The BBC News reports that by the beginning of 2013, every bank customer in the U.K. may have the ability to transfer money between bank accounts using apps on their mobile phones!
In February 2012, Barclays Bank became the first bank to launch such an app for its customers.
Now the banking industry at large – as represented by the Payments Council – is building a database that will link all bank accounts to their customers’ mobile phone numbers.
This will allow every bank to connect their own systems to the database, and offer their own money transfer mobile apps to their own customers.
Mobile-to-mobile transfers may revolutionize the way people send money.
“There’s clearly a great demand for mobile payments, and our work will ensure that banks of all shapes and sizes can offer their own competitive service to their customers,” said Adrian Kamellard, chief executive of the Payments Council.
“Whether you want to pay a friend or your window cleaner, we are laying the foundation to enable mobile payments to become a mainstream option.”
How the System Will Work
Once the system is up and running, if you want to send money from your own bank account to someone else’s, here’s what you’ll have to do:
1. Register with your bank and activate their money-transfer app on your mobile phone (the recipient must also be registered with their own bank).
2. Log in to the app on your phone using a pin number.
3. Select the person you want to send money to – all you will need is their mobile number.
4. Choose the amount to be paid and add any note that you wish, such as “loan” or “gift”.
5. Enter a pin number to confirm the transfer.
6. The payment is then made, details will appear on the recipient’s app, and your account will show your reduced balance.
The money will be transferred instantly. So if you want to pay a vendor, or you get a call from a friend or relative needing a little financial assistance, you could move money to their account instantly.
“The point is not only that it is very secure but that it is fast as well,” Mr Kamellard says.
“It offers customers a different way of behaving.”
An Alternative to Credit Cards?
Money won’t be stored on your phone itself – the system doesn’t turn your phone into a mobile wallet – but the banking industry seems to believe that the coming changes will revolutionize personal payment habits.
Dave Birch, a payments expert at Consult Hyperion, says the biggest impact may not be on individuals but on small businesses such as shops.
“This could be adopted very quickly in the small business space – it may turn out to be more convenient and cheaper than accepting credit card payments,” he says.
Perhaps. But if I were a merchant, I wouldn’t want to have to use an app to log in to my bank account and confirm payment every time someone purchased a product. There are also security issues that will need to be addressed. For example, banks will have to be able to disable the app remotely if the phone is lost or stolen. But I suppose that’s not much different than having to cancel your credit cards when your wallet gets stolen.
I also wonder if this is bad news for online money transfer services like Paypal, and maybe debit card and credit card providers as well.
In any case, these are interesting changes that are coming, and it will be fascinating to see how they impact various financial spheres, including remittances, personal money transfers, and the retail industry.