digital money.

Singapore is far from the world's most cashless economy: that distinction belongs to Iceland, where cash accounts for less than a fifth of all retail transactions. In Britain, more than four-fifths of transactions are in cash.

What is prompting Singapore's move towards a cashless economy? First, it's more efficient, more convenient, and cheaper. Yes, cheaper. Most people go through their lives buying and selling and never thinking about the cost of money. A lot of people assume it's free. But just consider it - someone, somewhere is paying for the cost of that paper and metal like the printing presses at the Bank of England, the armoured cars transporting sacks of cash from supermarkets to banks, and much more.

So there is pressure for change. Interestingly, it's not the traditional payment system owners - banks - that are in the vanguard. Mostly, the drive is coming from the companies and government.

Look at the US, where McDonalds' customers in the Chicago area are paying for their burgers and fries by waving their Mobil Speedpass cards in the vicinity of the cash register. Exxon Mobil says 4.3 million customers are carrying the Speedpass, which can be used at 3,500 Mobil outlets. Later this year, the program will extend to Exxon stations and stores, and, if the company has its way, to drug, video, and grocery stores.

In Southern California, McDonalds' customers can pay in a similar way with the transponder (fixed to the dashboard) that they use to pay tolls on the motorways, merely by driving through a lane. McDonald's is collaborating with Massachusetts state officials on a similar deal for the state turnpike, which has hired the fast-food chain to run its food concessions.

In Hong Kong, travellers on the mass transit system are using a smart card, called Octopus, to pay for their journeys. Around 7 million cards are in circulation, removing about 25 tonnes of coins per day from the transit system, and making life easier for travellers. Transactions with the smart card take less than a third of a second, and cards can be read from up to 10cm from the reader, so you don't have to take them out of your wallet. The cards work in phone booths, drinks machines, snack bars - even in Starbucks and Maxim's pastry shops. Meanwhile, in London, I'm still fumbling around the bottom of my briefcase for a stray 10p piece when I want to take the tube.

What about shopping over the internet? While most of us are still typing in our credit card number, address, expiry date, and other information on as many as 10 other fields in order to buy a $5 item of shareware, Sony and its Japanese partners have just completed the trial of a new contactless payment card. Called Edy, the electronic "purse" is based on Sony's Felicia system. Consumers will be able to load their purses with electronic money at ATMs or convenience stores and then spend it in various places, including online: Sony says it will launch a PC interface so customers can spend cash over the internet just by sitting next to their computers!

Back in Britain, we are far more conservative about the technology of money. I've never understood why the government considers wasting hundreds of millions printing euro notes and minting euro coins. If the government does decide to join euroland, why doesn't it make the UK home of the e-euro? Let people keep their bank accounts in euros, store their euros on their smart cards, and send them to each other via the web and e-mail using systems like Paypal? The technology exists. It's secure, inexpensive, and easy to use.

Think about it: the Egyptians were using metal coins 2,500 years ago. Paper notes have been around since 1273, when Kubla Khan began issuing money on strips of mulberry bark. Do we have to keep wasting more of our hard-earned taxes on old-fashioned technology?

• Dave Birch is a director of Consult Hyperion, whose fourth annual Digital Money Forum - with speakers from (among others) the European Central Bank, Paypal and Sonera MobilePay -will be held in London on April 25th/26th 2001. For more information, see www.digitalmoneyforum.com