UK mobile commerce outfit Zapp is targeting 20 million users by 2017, promising to rival traditional payments giants such as Visa and MasterCard by the end of the decade.
Set up by VocaLink earlier this year, Zapp is aiming to bring real-time mobile payments - in store, online and through apps - to millions of Brits by integrating its system into bank apps and tapping into the Faster Payments rails.
The firm is on the verge of closing deals with up to three major high street banks, which will then invite customers to opt in to the service when it launches in the second half of next year.
Bypassing the card networks, customers who choose to pay by Zapp will be taken to their banking app, where they will log in and confirm the purchase. Zapp argues that its system is both more convenient and secure than other options because customers do not need to hand over any card information. Instead a token that lasts only for a few minutes and has no intrinsic value but represents the request and authorisation of payment, is passed between the retailer, Zapp and customer's bank.
The company admits that, for in-store purchases in particular, the convoluted log-in procedures some banks currently employ for their apps could put customers off. Zapp says that it is talking to banks about making these processes faster and is hoping to convince them of the merits of 'adaptive authentication' - a risk-based approach that lowers the log-in barriers for smaller payments.
Despite the issues surrounding log-ins, Zapp CEO Peter Keenan says that the service has the potential to revolutionise in-store payments, freeing them from the checkout. For instance, customers in sandwich shops could pick up their food and pay via QR code and then flash their phone at a staff member on the way out of the shop to prove that they have paid.
As well as QR codes, retailers could integrate Zapp with their contactless infrastructure. However, the firm says that its token-based system means that the secure element requirements normally associated with this technology becomes redundant.
As well as bringing banks onboard, Zapp is also expecting to have several major retailers committed to the project within the next few weeks, lured in by promises of higher checkout completions and lower fees than those associated with card payments. Payments providers WorldPay Optimal Payments, Realex and SagePay have all already struck deals with the firm.
Zapp is not only targeting the high street and e- and m-commerce firms, it is also setting itself up as a rival to the likes of iZettle and PayPal Here. The company's technology will let merchants such as plumbers accept payments, which will be processed immediately thanks to Faster Payments.
Trials for the e- and m-commerce features, small business service and a bill payment option will begin next summer ahead of a full launch by the end of 2014, while in-store payments will follow shortly after.
According to a report from the Centre for Economic and Business Research, commissioned by Zapp, the value of mobile goods and services purchases will triple by 2018 to £14.2 billion. Confident of getting banks and merchants signed up, Zapp is hoping to win a significant share of this, setting a target of 20 million users and two billion transactions a year by 2017.
VocaLink - owned by the banks - has invested heavily its venture, recently putting in another £17 million on top of an initial outlay of £16 million. However, Zapp says that it is still hoping to attract outside investment as it bids to secure a total of around £100 million to bring the service to launch, with much of the money earmarked for an aggressive marketing campaign.