<PAGE>


                                                                    EXHIBIT 10.2

                              SECURITY AGREEMENT


   This Security Agreement ("Agreement") is made as of the 5th day of January,
2000 among CASH TECHNOLOGIES, INC. with an address at 1434 West 11th Street, Los
Angeles, California 90015 (the "Company"), and GunnAllen Financial, Inc., a
Florida corporation with an address at 1715 North Westshore Blvd., Suite 700,
Tampa, Florida 33607, as agent (the "Agent") for the Note Holders (as defined
                                    below).

                                   RECITALS

A.   Certain persons (the "Note Holders" have agreed to lend the Company an
aggregate of up to $3,350,000 (the "Loan") and the Company desires to borrow
such funds from the Note Holders pursuant to the terms of certain Secured
Convertible Promissory Notes issued by the Company to the Note Holders in the
aggregate principal amount of up to $3,375,000 (the "Notes") pursuant to the
Company's Confidential Private Offering Memorandum dated December 31, 1999 (the
"Offering").


B.   In order to induce the Note Holders to make the Loan, the Company has
agreed to grant to the Note Holders a security interest and lien in and to all
of the Company's assets for purposes of securing payment and performance of its
obligations under the Notes and this Security Agreement, as the same may be
amended, modified, supplemented, restated, extended, renewed or refinanced at
any time or from time to time in accordance with their terms (the "Secured
Obligations").

C.   NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
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1.   Grant of Security Interest. To secure to the Note Holders the prompt
and full payment and performance of the Secured Obligations, the Company hereby
grants to the Note Holders a first priority continuing security interest and
lien in and to all of the assets of the Company of all kinds and descriptions,
wherever the same may now or hereafter be located, now existing and/or owned and
hereafter arising or acquired, or in which the Company may acquire an interest
(to the extent of such interest), including, without limitation: all (i)
accounts; (ii) chattel paper; (iii) contract rights; (iv) documents; (v) general
intangibles, including, without limitation, all rights to receive payment of
money or property not constituting "accounts" under the UCC (as defined below),
whether under any contract, undertaking or arrangement or pursuant to any law
rule or regulation (including, without limitation, tax refunds, condemnation and
damage awards, judgments, royalties and license fees), all trade secrets,
proprietary information, tradenames, copyrights, copyright applications, patent
applications, patents, trademarks, trademark registrations, computer software,
service marks and applications therefor and all other rights, interests and
property generally understood to constitute intellectual property and all rights
as licensor or licensee under intellectual property license agreements
(including, without limitation, United States patent applications numbered
60/062,751, 09/328,529, 60/067,123 and 09/347,069 (vi) instruments; (vii)
equipment; (viii) inventory; (ix) goods; (x) (to the extent not otherwise
included in clause (vii) above) equipment, fixtures, furniture and furnishings
now or hereafter located upon any real property of the Company, and used or
usable in connection with any future occupancy or use of such property; (xi)
deposits and any other indebtedness at any time held or owing by any bank to or
for the credit or the account of the Company; (xii) claims or payments made
under any insurance policy;  (xiii) investment property (as defined in the UCC),
including, without limitation, rights in investment securities, whether
certificated or uncertificated and rights in securities commodities accounts;
(xiv) interest of the Company in any goods, the sale or lease of which shall
have given or shall give rise to, and in all guaranties and other property
securing the payment of or performance under, any accounts, contracts, general
intangibles or any chattel paper or instruments referred to above; (xv) all
replacements, substitutions, additions or accessions to or for any of the
foregoing; (xvi) (to the extent related to the property described above) books,
files, records and other papers and documents, including, without limitation, to
the extent so related, all tapes, computer runs, computer programs and other
papers and documents in the possession or control of the Company or any computer
bureau from time to time acting for the Company; (xvii) (to the extent not
otherwise included) all attachments, accessories, accessions, substitutions and
replacements of or to any or all of the foregoing types of tangible Collateral
(as defined below); and (xviii) (to the extent not otherwise included) proceeds
and products of any and all of the foregoing (collectively, the "Collateral").
The Agent will file, and the Company consents to such filing, the appropriate
forms to perfect the Note Holders' security interest in the Collateral in
compliance with the UCC.  "UCC," as used herein, means the Uniform Commercial
Code as in effect on the date of this Agreement in the State of California.

