Paym: the most exciting development in payments since cards
The launch of Paym is likely to see existing banking apps become considerably more useful, allowing easy payments to be made between friends using only their phone numbers and effectively making most mobile banking apps direct competitors of Barclays’ Pingit.
No launch date has been set for Paym, which will link UK current accounts to customer mobile phone numbers for the first time, though the Payments Council has confirmed it will be in April.
Customers of Bank of Scotland, Barclays, Cumberland Building Society, Danske Bank, Halifax, HSBC, Lloyds Bank, Santander and TSB Bank will be able to use the service from launch.
Clydesdale Bank, first direct, Isle of Man Bank, NatWest, RBS and Yorkshire Bank are also committed to join, possibly later in the year, which would give nine out of 10 UK current accounts access to Paym. Nationwide Building Society is expected to join in early 2015, while Metro Bank and Ulster Bank are finalizing launch plans.
The move puts the UK into a group of countries that has already launched similar initiatives, such as the US with Popmoney, Canada with Interac and Sweden with Swish.
“It is a big step, introducing real innovation into the payments space which we haven’t seen in the UK for some time, perhaps since the launch of cards,” says George Charalambous, head of mobile banking at HSBC.
The industry-wide collaborative project should improve the functionality of existing mobile banking apps and open up competition for payments apps, says David Hodgkinson, head of digital and mobile in the customer and growth practice at KPMG.
HSBC, which has recently enhanced its app to allow customers to open loyalty cash Isas direct from their phones, confirmed it will incorporate Paym into its app. It has no plans to allow payments to be made to phone numbers from the internet banking site.
Most envisage it as a way for friends to make payments between themselves when sharing dinner bills or repaying money owed, replacing low-value cash exchanges but also cheques or internet payments via Faster Payments,a UK banking initiative to reduce payment times between different banks’ customer accounts.
“The ability to link bank accounts with phone numbers will improve existing mobile banking services for P2P payments and I can see it being used by tradespeople and other small businesses to accept payments,” says Hodgkinson. “It doesn’t even take much of a leap of imagination to see it being used in shops.
“Barclays’ Pingit has offered a very similar service to Paym for a while now and Pingit will now incorporate Paym.”
Users of Pingit will be given the option to register for Paym via the app, which would extend their reach beyond other Pingit users to anyone else registered for Paym.
A spokesperson for Barclays welcomed the Paym initiative and said it brings the rest of the industry up to speed, with other banks playing catch-up after the two-year, 2.5 million-download head start Pingit has given it.
Charalambous adds: “As Paym will exist as part of the banking app, you will have to log in to access the service, so it is totally secure. It sits behind the same front door as other bank-account functionality.
“It really leverages the speed of payment available since Faster Payments, and offers convenience. When you type in an account number and sort code, you have to double and triple check because you don’t want the payment to go to the wrong place. The phone number is easier to check and once it has been set up you can select the contact, and the app will show you the full name associated with the number to confirm it is going to the right place.”
The emergence of Paym will likely encourage new offerings to market to compete, says Hodgkinson. “Apple hasn’t shown its hand yet and Google Wallet has committed considerable resources to this and is moving away from NFC [near field communication], which I think is obsolete.”
Bankers admit Paym will only fulfil its potential usefulness if it achieves the necessary scale of uptake to make it ubiquitous, as it will not be possible to send payments to anyone that has not registered for the service.
However, most are confident the functionality will prove popular as it has in other jurisdictions where it has been tried, with research showing there is customer demand for this service.
“A successful mobile payments platform needs to have a value proposition for the merchant and the customer, and it needs to have trust,” says Hodgkinson. “There have been a number of offerings already, but so far very few of them look compelling from the perspective of the merchants.”
However, this is because nobody has found the right model yet, not because merchants are inherently disinterested in mobile payments, which might offer new ways to reward loyalty, monitor shopping habits and push offers.
The most interesting offerings have been apps that incorporate payments functionality into other services. Uber, for example, allows customers to book taxis in large cities around the world and pay via their phones, and OpenTable is due to launch payment functionality allowing diners to not only book restaurants from their phones but pay for their meals as well.
“Apps like Uber and Amazon already offer mobile payments, but people don’t always view it that way,” says Hodgkinson. “Mobile payments are actually growing even faster than people predicted – it just looks different to what some people imagined.”