Five major UK financial services firms have committed to rolling out mobile payments technology from Zapp, enabling customers to make in-store and online purchases from within their banking apps.
I like Zapp's concept, but it's hard to see the proposed user flow to fly: "For purchases at participating retailers, customers who choose to pay by Zapp will be taken to their banking app, where they will log in, see their balance, and confirm the purchase."
What benefits would consumers get compared to conventional bank cards?.. For example, will/can Zapp offer the same consumer protection as a credit card? Especially in case of e-commerce?
Also, how can a mobile-generated (i.e. s/w-based) token be *more* secure than "chip & PIN" transaction?.. (Card data passed during an EMV transaction is useless without CVV.)
With the proposed implementation, it will be hard for Zapp to displace cards and wallets: Zapp cannot be used for transit payments and cash withdrawals from ATMs, for example. If consumers do continue carrying their cards, they are likely to continue using
Having said that, by working with the banks direct Zapp could indeed gain a competitive advantage. IF they get user experience and value proposition right...
I agree with Alexander here. The actual user experience and process flo is pretty poor to say the least, and what protections can they offer when the money is moved via fasterpayments...
Also, its in participating stores, so they face the same challenege all payments companies face who want to change customer habit, and merchant habit, and that is are you making life simpler and adding value. The answer is no....so why would a business offer
zapp? why would i opt to move money from my banking app to pay things when it will take longer than actually paying on my card, and i dont get the same protection and to top it off, no added value or incentive to do so...
On protections, Zapp says:
"All Zapp payments will be covered by similar protections as exist today for debit card payments, ensuring that in the event of goods not being delivered or an issue with the payment the consumer will be covered."
Easy to say that, hard to get the money back from the merchant since they would already have the money..So would Zapp foot the bill?
There are simply far too many questions regarding the proposition, and thats because it isnt available, this is all what they hope will happen
There are no fast rules when it comes to debit cards and consumer protection (http://www.money.co.uk/article/1004510-is-debit-card-protection-the-same-as-for-credit-cards.htm).
As Zapp seems to "consolidate" the banks in opaque way, i.e. user pays via a specific bank's app, it's that bank that needs to deliver the promise (unless it says otherwise in T&Cs).
If consumer protection equals the one offered by credit cards AND if the liability is shifted from e-merchant to the bank (i.e. consumer...) in terms of chargebacks, then Zapp has an interesting and compelling story to tell.
Do people still use debit cards, apart from in ATMs? As it says above, you get no consumer protection. You also get no rewards. Can't remember the last time I actually swiped mine. Right then - I'm off to book my next free flight...maybe MBNA will go
Debit growing faster than credit. Macro factors are at play, affordability, recession etc.
Will, Zapp could (and I think should - http://www.finextra.com/blogs/fullblog.aspx?blogid=8784) extend itself to credit products. That way they can compete with Visa/MC
by offering e-commerce merchnant tangible and compelling benefits.
Think about it: partner banks accepted Zapp as a front-end for their products. It doesn't matter whether it's debit or credit; online purchase or ATM transaction. That means that Zapp could, potentially, displace Visa and MasterCard in the UK.
Technically, V/MC can offer everything Zapp does (and more...) But it's about agility and flexibility these days. Zapp could have an edge there (if they don't lose focus on their main stength...)
There is, however, another critical element: execution (user experience that leads to user adoption and frequent use). Zapp is not shining there for now, IMHO.
Agreed - I was just wondering why no credit cards had signed up at this stage, but if our colleague is correct, then that may be the answer. I'd love to start leaving my wallet at home...
From my understanding of the Zapp proposition, its not actually a scheme, rather a mechanism for using faster payments to complete a payment itself. Zapp payments is simply a wrapper for the consumers own banking app, and it is that banking app that uses
faster payments to complete the transaction, Zapp has no access to faster payments.
So with this in mind, things like credit just cant be supplied by Zapp. In addition, questions about consumer and merchant protection still remain, its one thing to just claim both will be protected, its another to explain how.
