By Ross Macmillan, head of research and intelligence at allpay
You’d be forgiven for thinking that with all the hype and hysteria around mobile payments generated from the likes of Apple Pay that we were on the cusp of a revolution. However, the underlying platform that sits behind the current crop of mobile payments relies on the same payment technology designed more than 30 years ago.
Apple Pay, for all its superb marketing, has actually contributed modestly to payment innovation and relies on the same processing system used as when we pay for something using our debit or credit card; and the first credit card issued in the UK was in 1966 with the debit card following in 1987.
Similarly, a lot of the new bank transfer mobile payment platforms being launched are driven by the Faster Payments system, originally launched nearly 10 years ago and the same system that enables Standing Orders.
Is anything new?
So what’s new and what’s changing? The way we interact and initiate a payment is changing, and, rather alarmingly, it’s disappearing, or to be on trend is becoming ‘frictionless’. Who can remember their last contactless transaction or their last PayPal transaction?
While the underlying technology driving the payment may not be changing, the interface and engagement in the process is. And, with a nod to Brock Hinzmann’s eighth Golden Rule of Technology development, payment technology is evolving in the direction of free resource, in this case mobile.
Cheques, bank cards and even cash relies on the bank sending, issuing or dispersing something tangible to us to then use in the transaction. What mobile payments are doing is enabling transactions from a resource we already have; our mobile.
According to payments trade association, Payments UK, an all-time record 44 billion payments will be made in 2024, up 3.4 billion over 10 years, equating to 120 million payments per day. The increase, it says, will be driven by rises in card, internet and mobile banking payments.
At allpay, where we process household bill payments, the volume growth in our own mobile payments platform has grown by more than 70% year on year, outstripping online payment growth at between 10% to 20%.
How safe is a mobile payment?
So we’re agreed the systems are the same, but the interface and engagement is changing, but what of the security. Generally speaking, most mobile payment systems can be characterised as either scheme-based solutions, emulating a bank card (Apple Pay) or bank to bank systems, which use their own acceptance network, such as the Faster Payments platform.
Those payment systems emulating a bank card at the point of sale can thus offer similar chargeback and Section 75 protections to when you pay for goods and services with your credit or debit card.
In the case of what Apple Pay has brought to the market, in addition to further confirmation of its ability to execute a perfect marketing strategy, is widespread promotion of card tokenisation, preventing your card details being used in the process. It also uses enhanced confirmation steps to authenticate the payment, such as your Touch ID code or fingerprint.
In terms of comparison, bank to bank systems and those utilising the Faster Payments system offer merchants the potential for speedier settlement times and cheaper transaction fee; however, they do not always offer a similar level of consumer protection for the consumer.
So in terms of the future of mobile payments, think evolution as opposed to revolution. The payments experience is getting slicker, quicker, easier and less memorable and the method by which consumers make a payment is evolving from things we are given to things we already have.
Organisations wishing to marry payments acceptance and consumer convenience need to be tuned into mobile acceptance and the benefits this brings to them as a merchant and to their customers making the payment.
Allpay is a UK payments specialist. Its core business concentrates on providing bill payment services, primarily to the public sector, and it handles £5 billion a year across 50 million transactions.