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VocaLink unveils Zapp m-payments service for banks and retailers

24 June 2013  |  16911 views  |  3 Teenagers using Smartphone

VocaLink has formed a new company, called Zapp, to build a service that will let Brits link their bank accounts to their mobile phone numbers and make real-time payments through their handsets.

VocaLink is currently working to get banks and retailers on board by the end of the year so it can launch Zapp to consumers in early 2014, when it will target all commerce channels, mobile, online and in-store.

Banks who agree to take part in the service will integrate Zapp into their mobile apps and then invite customers to opt in, linking their bank account to their phone number.

Then, at participating retailers, users shopping on their phone or tablet who click the pay by Zapp button will be taken to their mobile banking app, where they will be shown their account balance before being asked to confirm the transaction.

On a desktop or in-store, the payment terminal or browser will generate a six digit Zapp code which the user enters into their mobile app to complete the transaction.

By sidestepping cards, VocaLink argues that Zapp will help Brits unlock the money in their current account in a much simpler and more secure way because no information is passed to the recipient. Meanwhile, retailers will benefit from instant payments and fewer abandoned shopping carts.

Zapp CEO Peter Keenan stresses that the service is completely separate from the Payments Council phone number-based mobile payments offering - to launch next year - for which VocaLink is building the central database. That service will focus on person-to-person payments, while Zapp is purely about consumer-to-business transactions.

Although, VocaLink has refused to provide names, it is understood to have secured the commitment of several banks and retailers to the service, in which it has already invested £16 million.

Zapp is now inviting retailers and other potential partners such as telcos to buy stakes in the venture in a bid to raise around £100 million.

David Yates, CEO, VocaLink, says: "We are proud to be collaborating with financial institutions and retailers to spearhead the creation of a new payment system, which gives all of us easy access to the money in our bank accounts by using cutting-edge, secure technology through the mobile phone."

Last week Finextra revealed that Barclays is planning to extend its mobile phone number-based P2P payments service, Pingit, to retailers. Launching soon, the Buyit feature will let users make purchases by scanning QR codes on adverts.

Fiona Ghosh, payments expert at global law firm Eversheds, thinks that the emergence of Zapp, Buyit and others could spell trouble for card firms.

"Instant mobile payment initiatives like Buyit and Zapp involve direct bank transfers, which are cheaper for retailers than credit card payments, which come with interchange fees and other bank card transaction fees attached. This is bad news for credit card companies, who are already awaiting the European Commission's ongoing investigations into Visa and MasterCard's multilateral interchange fees," says Ghosh.

Comments: (3)

Jan-Olof Brunila
Jan-Olof Brunila - Swedbank - Stockholm 25 June, 2013, 07:09

How will retailers manage to consolidate their payments account against the cash register entries if one receive more than a few zapp payments per day? For debit card payments retailers normally get a batch settlement from the acquirer, containing all the card payments that day, to be checked against the cash register enty summary for card payments.

 

1 thumb up! 1 thumb up!
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 26 June, 2013, 14:15

With reduced shopping cart abandonment as one of its key benefit, Zapp seems to be targeted at buyers who are wary of using credit cards. Curious to know whether banks will levy any charge on either the buyer or the merchant for accepting payments via Zapp. 

1 thumb up! 1 thumb up!
Mark McMurtrie
Mark McMurtrie - Payments Consultancy Limited - Woking 26 June, 2013, 15:53

It is always good to hear about new payment solutions being announced. There is room for more choice.

Bank account to bank account transfers are now an alternative to cards particularly with the emergence of smart phones. IDEAL from the Netherlands has had great success. PINGIT has also revealed how new technology can disrupt the current status quo.

In order for them to achieve significant success (and mass adoptioon) they do though have to deliver benefits to all stakeholders.

Retail merchants will want to see lower costs than the existing payment options. Or see that they will help in the recruitment of new customers and in the generation of incremental revenue. They will also be keen to minimise the impact on their in-store systems. This tends to add cost, tie up valuable IT resources and result in the need for a further rounf of bank certifications.

Consumers will be looking for greater convenience and choice. They will also need to be convinced of security. Financial incentives drive adoption. Lots of education of consumers will be required, often this is overlooked.

Banks too can benefit. They are sensitive to cost and would be happy to disintermediate parties in the current value chain.

But before anyone gets too excited about ditching the current card based systems they must not overlook the many things that currently work well. Like the universal acceptance and dispute handling processes. These have taken many years to refine and cant all be replaced overnight.

I look forward to leaning more about Zapp over the coming months.

4 thumb ups! 4 thumb ups!
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