The rules of the game are changing with changing customer behavior. How can Banks & Fintech incumbents create an enhanced mobile experience for the connected consumer of today? Will the banks be able to compete with nimble startups and aggressive payment tech firms in the Mobile Commerce and peer to peer transfers race?
Banks have been a little late to the party, but it seems to me that they are catching on. We have seen hundreds of banks across the world launch mobile banking and other apps that are beginning to see adoption go high. But what has been interesting to see is formation of councils and consortiums of banks such as Paym in UK and NPCI in India to deliver nationwide peer to peer transfers and payments. Some of the mobile payment apps offered by groups of banks, consortiums, councils or even third parties (building for banks) have been discussed below.
ClearXchange: It is the first network in the U.S. created by and for financial institutions that lets customers send person-to-person (P2P) payments. Using either mobile number or email ID, customers can transfer funds using their savings and checking accounts without using account information. It started as a venture by three U.S. banks i.e. Bank of America, JPMorgan Chase and Wells Fargo.
The ClearXchange service does not move funds. Instead, it just provides the information needed by the member banks to complete the transaction. The network added two major U.S. banks within an annual period. Colorado based FirstBank became the fourth member in 2013. FirstBank is the second largest bank as per number of deposits. Earlier this year, Capital One became the fifth member of the consortium. Capitol One was a quite a value addition as it has $297 billion in deposits and 900 branch locations.
"Our goal is to provide convenient and safe financial services options for our customers," said David Owen, ecommerce, Claims and Fraud Executive at Bank of America. "By creating a utility like clearXchange, we are able to meet the needs of our customers and differentiate our capabilities from other offerings in the marketplace."
The five banks address more than half of P2P payments market in the U.S. Each bank has the ability to control how clearXchange appears on their respective websites and mobile apps. The financial institution can continue to drive and maintain its own customer experience and remain the center of their customers’ financial lives. Enrolled customers conduct transactions on the bank’s sites and receive support from their bank regardless of where a transaction is initiated.
Zapp: Zapp, a British mobile payments startup, recently partnered with 5 major banks – First Direct, HSBC, Nationwide, Metro Bank and Santander – to offer its services directly to consumers without the involvement of any carriers. Zapp is a mobile payments startup formed by payments infrastructure operator VocaLink. Merchant acquirers Optimal Payments, WorldPay, Sage Pay and Realex have already signed up for the service. These four processors’ customer base combined, includes 60% of UK merchants.
- When users reach the checkout, a code will be sent to their mobile.
- They can then confirm or reject the transaction with the swipe of a finger.
- Unlike chip and pin cards, Zapp doesn’t hand over sensitive information, such as card numbers and expiry dates, that can be used by criminals.
- Zapp uses secure digital tokens that mean consumers don’t need to reveal any of their financial details to merchants during a transaction.
- It is also fully integrated into financial institutions’ mobile banking apps, enabling consumers to select from multiple accounts when they make a purchase and see their account balances.
IMPS India from NPCI: Immediate Payment Service (IMPS) is an instant , interbank electronic fund transfer service. It is similar in nature to NEFT (National Electronic Fund Transfer) in India but it can only be initiated via mobile phones. The National Payments Corporation of India had already carried out a pilot on the mobile payment system initially with 4 of its member banks back in August 2010. IMPS offers an instant, 24x7, mobile based fund transfer service. It enables customers to use their mobile as a channel to access bank accounts and enable high value fund transfers in a secured manner with immediate confirmation features.
The authentication is enabled via MMID or Mobile money Identifier. It is a random seven digit number issued by banks to customers. It is used in combination with the mobile number when the transaction is to be initiated by either party.
Some of the recent developments around IMPS include:
- Merchants, Government agencies and payment companies can now incorporate IMPS service for their customers.
- IMPS transfers are channelized through NEFT with transactions being processes and settled in batches. This would drive the MMID usage as well.
- UIDAI has tied up with IMPS to offer domestic remittance services. This gives banks the opportunity to incorporate UIDAI authentication as well.
- Most of the mobile banking apps are incorporating IMPS services within the app itself. This shall drive mobile usage as a channel for payments.
