Out-Law News 4 min. read

Banks back new 'Paym' mobile payments service

A new mobile payments service that will link users' mobile numbers to their bank account details to enable contactless transactions has the support of a number of major financial institutions, the UK's Payments Council has said.

Bank of Scotland, Barclays, Cumberland Building Society, Danske Bank, Halifax, HSBC, Lloyds Bank, Santander and TSB Bank will give their customers the chance to associate their mobile numbers with their bank account details when the 'Paym' service is launched, it said.

A number of other institutions, including the Clydesdale Bank, first direct, NatWest, RBS, Yorkshire Bank and the Nationwide Building Society are expected to join the scheme either later this year or in 2015, it added.

"The nine launch brands will offer their customers the opportunity to register their mobile number and select the current account they want payments made into before the service goes live," the Payments Council said. "From launch in spring, Paym will be the most wide-ranging payment service capable of moving funds directly from account to account, without the need for sort codes or account numbers."

"Paym will be integrated into customers’ existing mobile banking or payment apps as an additional way to pay, making it possible to send and receive payments using just a mobile number," it said.

Testing of the Paym service is still being conducted, but the Payments Council said it expects to announce in April the exact date on which the scheme will launch.

"We’re all used to the idea of a ‘mobile update’ to improve our apps - Paym is a mobile update for payments that means you can pay securely using just a mobile number," Adrian Kamellard, chief executive of the Payments Council, said. "Paym will make it easier to repay a friend for cinema tickets, split a restaurant bill or settle up for a colleague’s birthday collection."

"The service has the potential to link up every bank account in the country with a mobile number - millions of people will be able to use it this year and we look forward to expanding Paym even further, so everyone can benefit from this easy, secure new way to pay," he added.

Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that participating banks in the Paym scheme would be able to develop, or add to, their own applications on mobile payments to help them to differentiate their digital offerings. Retail and business customers are placing increasing importance on banks operating strong online and mobile services, he said.

McFadyen added that it is not yet clear whether the Paym scheme would be placed subject to a new regulatory regime. Last week the Financial Conduct Authority announced a call for input into the establishment of a new payment systems regulator. The regulator will oversee competitiveness in the market and is scheduled to begin its work in April 2015.

“The new regulator will be able to designate the individual payment systems that it will regulate,” McFadyen said. “Established payment systems such as BACS are expected to be designated as being subject to the new regime, but it is not yet clear whether Paym will also be. If a payment system is designated then anyone who has a part in its operation will be in scope of regulatory action. One of the consequences of a payment system being designated is that the new regulator could set rules on access to that payment system, in some cases mandating access to new entrants that wish to participate.”

An alternative mobile payments service backed by a group of mobile network operators is also set to launch this spring in the UK. The 'Weve' service has been developed by O2, EE and Vodafone through a joint venture arrangement. Barclays, HSBC and Lloyds are among the major banks to have signed up to participate in the Weve scheme, whilst Ford, Tesco and Unilever are working with the joint venture company on advertising initiatives.

"Our business is underpinned by intelligent data insights that allow brands to target the right people, at the right time, in the right place," according to a statement on the Weve website.

"By storing everything from loyalty cards, coupons, to credit and debit cards in one place, our wallet technology will enable companies of all sizes to get involved in the mobile wallet revolution. With Weve businesses can do a single commercial deal and a single piece of technical integration that will enable their consumers to transfer their card-based data into their mobile wallets; saving businesses significant amounts of time, money and technical resources, while making life as easy as possible for their customers."

"Ultimately, this will allow consumers to purchase goods and services safely and securely using their smartphones, in a huge variety of locations – everywhere from physical retail outlets to online stores and even from other mobile users," it added.

Visa and MasterCard have also announced that mobile payment services they will operate will utilise cloud computing within the process for facilitating contactless payments. The services will operate in conjunction with host card emulation (HCE) technology.

HCE allows the sensitive data used to facilitate transactions to be stored on, and accessed from, cloud servers rather than a mobile device. At present banks rely on mobile network providers acting as an intermediary to transmit the necessary data to sanction contactless payments using NFC technology.

NFC technology allows contactless payments to be made using radio waves to transmit data between those devices and NFC-enabled point-of-sale terminals – this has become common on plastic cards, but relatively few mobile devices currently support it. To effect a payment, the compatible device and terminal must be in close proximity in order for there to be a connection and for the data transmission to work.

Separately, the European Central Bank last November outlined a raft of new mobile payments security standards (26-page / 361KB PDF) that payment service providers (PSPs) and 'mobile payment solution providers' (MPSPs) have to adhere to.

Editor's note 10/03/14: This story was updated to include comments from Angus McFadyen

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