The cheque is in the text
[Dave Birch] A few months ago, Charles Arthur from The Guardian was kind enough to reproduce some of my deranged ranting about cash in his article “Is this the end of money?”. I happened across the article while I was searching for something the other day, which reminded me that I’d meant to write something in response because at one point the article says
What about the school dinner money cheques, people asked? What about paying the builder who did that work on your house? What about all those transactions where the payee isn’t necessarily a shop, to whom you might want to make some small or gigantic payment?
Interesting use cases all of them.
- Paying the school. Even my youngest son’s state school has finally installed an online payment system. In fact, I made my first online payment (for a school trip) on the Sunday before Charles’ article appeared! The system has just been extended, a mere decade and a half after web payment became commonplace, so that we can now pay for school dinners online as well. I can finally put the cheque book away.
- Paying the builder. We had a lot of building work done at our house last year. I paid the builder online using the Faster Payment Service (FPS). It worked perfectly, every time.
- Paying each other. In the last couple of weeks I’ve used PayPal and FPS to send money to people. What’s the problem?
Look, if there are some people out there who want to carry on using cheques, I’m not saying that cheques should be banned, I’m just saying that they should pay for them. Similarly, in the future, if there are some people who want to carry on using cash then that’s fine, but they should pay for it. It should be part of the UK’s National Payments Plan to realign the costs and benefits of payment instruments to meet national goals.
Back to the point. FPS has been a very successful service using the web, but starting even before FPS was commissioned it had occurred to a great many people that letting customers use their mobile phones to instruct FPS transfers would be of considerable benefit to consumers, businesses and banks alike. The barrier, of course, was that you had to tell someone your bank account details so that they could send you the money. And if they were using a mobile, then typing in your bank account details would be tiresome and error-prone. Still, generally speaking, if you could press a couple of buttons on your phone to send money instantly to the school, builder or friend then you would and, frankly, you’d have to be out of your mind to write them a cheque instead.
So the idea arose that there ought to be a system, shared by all of the banks, whereby a simple identifier (there are all sorts of reasons why it should not be a mobile phone number, which are too boring to go into now, especially since it is inevitable that it will be a mobile phone number instead of a unique financial services identifier) would index a big database storing everyone’s bank account details. Remember, there is nothing even remotely secret about your sort code and account number: they’re on every cheque you write and (in my case) on the front of my debit card.
This is why the idea of a mobile “front-end” to FPS—whereby FPS transfers are instructed through a mobile “layer” that links bank accounts numbers to mobile phone numbers—is seen by many people as being an extremely attractive alternative to cheques in the UK.
This initiative was announced to the public last year, but has yet to see the light of day. Some observers attribute the slow progress to the UK banks deciding, essentially that it was a competitive space and they wanted to develop their own products rather than wait for a co-opetitive, cross-industry solution to emerge.
In May 2011, the Payments Council announced an industry-wide project to help participating banks and building societies deliver mobile payments in the UK. Within as little as a couple of years customers may be able to send money using only their mobile phone: either by using text, an app, or their phone’s internet browser.
I was thinking about this initiative when I recorded my vox populi podcast with a normal member of the public who doesn’t understand why banking and payments are so complicated (in this instance, my sister). Her tribulations trying to send some money to my niece at university illustrate rather well the day-to-day needs of the general public that are not well met by existing products and services. At the time I remember wondering when we would see the first bank mobile FPS product hit the streets. Well…
Barclays has developed the app, called “Pingit”, as a free service for its customers to make payments, though customers with other banks will be able to receive payments.
Barclays PingIt, which went live today, is a mobile front-end to FPS that indeed uses mobile phone numbers as a proxy for bank details. (It’s an app for the iPhone, Blackberry and Android so go download it and check it out.) Right now the app will only allow Barclays’ customers to send money, although it will be available to current account customers of all UK banks and building societies in the future, but all UK current account customers can register receive money. The free service lets you send money to a mobile phone number, provided of course that the recipient has registered their number to receive money. The app is protected by a 5-digit PIN (which I’m guaranteed to forget, but you can see why they do it - if they made it four digits then everyone would use their debit card PIN). I’m off to test it in a minute, since both of my sons have Barclays accounts and we’ll go check it out.
To reiterate: now, when I want to pay the plumber, I can send the cash to his mobile phone number and he doesn’t have to give me his bank details. This may seem old hat in advanced nations such as Kenya, but it’s a step in the right direction for the UK. And OK, it has some restrictions (like you have to have a bank account, which you don’t with M-PESA, and you can only send a maximum of £300 per day and you can only receive £5000 per day).
What is interesting about this play, though, is what it means for the networks. I think people who pay using debit cards are mad, and so do merchants who are most upset with the charges they have to pay to the acquiring banks and the card schemes. Using this scheme, instead of paying the plumber with a debit card (he wouldn’t take credit cards) as I did last time, I’ll just send him the money from my phone. He will save the 50p or whatever the bank charges him plus the £30/month he pays for the portable POS terminal - and he’ll get the money immediately, not in a month or three months. (Note that this only works for sole traders: business accounts have transaction charges associated with them.)
This may have an interesting impact. When I’m buying a lawnmower online, I’ll still use my credit card (for the legal protection it provides as well as the frequent flyer miles) but in other cases, where I might have used a debit card and am unconcerned about the payment protection, I’ll use PingIt.
Why do it? Well, Iif Barclays can get a big enough jump on the other UK banks, and get enough people to register on its database, it can see where the money flows are going and work out which mobile phones belong to individuals, small businesses, drug dealers and scrap metal merchants and then offer them appropriate financial services. Nice one. I imagine that in the long run the banks will end up building a shared infrastructure (I understand that the UK scheme will up and running until next year), but for the time being Barclays have a bit of a jump on the others.
P.S. If you want to know why the identifier for FPS should be a unique financial services identifier (or whatever) rather than a mobile phone number, here’s a long article I wrote about it that was picked up on in the Financial Times.
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