P2P Payments Come To The UK
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There were two interesting announcements this week heralding the dawn of the bank account-based P2P payment era in the UK. The first announcement came from Barclays about the launch of a Pingit service, which allows consumers to send and receive money using mobile phone numbers. Five days later, the UK Payments Council announced that it 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. Until now, if I wanted to make a payment to another person in the UK, I typically would have to give them cash, write a cheque or make a bank transfer using their bank account details. The recipient would have to share their bank account details (sort code and account number) with me in advance. These new services link the bank account details to a mobile phone number and that's all I would need to know. Sounds much better, doesn't it? It does, and Barclays should be congratulated for continuing to innovate and push mobile payments frontiers in the UK. From the first credit card and ATM in the UK to contactless cards, from NFC payments to now mobile P2P payments, Barclays (and Barclaycard) have been spearheading the payments innovation in the UK. However, the first question is why have two initiatives? While Barclays application is targetted at the end consumers, the UK Payments Council and VocaLink database will be a service to banks. It would appear that the Barclays service does not rely on the UK Payments Council initiative and will be asking the customers to register separately. Does it mean these two services eventualy are going to be competitive and the other banks will have to make a choice which one to use? A centralised database is a technically elegant solution, although the requirements for securing such a database are immense. On the other hand, as an individual bank handling the registrations you also want to be absolutely sure that when someone is trying to link their bank account details to a mobile phone, they are definitely the legitimate owners of both. The initial signs that the registration process with Barclays is somewhat cumbersome, perhaps deliberately so, which could yet prove to be a barrier for consumers willing to try this service. According to Finextra, "Barclays claims to have logged 20,000 downloads of Pingit in the first three days after its launch." It is very encouraging, but these are likely to be only application downloads; it's not clear how many of these end up getting registered and activated. The actual transfers are done over the UK's Faster Payments service, where the transfers are irrevocable and final. This puts the onus very much on consumers to make sure that they select the correct mobile number and enter the right amount, as mistakes may not be easily reversed. Finally, it will be interesting to see whether there is a genuine bank account-based P2P market in the UK. The traditional P2P example of "splitting a restaurant bill" is overused. In the UK, a group of friends after a meal would just ask the waiter to split the bill directly on their cards. The more likely users would be small businesses, such as mobile tradesmen (e.g. plumbers), but I suspect it will take some time to displace cash and cheques from that segment of the market.