Better ways for banking for all

3 min read Networks & Network Services
FOLLOW THE RIGHT PATHMobility is the answer to challenges like late-payment charges, cross-border integration and hyperinflation. It even saves banks money, says Simon Joyce of Upaid.
Industry watchers are all too aware that the banking climate is on the cusp of change, driven by the onset of interest charges for late payments from 2007 and the move towards a Single European Payments Area (SEPA) in 2008.

Both hold enormous advantages for banks and their customers, especially if a mobile payment channel is added.

We all appreciate the ubiquity of the mobile phone and the ease with which one single device enables us to communicate with friends, family, clients and customers the world over. Similarly, adding a mobile payment mechanism to traditional banking processes makes the payment and transfer of money much simpler.

Despite the obvious advantage, banking institutions in the UK have been lagging behind other markets in profiting from this. In today’s lending environment, banks need to deploy solutions that enable them to reduce their business costs and enhance the user experience by moving  towards electronic transactions in  order to accelerate processes and increase efficiencies.

Many thought that banks would become the obvious players to turn the mobile into the ultimate payment instrument – even just for domestic bills.

Electronic Bill Presentment and Payment (EBPP) – the online delivery of bills to customers, with electronic payment – is growing on the web, but growth in the UK has been slow. With such high mobile penetration, the mobile-EBPP market has the potential to mature into a hybrid system whereby customers use online and mobile banking to manage their finances and to pay bills.

In this light, merchants and banks are clearly missing an opportunity to develop a cost-effective, efficient and more convenient payment method.

Banks should look to other regions for inspiration on mobile payments to find out how they can create solutions for the issues they face in the current climate. Brazil, for example, had a ten-year fight with hyperinflation, during which, 40% of GNP was lost in inflation and people disposed of cash as quickly as possible because it lost its value almost immediately. Bank savings were non-existent and people resorted to buying the bare essentials to survive, which together had a knock-on effect on Brazil’s industries.

Ultimately, Brazil’s hyperinflation forced banks to advance their services, process cheques in real-time to ensure that money could be re-invested at the same value, and offer alternative means of paying for goods. The advent of mobile payments and e-wallets were two such initiatives.
"Mobile banking has the potential to revolutionise the way people bank and the services banks offer"

European innovation
Conversely, the EU is setting the tone and pace of cross-border financial integration with the advent of SEPA. Once integration is achieved, consumers will be able to reach all accounts sepa-wide from one home country account. Payment cards will displace cash and merchants will be able to accept payment from cards in all sepa countries.

The sepa initiative creates the perfect environment for a pan-European, interoperable payment mechanism that combines the most widely-used consumer device today, the mobile phone, with the most convenient payment instrument, the credit/debit card.

The current method of managing the in and outflow of consumer credit is dated, inefficient and involves a third party. Using simple text messages over the mobile handset as a way of paying for goods means credit card companies have a much better idea whether or not the customer will pay on time.

Lenders also have additional means of proving they did their best to contact the customer, wherever they might be, before charging. It is widely known that customers with a history of bad debt are likely to pay the most convenient bill first.

Mobile banking has the potential to revolutionise the way people bank and the services banks offer. Upaid’s over the air top-up platform has already met with great success in the Central Europe Middle East and Africa (CEMEA) countries, where a lack of traditional banking infrastructure has allowed mobile over the air top-up to proliferate.

Yet despite such advantages, banks in the UK have been slow to benefit from the mobile payment channel.

With new legislation coming to the fore to encourage banks to develop interoperable payment methods, banks need to deploy universal mechanisms on the mobile phone to make it easier for customers to pay bills and transfer money.
Simon Joyce is CEO and chairman of mobile payments specialist Upaid, which enables banks, operators and merchants to offer  m-payment applications to consumers.