Filed Under: Banking and Finance, Identification and Authentication, Political, legal and regulatory, Privacy and security

From “Top of Wallet” to “Front of Phone”

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Over the last few weeks, I have been working with the team inside Consult Hyperion trying to understand the potential impact of the European Union’s PSD2 regulation on our clients’ business. One thing is for certain: it has generated a large number of not-quite-three letter acronyms that will ensure high scores in any game of Acronym Bingo running during a presentation on the subject.

It is clear that the Account Service Payment Service Provider’s (ASPSP or bank to you and me) mobile application will play an important role in any PSD2 compliant transaction. Every time I want to make a bank to bank payment to a new payee, a message will appear in my mobile banking application asking me to verify the transaction and authenticate myself. Will this be the reason I need to keep the mobile banking application on my phone?

Personally, I sit down once a month in front of a computer to do my expenses and pay my bills. I have sufficient standing orders to maximise the return on my Santander 123 account. The rest are settled using Faster Payments, when there are sufficient funds in my account. Being a payment geek, over the years I have loaded several banking applications and PingIt onto my phone. None of these survived the transfer to my next phone as I was not using them. The alternative (my PC and contactless Amex card) are more convenient or deliver the customer experience I need. But perhaps that is changing.

At Consult Hyperion’s excellent Tomorrows Transactions Forum in London earlier this year, Greg Wolfond, CEO of SecureKey, outlined the customer experience to be delivered by the blockchain-based digital identity and attribute sharing service they are building in Canada, with the support of local banks. At the centre of this service was a push notification from the bank, via their mobile banking application, that a third party wanted confirmation of my age or address and a request for permission for the bank to share those details with the third party. To me the bank is the logical place to keep valuable personal information. Most have been doing it for over 100 years usually in the form of paper documents – birth, marriage certificates and Land Registry Property Deeds. However, in a connected world third parties need to be able to access this information when I give them permission. This process must be instantaneous, as I am likely to be on the third party’s website or in their store signing up for a service when the request comes through. I will be in a similar place when I want to make a PSD2 compliant payment.

Earlier this summer, I sold the last of my larger toys, a Laser 1 dinghy. Kids have left home, wife prefers to ramble with the dog, sailing club just too far away, water too cold …. The list of reasons why I should keep it was getting too long.

I posted the boat on Apollo Duck, (think eBay for the sailing community) assuming people would come to view it, we would agree a price, they would give me a cheque, I would bank it and they come back a week later to pick up the boat, when the funds were in my account. Everything was going to plan, until it came to payment. Rather than pull out a pad of paper, he opened his Barclays’ mobile banking application, asked for my bank details and transferred the funds using Faster Payments. Five minutes later the funds were in my account and we were packing the boat up for him to take away. The whole process, from viewing to take away was reduced from 7 days to just over 90 minutes. We did not move from my front lawn, except to access my PC to check that the funds had gone into my account.

This appears to have been the vision of those very clever people in the European Union when they drew up the PSD2 regulations. However, is the mobile banking application the right channel for such services?

In the UK smartphone penetration rates are around 81% of all mobile phone users. However, this figure varies according to the subscribers age, from 90% of subscribers aged between 16 and 24 to 18% of those over 64 . The older generation are likely to have more savings spread across multiple products from multiple providers. If they prefer not to load the mobile banking application onto their phone are there alternative solutions which they can use to authenticate themselves to multiple ASPSP?

Barclays UK does a very good job verifying me using my payment card and their PinSentry device or mobile application across all the channels that I access their services. I can also use the PinSentry device with cards from other banks which support the CAP User Interface Specification, but don’t tell Barclays. There are other solutions from organisations such as FiTeq which remove the need for the separate CAP reader and the payment schemes who are promoting the use of their 3D Secure service for use with other payment solutions.

One of the drivers behind PSD2 was to drive innovation and competition. Is SCA the first place we will see this?

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