Mobile payments one of the next drivers of Faster Payments

Since the limits to the Faster Payments Scheme were increased in September 2010 there has been an increase in use by the participant banks’ customers. Figures from the Payments Council for the 12 months to end January 2011 show a 43% increase in the volume of transactions and a 53% increase in the value of transactions proving the exceptional growth in usage of the service.

Developments driving new mobile services such as Barclays Pingit that will also use the Faster Payments Service (FPS) will further increase these volumes. However although the Barclays Pingit is an initiative in the right direction, there is still disappointment in the industry that no new members have joined as direct members linked to the central infrastructure of the scheme. Indeed, of the original members, Northern Rock has dropped out and Santander has acquired Abbey and Alliance & Leicester.

The Payments Council should also be credited for driving m-payments – having started work on a central database that links mobile numbers to account details.  The infrastructure is set to enable account to account mobile payments (including P2P, P2B and potentially B2P*) which could be as crucial to mobile payments in the UK as FPS is expected to be.

To quote Kevin Brown, chairman of the FPS, he says he is “keen to drive greater usage in 2012”, suggesting too that future mobile payments services could be built from the existing model.

Certainly as mobile becomes a more accepted banking channel, it makes sense to use the Faster Payments platform which offers a near real time service, that is now fast becoming a requirement of (particularly younger) retail banking customers and increasingly for corporates trying to manage their liquidity positions. 

However, only the major high street banks are currently directly connected to the system with the majority of others linking their FPS reachable sort codes via one of the original members. These banks seem focused on ticking a PSD requirement box rather than actively promoting the scheme to customers.  Realistically they are focusing on “running the bank” in the first instance rather than marketing new services to customers.  But the changes to the banking infrastructure in the UK, with the emergence of Metro Bank and Virgin as major players, suggests they may ultimately need to become full members of the scheme in the long term. For these players, having the Payments Council work on infrastructure is a welcome development and will go some way to enabling their organisations to innovate further down the line.  Ultimately, it is about access for all and about tailoring the right kind of service in the right timeframe to each customer be they retail or corporate. 

Once this has been coordinated, the next logical step is to extend the service to handle other currencies, such as the Euro which may be the tipping point of volume/value of transactions for foreign banks with a customer base in the UK to decide to become full members.

Other countries have seen a mobile payments service change the way companies are able to make payments fitting into the life style of their customers.  As reported in The Banker in October 2011, Absa in South Africa have found small businesses have used their mobile payments service to pay their staff while larger companies have used it for one off payments to consumers perhaps for competition prizes.

The industry needs to focus first on getting more banks on board as direct members linked directly to the Central VocaLink infrastructure to truly develop the service further.  The fact that only Barclays offer direct corporate access to the service is another disappointment for the industry and with corporates becoming ever more demanding of their banks, this may be another area where banks will have to expand their services and their use of the Faster Payments Scheme.

(* Peer to Peer, Peer to Business, Business to Peer)