A new service called 'Paym', due to launch in April 2014, will allow 40 million current account holders to make payments using just a mobile number.
The new mobile app will enable customers of participating banks to make payments to one another without any bank account details.
Users can make payments or switch money between accounts using a smartphone or tablet. To receive payments, users simply link their mobile number to a bank account.
While similar fast-track payment apps are already in use at Royal Bank of Scotland, NatWest and Barclays, these only allow payments between customers of the same bank.
The new Paym service allows current account holders across all participating banks to send money to each other. The standard limit is £250 per day, though some banks may allow more.
The ability to select an existing contact rather than entering account numbers and sort codes should see a vast reduction in the number of payments going astray due to so-called 'fat-fingered' transfers.
A single incorrect digit can send payments to a complete stranger - an area that has been hugely problematic for banks and customers.
Paym will also be a convenient process for payees. Those who only wish to receive payments won't need a smartphone - they simply need to link their mobile number to their chosen bank account, and they will receive payments even if their phone is switched off.
The system is being introduced by the Payments Council, which was responsible for the new fast-track service that allows customers to switch their current accounts within 7 days.
Which Banks are Taking Part?
Several major banks, including Barclays, HSBC, and Santander, are already enrolled with Paym. Customers will now be able to register and link their mobile number with their bank account.
- Bank of Scotland
- Cumberland Building Society
- Danske Bank
- Lloyds Bank
Other current account providers, including the Royal Bank of Scotland Group, First Direct, Nationwide Building Society, and Yorkshire Bank, are hoping to join the scheme within twelve months. This will make the service available to more than 90% of current account holders.
“This new service will offer a simple and secure way to split the bill for dinner, receive money from a friend or pay a tradesman without needing to remember or share account details,” explained Adrian Kamellard, the Chief Executive of the Payments Council.
“Paym is a fantastic example of the unique role the Payments Council can play in delivering far-reaching, innovative improvements for customers,” he added.
Swifter payments offered by Barclays' Pingit will soon be available to a much broader range of customers.
How to Use Paym
Paym is designed to be straightforward to use. In the first instance, a user wishing to make a payment will need to ensure that the recipient is already registered.
After logging on to their mobile banking app, they should select the option to make a payment. Then, they can select the person they wish to pay using their phonebook or by entering a new mobile number.
Once they have confirmed the name, they can enter the amount to be paid, plus any message for the recipient, before finally confirming the payment.
Simple to Send Payments
- Register a mobile number with your bank.
- Use the payment app and choose a contact.
- Confirm it is the correct recipient.
- Press ‘Send’. Up to £250 per day can be processed.
Simple to Receive Payments
- Register to use the service with your bank.
- Link your number to your chosen bank account.
- No smartphone required.
The Payments Council has assured account holders that the new service is secure. It says it has used the same strict security levels currently applied to current accounts and money transfers.
Using a mobile number as a conduit is also a built-in barrier against fraud. Since payments can only originate from the sender, anyone who gains illicit access to a phone number will only be able to make payments rather than access any funds, it added.
Nevertheless, customers are being warned to remain vigilant for any unexpected transactions on their account once they begin to use the service. Banks will be able to suspend Paym accounts if they suspect, or are alerted to, fraudulent activity.
The new service precedes the launch of Zapp, another payments system due to launch in the autumn that will allow people to pay for goods and services online or in store using a smartphone.
VocaLink, which designed the service, believes this form of payment is more secure than the use of a debit or credit card because no personal information about the customer is transmitted to the merchant.