Can a solution based on Faster Payments become a viable alternative to the card schemes in the UK?.. I (very much) think so.
Faster Payments service is based on the "account to account" system, i.e. it runs on inter-bank rails bypassing the card networks. Hence, it's (almost) cost-free, from the payment perspective.
Retail payments - as well as all other payments, in fact - are about authentication, i.e. ability to positively identify both parties to the transaction. The rest is "accounting" and "database records updating".
Currently, the merchant "pulls" the payment from the consumer: get card details, pass them to the acquirer, then to the issuer, verify card validity and funds availability, get the confirmation back through all the hoops, settle and reconcile later.
Let's reverse that "round trip" process and use "one-way push" instead.
Say I want to pay Starbucks £3.50 for my latte. Starbucks and I are both registered with Barclays Pingit (I am using Pingit as an example, but it can be any similar solution based on Faster Payments). I use my mobile phone to securely tell Barclays the amount
I want to pay and whom to. Barclays verifies that I have sufficient funds and instantly pushes "£3.50 paid" confirmation to Starbucks.
Ka-ching! Settle and reconcile later - but in hours, not days as currently is the case.
What are the benefits of "one-way push" vs "round-trip pull"?
1. "Push" approach allows the consumer to be in control, like Vivian in Pretty Woman - "I say who, when and how much".
2. The consumer does not have to disclose any - let alone sensitive (!) - details to the merchant.
3. The merchant gets paid in hours, not days.
4. Barclays can afford to charge the merchant less than Visa and MasterCard.
5. Most importantly, because Barclays knows who I am before I pay, it can offer me retailer-specific discounts, up-sells/cross-sells, etc. That alone is worth its weight in gold for Barclays - none of the current payment methods allow to do that as my
identity is not known until after the payment is done (if at all).
Add NFC and Bluetooth to the equation (I didn't tell you how Barclays knows whom to pay, did I...) and you have a nice yummy picture. Bon appetit!