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« Is there money for payments? | Main | Sterling service »

Slightly faster payments

By Dave Birch posted Jul 21 2008 at 10:14 AM

[Dave Birch] Well, the Faster Payment Service (FPS) is up and running and I was thinking about it because I happened to have had a couple of meetings with APACS last week. I made mental note that next time I log in to my home banking I shall attempt an FPS transfer in the spirit of first hand investigation and report back, but I don't think it will have much of an impact on day-to-day life for me in the short term. Where I think it will have an impact is in using secure mobile applications as a 2FA front-end to FPS transfers. If it is simple -- and I mean really simply -- to instruct an FPS transfer from the phone then it may become an established alternative to some other payment mechanisms. Clearly, one of those will be cheques. The Payments Council are studying mobile-based bank account to bank account transfers as we speak, guided by the focus given to mobile in the National Payments Plan published by the Payments Council (I interviewed the head of the Payments Council, Brian Pomeroy, in our podcast series), alongside further consultation on the future of cheques. These subjects are certainly related, since mobile (rather than Internet) payments are the only viable way to replace cheques as far as I can see.

Talking about FPS, I don't understand the attraction of the example that APACS have chosen to illustrate how the system works, since I'm not sure it . Their example is this.

Rosalind meets up with Mark for lunch, and he offers to pay for it all on his card. Rosalind doesn't have any cash on her so she promises to pay Mark back when she gets home using online banking. Mark gives Rosalind his full sort code and account number. That evening when Rosalind returns home, she logs on to her online bank account as usual, and double-checks that her payment of £15 is within the value limit set. She then visits www.canipayfaster.co.uk and checks that Mark's sort code is able to receive the payment. Once all of this is confi rmed, she carefully enters Mark's account details and makes the payment through her online bank account. Mark should have the money in his account within a couple of hours.

The alternative is

Rosalind meets up with Mark for lunch, and he offers to pay for it all on his card. Rosalind doesn't have any cash on her so she sends him £15 using Paypal on her Blackberry. He gets an e-mail soon afterwards, telling him that the money has been received.

And note this latter example requires Rosalind to know Mark's e-mail address, not his full sort code and account number. The alternative in Kenya is

Rosalind meets up with Mark for lunch, and he offers to pay for it all on his card. Rosalind doesn't have any cash on her so she texts him £15 using M-PESA. He gets the money within a few seconds.

And note this latter latter example requires Rosalind to know Mark's mobile number, not his full sort code and account number. No wonder that the National Payment Plan has a specific section on mobile payments as it will surely be the fastest growing payment mechanism over the next decade.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


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It is also worth noting that paypal either charges to receive money or imposes restrictive receiving limits on personal accounts. FPS is free.

Dave - The "fast payment service" has been part of the Indian payment system for ages. It's widely used for personal as well as business payments.

How about Rosalind opens up her secure application from whatever cell phone she has, enters Mark's phone number and sends the money directly from her exisiting bank account to Mark's bank account and it is delivered by Faster Payments because all of the validation is done transparently? Rosalind doesn't have to remember any sms short codes or procedures. Bot the sender & the recipient receive text confirmations that the money has been transferred.

PayPal funds DO NOT pass to the recipient's bank at the transaction time, it is not instant-credit....

The PayPal solution DOES pass through to your bank account immediately if you have configured a bank account in your PayPal profile.

In essence, PayPal is a bank account proxy.

The difference between the three is when the money actually hits a bank account. Whilst a mail/sms is recieved for both Paypal and mpesa, it isn't available for you to spend from your bank account, rather it is available within the system you have subscribed to. For a cash based economy such as kenya Mpesa is a suitable solution, however I think personally most people would want to get their money paid into a bank account rather than an intermediary solution like Paypal.

Funny that the restaurant did not offer Rosalind the ability to pay her share using her NFC enabled mobile. Or maybe Rosalind does not plan to reimburse Mark and FPS is certainly the best solution to "forget" her obligations.

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