You can see why Barclays havent got involved as their own pingit/buyit app already delivers more.
What is a credit card? It's a credit "hat" for some underlying bank a/c. That is connected, in the UK, to FP scheme...
Barclays Pingit hasn't (yet?) extended itself to Barclaycard products due to some internal conflicts of interests. Not due to technological limitations.
The problem with credit has a different nature, in Zapp's case: if they offer retailers certain "Zapp" rate, it will hard to make it a two-tier one (for debit and credit). Although V/MC do the same without any problem. It all depends on how Zapp sells its
story to the retail world. With e-commerce that's pretty straightforward.
I'm sceptical of the customer experience here - doesn't feel like there is much incentive for a consumer to use zapp rather than just use their card? Personally I find it a pain to enter all my passwords on my bank's clunky login screen every time...no way
I'd do that over just getting my contactless card out.
As for UX, Zapp makes more sense in e-commerce where they act just like PayPal, but with a twist of out-of-band authentication. However, as discussed above, a critical element is missing for e-commerce to fly - support of credit products.
Services like Zapp are credit transfers, where I transfer funds from my deposit account to someone´s bank account. payer and payee may have their accounts in different banks. That is easy. It may be much more difficult to reclaim a transfer due to no delivery
of goods, error or other reasons. In practice the payee should voluntarily make a new transfer to the payer since the deposit protection legislation protects the funds that went into the payee account! If the payee is a fraudulent or disorganized merchant,
it is less likely that the funds are repaid. For e-commerce and later shipping trades the global card schemes have the "services not rendered/goods not received" guarantee to the cardholder where the issuer can pull back the monies from the acquirer who then
is left to deal with its non-performing merchant. This applies both to debit and credit cards. Thereby the consumer protection is upheld by the involved financial institutions and they assume the risk for non-performing merchants - and therefore excercise
control on the participating merchants. Who protects me if I pay with Zapp and I never receive the merchandise and the merchant does not respond to my repayment request? Zapp seems to be more fit for rapid credit transfers between consumers than for shopping
Agreed...You can see why the banks they have on board are on board, after all these are banks that dont have a p2p app, and dont have a thing in the mobile payments area at all...So they obviously will sign up for a wallet that actually pushes the consumer
into their own banking app to complete a mobile payment...
Fact that Barclays is no where to be seen regarding Zapp tells a big story. Why would they. Pingit/buyit is light years ahead of the Zapp clunky vision.
Is this a
good idea, or a dead end concept?
would be good to understand how refunds work, if/how chargeback rules work and how merchants and consumers are protected. Also if/when credit can be enabled. I'd give a go as all done in my bank's app and I trust bank (to handle money ;-) and is better than
PingIT as I wouldn't have hassle of top ups
Hi Alexander. I agree, that sounds impressive. But, lets look at it. HSBC and the banks are supporting this because they have nothing to offer themselves, they are hoping that Zapp then takes off so that their customers dont jump ship to a different bank.
IMHO the experience is pretty poor, its a lot worse than chip and pin transactions at POS and so, do we really see merchants promoting this? Especially as their is still no added value to that merchant for making an investment in Zapp? Even for eCommerce,
the experience is behind a PayPal and has no traction compared with PayPal.
Support from the likes of WordPay isnt anything to write about either, anyone can buy into being supported by WorldPay and others.
Its all good PR and no doubt helps raise funds for Zapp, but does any of these relationships help deliver a solution that an SME and a consumer will buy into together (cant have one and not the other). IMHO no, nothing new here....
If the average John Doe really cared about fraud protection / chargeoff and stuff like that, IMHO they'd stick to credit cards, especially for online shopping. For the market segment that uses debit cards for online transactions today, Zapp offers a strong
value proposition by obviating the cumbersome task of entering so many keystrokes for card #, CVV, expiry, etc. on a virtual keyboard. Just enter one PIN # - hopefully the same Mobile Banking PIN # - and they're done. Not sure if this segment is big enough
to support yet another PSP, though.
£50k-80k base, double OTELondon, UK
© Finextra Research 2014