ii.  Covenants and Warranties. The Company represents, warrants, covenants
and agrees as follows:
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(i)    The Company is the sole owner of the Collateral, free and clear of any
liens, security interests or other encumbrances (other than liens solely on
specific equipment subject to equipment leases (such equipment having a fair
market value of not more than $500,000 in the aggregate)) (collectively, the
"Permitted Liens");

(ii)   Performance of this Agreement does not conflict with or result in a
breach of any agreement to which the Company is bound;

(iii)  The Company will not (i) change the location of its chief executive
office or other places of business or remove its books and records from such
location, or (ii) remove any equipment or inventory from any location in which
it may be located (except for sales in the ordinary course of business), (c)
change its identity or corporate structure to such an extent that any financing
statement filed by or on behalf of the Note Holders would become misleading,
unless, in each of the foregoing cases the Company shall have given the Agent
and the Note Holders at least 30 days prior written notice thereof in reasonable
detail and shall do all things necessary to maintain the first priority status
of the Note Holders' security interest in the Collateral contemplated hereby;

(iv)   If any Event of Default (as defined in the Notes) shall occur, the Note
Holders may exercise any and all rights and remedies of a secured party after
default under the UCC;

(v)    No security agreement or financing statement with respect to all or any
part of the Collateral is on file or of record in any public office, except
security agreements or financing statements in respect of Permitted Liens. When
appropriate financing statements have been filed by or on behalf of the Note
Holders against the Company, the security interest granted pursuant to this
Agreement will constitute a perfected security interest (to the extent such
liens can be perfected by filing) in the Collateral in favor of the Note
Holders, which security interest will be prior to all other security interests
in and liens on the Collateral (other than Permitted Liens) and which security
interest is enforceable as such against all creditors of the Company;

(vi)   The Company agrees to pay, and to hold the Note Holders and the Agent
harmless from any and all liabilities, costs and expenses (including without
limitation, reasonable legal fees and expenses) (i) with respect to fees, taxes
or other costs incurred with respect to recording UCC financing statements and
(ii) in connection with any of the transactions contemplated by this Agreement
or the enforcement of the Agent's or the Note Holders' rights hereunder, except
those liabilities, costs and expenses arising out of the gross misconduct of the
Agent or the Note Holders. In any suit, proceeding or action brought by the
Agent or Note Holders under any account for any sum owing thereunder, or to
enforce any provisions of any account for any sum owing thereunder, or to
enforce any provisions of any account or contract, the Agent and Note Holders
shall be indemnified by the Company from and against all expense, loss or damage
suffered by the Agent and Note Holders in any such action, except for expenses,
loss or damage arising out of the gross misconduct of the Agent or the Note
Holders (in the case of indemnified amounts which would otherwise be owing to
the Agent or the Note Holders);
<PAGE>

(vii)  All information heretofore, herein or hereafter supplied to the
Agent and Note Holders by or on behalf of the Company with respect to the
Collateral is accurate and complete in all material respects; and

(viii) Any subsidiary formed or acquired by the Company shall, upon the
formation or acquisition thereof, join and be bound by this Agreement in the
same manner and to the same extent as the Company.

iii.   Inspection Rights. The Company hereby grants to the Agent and the Note
Holders and their respective  employees, representatives and agents the right to
visit, during reasonable hours upon prior reasonable written notice to the
Company, any of the Company's properties and/or facilities holding, utilizing
and/or representing any of the Collateral, and to inspect the records relating
thereto upon reasonable written notice to the Company and as often as may be
reasonably requested.

iv.    Further Assurances; Attorney in Fact.  At any time and from time to
time, upon the written request of a Note Holder or the Agent, at the sole
expense of the Company, the Company will promptly and duly execute and deliver
such further instruments and documents and take such further action as the Note
Holder or Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the UCC in effect in any jurisdiction with respect
to the liens created hereby.  The Company hereby authorizes the Agent on behalf
of the Note Holders to file any such financing or continuation statement without
the signature of the Company, as the case may be, to the extent permitted by
applicable law, and the Agent agrees to provide the Company with a copy of any
such statement filed by the Agent.  The Company hereby irrevocably appoints the
Agent as the Company's attorney in fact for the purpose of signing the Company's
name to any such financing and continuation statements.  A carbon, photograph or
other reproduction of this Security Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.

