Analysis

Paym: Too many ways to pay?

Clare McDonald

Mobile payments are an ever-increasing medium, with mobile retail accounting for 32% of online sales between November 2013 and January 2014. The launch of the Paym mobile payment system by the Payments Council adds to the many payment options now available.

Figures from the Office of National Statistics found that 72% of UK adults bought goods and services online in 2013. Meanwhile, research from CSC found that banking apps are struggling to cope with the level of customer use they receive.

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With m-commerce steadily growing, it’s no surprise there are so many ways to pay for goods and services through your mobile, including PayPal, which recently acquired mobile payment startup Card.io, mobile payment wallets such as Zapp, and several mobile banking apps such as the Barclays PingIt service.

Last month, the Payments Council launched Paym, a system that allows subscribers to transfer money to a recipient’s bank account using only their mobile phone number.

The question is, what do these payment systems have to do to ensure that consumers continue to use them in the future?

Do people need another mobile payment option?

The Payments Council claims the Paym project is the first to enable a link between every current account in the UK using only mobile numbers. Since registration for the service opened, 400,000 people have signed up to the scheme.

Paym will integrate with banks’ current mobile apps and allow users to pay people using the contacts in their phone.

Mobile payment systems have to prove their worth to stay in your wallet, and some of them will struggle

Rob Bamforth, Quocirca

Both participants have to register their mobile number with Paym to allow banking transactions to take place without having to exchange bank details.

Adrian Kamellard, chief executive of the Payments Council, said: “We’re all used to the idea of a ‘mobile update’ to improve our apps – Paym is a mobile update for payments that means you can pay securely using just a mobile phone number.”

Quocirca analyst Rob Bamforth said consumers are more likely to use the payment option that causes them the least hassle.

“Ultimately, all of these payment systems have to prove their worth to stay in your wallet, and some of them will struggle. Some of the technology-based ones will struggle because they’re just not convenient enough,” he said.

Bamforth pointed out that some payment systems have encountered problems, resulting in a product designed for ease instead becoming an inconvenience. One example is contactless bank cards causing "card clash" with Oyster cards, whereby card readers have difficulty charging cards due to the nature of near-field communications (NFC). Where issues like this occur, people are likely to try alternatives.

“At the moment we don’t tolerate that kind of delay, because the whole idea of moving to these kinds of payment technologies is to streamline and speed up," he said. "If they don’t do that, why are they going to replace other payment technologies?”

Banks slow to roll out Paym

A number of banks are already involved in the Paym system, including Barclays, Halifax, Lloyds and Santander.

Other banks, such as Royal Bank of Scotland and NatWest, Yorkshire Bank and Nationwide Building Society, have plans to implement the system, but have not yet done so. 

RBS and NatWest expects to be able to offer the service later this year, but in the meantime it plans to focus on modernising its infrastructure to provide customers with more benefits, including faster processes and mobile services.

Due to these delays, a large proportion of banking customers will not be able to use the Paym service until 2015.

The Payments Council predicts that one billion payments will be made through Paym by the end of 2018, but reports on the internet indicate that research by Consumer Intelligence found that only a quarter of consumers would consider using Paym, mainly due to security concerns.

Ernest Doku, telecoms expert at energy comparison firm uSwitch, said the system was promising but there were some hurdles to overcome. 

"Fears about smartphones containing personal data being stolen, combined with a limited number of partners, have so far put the brakes on the take-up of this tech. It remains to be seen if Paym can build enough trust in consumers, as well as deliver a simple and secure payment method, to promote mass uptake,” he said.

How secure are Paym transactions?

According to the director of financial stability at the Bank of England, Andrew Haldane, cyber security attacks are the main risk faced by UK banks, with mobile technologies among the top threats.

It is also well known that consumers are already wary of mobile payments, and 56% of consumers would like to see banks and mobile providers guaranteeing any financial losses, according to research by ICM.

The Payments Council claims the Paym system is secure as it is integrated with the user’s current mobile banking app, and so does not compromise user security any more than the banking app already does.

The Paym system is secure as it is integrated with the user’s current mobile banking app, and so does not compromise user security any more than the banking app already does

The Payments Council

Similarly, in a release from Barclays about the integration of Paym with its PingIt app, the bank claimed that since money, personal details and account details are transferred using the same systems that normally process these details, using Paym through PingIt would be no less secure than normal mobile banking.

Quocirca's Bamforth said that, as with any form of digital communication, data is at most risk when entering or leaving an application.

“The critical thing is around the edge of the application. So it involves using people, and people with mobile phones. Just like any form of payment, it’s probably around that edge that there are vulnerabilities if they are anywhere,” he said.

“In your wallet it’s safe and secure, but at the point of transaction there is a risk. With any form of payment system, physical or digital, that’s where the potential for risk is. All that’s required is that the people handling the process put the right safeguards in place to protect you against those risks.”

He said accessing application data like this isn’t necessarily any less safe, and that people will use it as long as they trust it.

For payment by mobile to replace cash-based systems, however, it will need a lot more than to be secure. It will also have to be simple and provide consumers with a way to pay not just online, but also in-store.

Mary Carol Harris, director of mobile at Visa Europe, said Paym is a great step in the right direction. 

"Its potential is about much more than payments in a single market – it's about being able to use these services anywhere in the world, like you can with your card today," she said.

"For example, our research shows that of the people wanting to send or receive money while abroad, 33% have been unable to do so. That's the kind of barrier we have to bring down, and to make that happen we need globally accepted standards and interoperability. That's Visa's role, and what we're focused on establishing in the very near future."


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