Stats indicate that cumulative number of transactions have grown from 700,000 to over a million in 2 months time. More than 50 banks are already onboard. Top 3 leading MMID issuers include ICICI Bank, Axis Bank and SBI. During this phase 94.7 Mn MMID’s have been issued (that is more than population of several countries) and the total transaction numbers have gone up by around 400,000.
Digicash: Digicash, the bank led payments service, has expanded its QR-based mobile payments platform. It now includes new POS beacons that support QR Code, Bluetooth Low Energy (BLE) and NFC technology. The new Digicash Beacons are being tested in Luxembourg, Europe. The test is being conducted ‘under field conditions’ by certain banks – Post, BIL and BCEE at Cora supermarkets; as well as a few convenience stores and Apple reseller Lineheart. The first SEPA payments with Digicash using the Beacon concept have been successfully performed in the last weeks according to them. This video gives you an overview of Digicash Beacon Payment:
- When using Digicash Beacon, required payment-related data is transmitted automatically to the payer’s smartphone when the phone is held close to the device.
- Terminals at the POS use the Bluetooth Low Energy (BLE) technology, as well as NFC and QR Codes.
- This automatically provides the user with the best user experience based on the features of his smartphone.
- Users who want to pay by Digicash do not need to link a credit card or to top-up a wallet.
- Payments made using Digicash are performed directly from the user’s existing bank account using SEPA credit transfers.
Bankinter: In 2013, Spanish lender Banktinker and Seglan developed a mobile based payment solution to enable customers to securely and instantly create a onetime-use debit or credit card on their smartphone. Bankinter announced later in February 2014, that the Mobile Virtual Card (MVC) solution was ready for commercial launch around Q2/Q3 2014.
- The user downloads the MVC application into his Smartphone.
- He then securely registers, via either web, phone banking or at the banking branch.
- One or many of his existing debit or credit cards can be used for EMV mobile payments at merchant locations.
- This solution does not require any changes to the existing acceptance infrastructure (POS terminals) for NFC proximity payments.
- It does not require to have network connectivity at the time of payment.
- The solution also enables the bank to autonomously define its own business model and brand image in mobile payment media, without entering into an agreement with third parties.
- Basically, the cards registered by the user can be updated with the help of a remote management system 100% integrated into the Mobile Virtual Card client-server system of the financial institution.
“Blackberry has been the company leading Host Card Emulation technology, and we are glad to recognize their major contribution to HCE-based mobile payments. Google later announcement (Nov/13) about HCE support on their new Android 4.4 Kit Kat operating system has allowed us to build a wide enough commercial proposal for our customers. We are convinced that iOS and Windows Phone will incorporate HCE very soon,” Jacobo Díaz, Director of Innovation at Bankinter, stated at the time. “The Mobile Virtual Card solution eliminates the main difficulties that have slowed the commercial launch of NFC payments and make it in compatibility with the standards of the financial industry on which many banks have invested along the last 10 years.”
Paym: A couple of weeks back, I had written about Paym – a new service is all set to enable users of Britain’s nine biggest banks to send money to each other via their mobile phones. It was announced that Paym would go live on April 29th meaning users may never have to ask anyone for their current account number or sort code by the end of this month. Registrations began on 2nd April 2014, for the 30 Million users of Barclays, Bank of Scotland, Cumberland Building Society, Halifax, HSBC, Lloyds Bank, Santander and TSB Bank. Danske Bank users however, can register from April 25th. Metro Bank and Ulster bank are two others that are finalizing their plans to join.
- Before you use Paym, register your mobile number and the current account you’d like payments made into.
- Your friends will then be able to pay directly into your current account using just your mobile number – no sort codes or account numbers.
- Using your existing mobile banking or payments app, select a friend’s number using your contacts or enter a mobile number manually.
- You’ll be asked to confirm the name of the recipient. Once you’re happy, check the amount and press send.
- You will then receive confirmation that your payment has been sent.
- The money will appear in your account.
- You will be able to send up to £250 a day, although you may be offered a higher daily limit.
- You don’t need a smartphone to receive payments but you will still need to register your mobile number.
On the security front the company says, that your details are held securely and are fully protected by data protection laws. The only information stored will be the details needed to send or receive payments.