v.     Events of Default. The occurrence of any of the following shall
constitute an Event of Default under this Agreement:

(i)    An Event of Default (as defined in the Notes) occurs under any of the
Notes; or

(ii)   The Company breaches any warranty or agreement made by the Company in
this Agreement which breach is not cured in a timely manner as provided herein.

vi.    Remedies. Without limiting the generality of the remedies available to
the Note Holders, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Company (all and each of which demand,
presentments, protests, advertisements and notices are hereby
<PAGE>

waived), the Note Holders (or the Agent on behalf of the Note Holders) may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Note Holders or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The Note
Holders (or the Agent on behalf of the Note Holders) shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold. The Company further agrees, at the Note Holders' request (or the
Agent's request on behalf of the Note Holders), to assemble the Collateral and
make it available to the Note Holders at the places which the Note Holders (or
the Agent on behalf of the Note Holders) shall reasonably select, whether at the
Company's premises or elsewhere. The Note Holders (or the Agent on behalf of the
Note Holders) shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Note Holders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Secured Obligations, in such order as the Note Holders may elect; and
only after such application and after the payment by the Note Holders of any
other amount required by any provision of law, including, without limitation,
any provision of the UCC, need the Note Holders account for the surplus, if any,
to the Company. To the extent permitted by applicable law, the Company waives
all claims, damages and demands it may acquire against the Note Holders arising
out of the exercise by the Note Holders (or the Agent on behalf of the Note
Holders) of any rights thereof hereunder. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least five (5) days before such sale or
other disposition. The Company shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Secured Obligations and the reasonable fees and disbursements of any
attorneys employed by the Note Holders (or the Agent on behalf of the Note
Holders) to collect such deficiency.

vii.   Attorneys' Fees. If any action relating to this Agreement is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.

viii.  Amendments. This Agreement may be amended only by a written instrument
signed by the parties hereto.

ix.    Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
<PAGE>

x.     California Law.  This Agreement shall be governed by the laws of the
State of California, without regard for choice of law provisions thereof.

xi.    Consent to Jurisdiction; Waiver of Jury Trial.

xii.   The Company, the Note Holders and the Agent each (i) agrees
that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in the appropriate State Court, County
of Los Angeles or in the United States District Court for the District of Los
Angeles, (ii) waives any objection which the Company may have now or hereafter
based upon forum non conveniens or to the venue of any such suit, action or
proceeding, and (iii) irrevocably consents to the jurisdiction of the State
Courts, County of Los Angeles and the United States District Court for the
District of Los Angeles in any such suit, action or proceeding.  The Company,
the Note Holders and the Agent each further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the State Court, County of Los Angeles or in the United States
District Court for the District of Los Angeles and agrees that service of
process upon the Company, the Note Holders and the Agent, mailed by certified
mail to their respective addresses, such service to become effective three (3)
business days after such mailing, will be deemed in every respect effective
service of process upon the Company, the applicable Note Holders or the Agent,
as the case may be, in any suit, action or proceeding.  FURTHER, THE COMPANY,
THE NOTE HOLDERS AND THE AGENT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO
ENFORCE THIS AGREEMENT AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR
CROSSCLAIM ASSERTED IN ANY SUCH ACTION.

xiii.  The Agent.  By its acceptance of the Notes and this Agreement, each
Note Holder agrees as follows:

(i)  The Agent shall be deemed to be authorized on behalf of each Note Holder to
act on behalf of such Note Holder under this Agreement and, in the absence of
written instructions from the Note Holders received from time to time by the
Agent (with respect to which the Agent agrees that it will, subject to the last
two sentences of this Section 12(a), comply, except as otherwise advised by
counsel), to exercise such powers hereunder as are specifically delegated to or
required of the Agent by the terms hereof, together with such powers reasonably
incidental thereto. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement or the Notes
by the Company. Each Note Holder will indemnify the Agent from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed upon, incurred by, or asserted
against the Agent in any way based upon, relating to or arising out of this
Agreement, the Notes or any other agreement or document executed and delivered
to the Note Holders or the Agent by the Company ("Other Documents"), including
the reimbursement of the Agent for all out-of-pocket expenses (including
reasonable attorneys' fees) incurred by the Agent hereunder or in connection
<PAGE>

herewith or in enforcing the Secured Obligations of the Company under this
Agreement in all cases as to which the Agent is not reimbursed by the Company;
provided, however, that the Note Holders shall not be liable for the payment
--------
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements determined by a
court of competent jurisdiction in a final nonappealable judgment to have
resulted solely from the Agent's willful misconduct. The Agent shall not be
required to take any action under this Agreement or under the Notes, or to
prosecute or defend any suit in respect of this Agreement or the Notes, unless
the Agent is indemnified to its reasonable satisfaction by the Note Holders
against loss, costs, liability and expense. If any indemnity in favor of the
Agent shall become impaired, the Agent may call for additional indemnity and
cease to do the acts indemnified against until such additional indemnity is
given.

