By Dan Hartveld, Technical Director at Red Ant.
Set up by the Payments Council and backed by most of the major banks, Paym, which launched at the end of April, represents a significant milestone in the future of person-to-person payment. Around 400,000 people have already registered to use the system, which allows them to pay others up to £250 a day just by using their mobile phone number.
While the benefits for individuals are clear – making one-off payments to babysitters, plumbers and other sole traders will become smooth and seamless, without the need to remember account numbers and sort codes or to dig around for a cheque book - Paym also paves the way for more simple, user-friendly business transactions in an increasingly mobile arena.
For businesses, helping consumers overcome their reservations about mobile payments has traditionally been quite tricky. Security is one of the major concerns for people making payments via mobile, so Paym's visible advertising and support of major banks such as Barclays, Halifax and Lloyds will help them understand that mobile payments are secure and mainstream – similar to the evolution of eCommerce payments.
With mobile phones not far off 100 per cent penetration in the UK, the use of one mobile number as a single payment identity makes a lot of sense. It's easy to remember, it can be ported to different providers (unlike email, Facebook, Twitter and so on) and it has built in two-factor authentication (via SMS or phone call). While mobile payments are still very fragmented with many competing technologies (tap-and-go, credit card readers and others), Paym is an example of suppliers and service providers working together for the benefit of the consumer, which is vital when it comes to building trust.
Paym clearly has great potential for users, but it's arguably more significant than that - it also has the potential to drive the development of a more effective mobile payment system for retailers. For example, small retailers (market traders, pop-ups, home businesses etc) could potentially use it to easily take payments without the need to sign up for expensive hardware contracts and lengthy authorisation periods. While Paym charges are currently higher than those for Chip and PIN services, as more people subscribe these will inevitably come down. Even large retailers will find opportunities to benefit - PoS systems based on open consumer technologies are much more innovative, keep pace with new technology, and can be developed in house as well as in conjunction with partners to extend multichannel capabilities.
Furthermore, adapting this technology to the retail market enables numerous elements of the business - consumer apps, staff apps, digital displays, PoS – to all be managed using the same platform. Mobile and/or payment can be used as the identifier to tie together retailers' various data sources into a single customer view. By linking online and offline activity and generating better data for the retailer, such a system facilitates better service for the customer and, ultimately, an increase in revenues.
Online retailers, for instance, can use mobile to remove further barriers to the checkout process, a move which will increase conversion. This is particularly useful for retailers who only have intermittent or one-off customer interactions and are therefore less likely to be able to obtain and store card details. In addition, a unified standard for mobile payments would also enable retailers and online merchants to offload responsibility for storing PCI data, reducing the cost of compliance and the risk of damaging data breaches.
While more traditional payments currently remain the transactional method of choice for most people, with the advent of Paym it's clear that there's both the will and the way to introduce a more simple, secure and standardised way of paying via mobile, which can only improve the path to purchase for both retailer and customer.