Consider, for example, the IOU from the dinner at which you found yourself embarrassingly “sans-wallet”, the window cleaner’s bill due in an unfortunately cashless moment or the train fare urgently needed by errant offspring stranded on the other side of the country.
Wouldn’t it be nice to be able to pay them in a matter of seconds via a few swipes of your smartphone – which, let’s be honest, rarely leaves your side – without needing any further information than the desired contact’s number?
It may sound faintly space age but, for most in the UK, this could be a reality within a matter of months. The biggest banks in the country are now working on a collaborative project, set for a spring 2014 launch and managed and co-ordinated by the Payments Council, which will allow registered customers to pay friends, family or businesses via a mobile handset with no need for an account number or sort code.
A number of banks already offer similar services, but usually only among their own customers, which severely limits effectiveness. This scheme, however, will standardise the system across providers and could potentially link every account in the country with a corresponding mobile number.
Eight institutions, including Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander, which between them are responsible for 90 per cent of the UK’s current accounts, have already signed up to the mobile payments project,. More should be aboard by launch, says Neil Aitken, senior communications officer with the Payments Council.
We may be sitting here in ten years without cards in our pockets and with all that information stored on our phones
Even institutions that have already invested heavily in person-to-person payments, such as Barclays, are vocal in their backing. “We strongly believe that this will be a standard way of moving and managing our money in the years to come, so anything that supports this and opens up these networks to the full potential of mobile payments is a good thing,” says Darren Foulds, Barclays product director for mobile banking and peer-to-peer (P2P) payments app Pingit.
Typical usage is envisaged to be sending small amounts to family or friends, although the service could also be employed to pay smaller businesses and sole traders or make charitable donations. According to Payments Council research, the technology should have widespread appeal, although smartphone owners and in particular the traditionally tech-savvy demographics of young, wealthy urbanites, well-off larger families, and students, will be the most likely early adopters.
The most arduous and crucial of the project’s technological foundations – a vast central database managed by the Payments Council, which will allow banks to store customer mobile numbers and link them up with account details – is already in place. This is just as well, says Ben Green, head of mobile for Royal Bank of Scotland and NatWest, as the volumes of information passing through it are likely to be “eye-watering”.
Fine tuning and testing of the database will continue over coming months. In the meantime, numerous smaller, but by no means insignificant, details remain to be finalised, including the registration process, transaction value limits and an exact launch date.
For the banks, other challenges remain. Andy Hill, programme director of global payments with Lloyds TSB and Bank of Scotland, describes the most pressing as “achieving the right balance of user experience and security, ensuring that the latest smartphones can be supported and synchronising the launch activities between all the parties involved”.
Security will, of course, be an overriding priority, but concerns should be somewhat assuaged by the fact that money will be moved between accounts via the established Faster Payments and LINK networks, which respectively processed more than 800 million online and phone payments and 3.1 billion real-time ATM transactions in 2012. As a result, the UK’s existing Payment Services Regulations will apply to the mobile payments, providing customers with the same level of protection as they already enjoy when using more traditional channels.
Making potential users aware of these safeguards, along with the promise and potential value of the system, will prove critical to its long-term success, says Mr Green, adding that the number of staunch smartphone devotees likely to embrace it unprompted will quickly level off. “For the people who aren’t quite as confident in terms of how they use their mobile phone, it’s still an amazing service, but we have to talk to them in a different way to present the value and get the adoption rates,” he says.
It certainly seems likely that some consumers will be, perhaps understandably, apprehensive about linking their mobile number and bank details under overly prescriptive conditions. Instead, most are likely to want the freedom to use their phone with multiple accounts from different banks and to specify where funds paid via the scheme end up, Mr Green says.
As a result, he warns, the institutions involved in the scheme must be sympathetic to their customers’ needs, desires and concerns. “We have to really get away from thinking like banks and start thinking about ordinary consumers, and how they would like to use this system. If we can build it from that perspective, I think, from an industry point of view, it will just fly,” he adds.
If this is achieved, the implications for future development and, by extension, the UK’s payments landscape, could be dramatic. Mr Aitken believes the service could eventually grow to encompass other types of bank accounts and involve a variety of financial-services providers, replacing more traditional means of payment in the process. “We may be sitting here in ten years without cards in our pockets and with all that information stored on our phones,” he says.
The future of payments, then, may look very different. But this vision is by no means guaranteed and ensuring it becomes a reality will require significant efforts from all involved.
