bank P2P (or, more properly account-to-account payments) would be an obvious replacement for expensive checks and wire transfers.[From Person-to-person banking]
This was hardly unique, visionary stuff. Everyone else thought this too. In fact, everyone else has been thinking this for years. Hence the great excitement about the recent announcement that
The UK Payments Council has commissioned VocaLink to build a central database that will allow bank customers to link their mobile phone number to their account for person-to-person mobile payments.[From Finextra: VocaLink to maintain UK database of mobile numbers for bank payments platform]
One or two journalists asked it was coincidental that this announcement came the week after Barclays announced their PingIt application for iPhone, Blackberry and Android. I told them that it was, since I happen to know that the Payments Council announcement had been scheduled before the Barclays PingIt press release came out. PingIt definitely did attract some attention though, and it did get people thinking about how a mobile front end to FPS might work in practice.
To be honest, my first experiences with PingIt have been mixed. It’s a really nice app, and I really like being able to check my account balance without having to log on to the internet banking site, but I’d really like it to do a little more – like give me my last ten current account transactions, that sort of thing. It was easy to use, and easy to set up as a Barclays customer. My first few payments went as follows:
- Sent a tenner to my brother. He doesn’t bank with Barclays. He tried to register but gave up. It subsequently turned out that the mini-statement he was viewing on his smartphone doesn’t display the reference number that Barclays needs to complete the sign up process so he should have gone home and logged in on a PC.
- Sent a tenner to my son. I thought this might be one of the most common transactions in the PingIt universe: sending money to teenagers. We’ve all had the midnight phone call “I’ve missed the last bus and need to get a taxi but I’ve got no money left in my account and the ATM won’t give me a tenner” sort of thing, and PingIt would be perfect for that. Unfortunately, despite me having a Barclays Premium Account and my son having had a Barclays current account for four years, he wasn’t allowed to register to receive the money because he isn’t 18 yet. Hhhmmm…
- Got a tenner sent to me from someone else at the office testing the system: worked perfectly.
- Sent a tenner to someone else at the office. It took him a day to sign up and get the money, and he wrote an A4 page on why it was all so complicated that I won’t repeat here. But he did eventually get the money.
- Sent a tenner to a friend who want to see if the system worked: it did, and he got the money in literally five seconds.
As I say, mixed, but an interesting start. The BBC asked for my thoughts on PingIt so I gave them one of my standard nine hour lectures on the evolution of banks and mobile operators in this space, from which they took one sentence.
Dave Birch, a payments expert at Consult Hyperion, says the biggest impact may not be on individuals but on small businesses such as shops.
“This could be adopted very quickly in the small business space – it may turn out to be more convenient and cheaper than accepting credit card payments,” he says.[From BBC News – Mobile money: Using your phone to transfer cash]
Again, hardly a unique and visionary insight. And not really that visionary, to be honest. Apart from anything else, I wasn’t guessing – I knew this to be true. Let’s have a look at a typical English small business, perhaps based somewhere in the South East of our fair nation.
We are dealers in mid 20th century design and Modern British Art, based near Worthing in West Sussex on the south coast of England. The main focus of our stock is American and Danish furniture from the 1950s to 1970s…[From RetroSixty – Dealers in original mid century modern design, post-war decorative, and modern british art]
They sound like great guys. But they have a place in my heart because they were, to the best of my knowledge, the first business to advertise that they will accept Barclays PingIt (in other words, FPS) for payments up to £300. They’d be mad not to: if I buy a vintage Danish footstool for £250 and pay with a credit card then it might cost then a tenner, but if they can persuade me to pay with PingIt to a personal account then it will cost them nothing. No wonder they’re keen!
So, back to the beginning. P2P is the wrong name for this. I’m going with “Mobile-instructed A2A via FPS”, because I’m like that. But whatever you decide to call it, it makes total sense and will be huge. This is why the Payments Council project to interconnect the UK banks is important. I won’t go into all of the boring reasons why I think the Payments Council database should be based on unique “Pay Names” rather than mobile phone numbers again, but I do think that once the system is up and running for all UK banks then I expect it to get rapid adoption.
It isn’t all about banks though. Connect the mobile-FPS system up to specialist Payment Institution (PI) plays around prepaid payment accounts and there will be significant innovation.
Why? Well there’s a key factor, at least in Europe. You don’t need to be a bank to offer prepaid services: the combination of an Electronic Money Institution Licence (ELMI) and PI Licence means that any company can offer a decent full service. I suspect that many of the companies applying for these licences are doing so because they want to use new technology to deliver new services that need, but aren’t, payments, if you see what I mean. That is, they don’t expect to earn money from the payments themselves, but from the value-added services that need the payments to take place.
What kind of specialist PI plays might work? I don’t know, I’m not an entrepreneur. But here’s an example: it’s not impossible to imagine a PI built around the governments bold Universal Benefit (UB) scheme: there are plenty of benefit claimants without a bank account and the government’s current plan (which is to bully the UK banks in providing an unprofitable “basic bank account” to customers who don’t want one) is doomed. So why not have someone create a PI around a benefit account: FPS access for fast payment in and out, but all sorts of bells and whistles to help people to budget and manage their money, driven through mobile and digital TV interfaces naturally. Build it around a prepaid card, and it surely provides the “basic banking” requirements for 99.9% of people. This, it seems to me, is a very attractive proposition.
From the consumer side, prepaid allows consumers to test new opportunities and options without risking a lot of money or putting their bank accounts or credit cards on the line.[From PaymentsJournal – When It Comes to New Payments Technology, Prepaid Will Lead the Way]
Provided that the FPS platform remains free to personal customers, as it should, I think we should expect to see quite a shift to FPS value-added plays, and in the reasonably near future.
By the way, I happen to have a couple of spare tickets for the Future of Money Summit at the International Payment Summit on Monday 12th March. If you’d like to come along and join in the discussion, then I’m happy to send them to the first couple of people to e-mail me on dave dot birch at chyp dot com — look forward to seeing you there!
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
For those scratching their head to what FPS means, Faster Payments Service:
I believe it was a Forrester analysis that said current trends in banking and payment transactions will mean that by 2018, the majority (or more) transactions will be via mobile device or via some ID key. The days of credit cards are numbered.