(ii)   Neither the Agent nor any of its directors, officers, partners, employees
or agents or any officers, directors, employees, consultants of such parties,
shall be liable to the Note Holders for any action taken or omitted to be taken
by it under this Agreement, the Notes or the Other Documents, or in connection
herewith or therewith, except for the Agent's own willful misconduct. The Agent
shall not be responsible to any Note Holders for any recitals, statements,
representations or warranties in this Agreement, the Notes or the Other
Documents or any certificate or other document delivered in connection herewith
or for the authorization, execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, or sufficiency of the Notes, this
Agreement or any of the Other Documents, the financial condition of the Company
or the condition or value of any of the Collateral under this Agreement, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of any of the Notes, this Agreement
or the Other Documents, the financial condition of the Company or the existence
or possible existence of any default or Event of Default (as defined in the
Notes) thereunder. The Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate, statement or
writing which it believes to be genuine and to have presented by a proper
person.

(iii)  The Agent may resign as such at any time upon at least 10 days' prior
notice to the Company and the Note Holders, such resignation not be effective
until a successor Agent is in place. If the Agent at any time shall resign, the
Note Holders may appoint a Note Holder as a successor agent who shall thereupon
become the Agent hereunder. If within 10 days after the retiring Agent's giving
of notice of resignation, no successor Agent shall have been so appointed, and
shall have accepted such appointment, then the retiring Agent may, on behalf of
the Note Holders, appoint a financial institution or a limited purpose trust
company as the successor Agent, and the Company shall pay the successor Agent's
reasonable fees for serving as successor Agent. Upon the acceptance of any
appointment as agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement.
<PAGE>

(iv)   The Note Holders may at any time and for any reason replace the Agent
with a successor Agent selected by them, upon at least 10 days' written notice
to the Agent, the Company and the holders of the Notes. Should the successor
Agent be a financial institution or a limited purpose trust company, the
Company, by its acceptance of this Agreement, shall be deemed to have agreed to
pay the successor Agent's reasonable fees, if any, for serving as successor
Agent. Upon the acceptance of any appointment as agent hereunder by a successor
Agent, such successor Agent shall be entitled to receive from the terminated
agent such documents of transfer and assignment as such successor Agent may
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the terminated Agent, and the
terminated Agent shall be discharged from its duties and obligations under this
Agreement.

xiv.   Notice.  Any notice or other communication required to be given to any
of the parties hereto shall be in writing and shall be given by certified or
express mail, return receipt requested, to such party addressed at his or its
address set forth opposite its signature on the signature page hereof.

xv.    Rights of Secured Party.  The Agent shall have the same rights and
powers with respect to the Notes held by it or any of its affiliates, as any
other Note Holder may exercise as if it were not the Agent.  The Company hereby
waives, and each Note Holder shall be deemed to waive, any right to disqualify
any Note Holder from serving as the Agent or any claim against any Holder for
serving as the Agent.

xvi.   Prorata Participation by the Note Holders.  The Note Holders shall
share ratably in the distribution of benefits and any expenditures relating to
this Agreement based on the ratio of the principal amount of their respective
Notes to the total Loan amount.
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.

i.   Address of Company:              COMPANY:

     Cash Technologies, Inc.          CASH TECHNOLOGIES, INC.
     1434 West 11th Street
     Los Angeles, CA 90015
     Attention: Bruce Korman
                                      By:
                                      Name:
                                      Title:


ii.  Address of the Agent:            SECURED PARTY:

     GunnAllen Financial, Inc.        GUNNALLEN FINANCIAL, INC.
     1715 North West Shore Blvd
     Suite 700
     Tampa, Florida  33607
     Attention:  Rick Frueh           By:
                                      Name:
                                      Title: