Barclays recently heralded what is set to be a major new phase in digital banking through the launch of a pay by mobile service, adding a significant new service currently unavailable with any other UK bank. In the digital era of growing mobile banking, this is the biggest change since the launch of banking apps on the mobile.
The service is known as Pingit and will increase the ease with which customers can transfer money. The service allows customers and small businesses to transfer up to £300 per day to other bank accounts. Reports suggest that 20,000 customers signed up in the first two days. This appears to also suggest a huge step forward in the customer experience for banking, particularly with some other banks still requiring the use of a cumbersome token to make transfers online. It also builds on the steps being made with payment through Near Field Communications, which a previous blog on M-Payment has covered in more detail.
Why is this so different now?
The UK banking industry has been commendable in focussing on digital methods for customer engagement, which has often grown alongside a change in the design of branches in some of the high street banks. In an industry which has struggled with seamless multi channel integration in the past, these are notable moves. But despite this trend, this latest move by Barclays has taken competitors by surprise, given that the technology itself is not particularly new. This latest innovation enters an arena that is traditional Paypal territory, enabling the transfer of small amounts of money and competitors will no doubt be rushing to keep up, especially as Barclays are suggesting that a future release of the app will enable customers of competitive banks to use the service as well. This could see a new front in the highly competitive world of retaining personal customers in the banking industry.
But is this really new and innovative?
Such technology has been available for a long time, in fact payment and money transfer by mobile has existed in parts of Africa for over 4 years, not traditionally an area linked with technology innovation. Transferring money by mobile can be conducted in Kenya using a tool called M-Pesa, which over 50% of the adult population use to send money to relatives, to pay for shopping, utility bills, and taxis. Equally payment by mobile for parking meters has existed in some European cities now for years.
What has brought this existing technology to the fore now is the fact that one of the world’s largest banks has announced it and is marketing it as its own product.
How will it impact customers though and where is the benefit to the bank?
Initial response from customers and the industry has mainly been positive, despite the usual concerns with almost anything digital in the banking industry about security risks. It is an easy to use system, that if as successful as it has been in Kenya, could soon become the norm for payment of even small sums that currently remain the forte of cash, such as taxi journeys or your plumber. So good news for customers it seems.
But where is the benefit to the banks? At the moment it seems that Barclays are not benefiting financially from this, and there has not been any discussion about charging for having access to the service – unlike Paypal who charge a fee per transaction. Furthermore, money transfers have traditionally been the target of charges from banks, with debit and credit card use charges amongst the best known.
Whilst transfers of money between bank accounts may continue to be free as they are currently with online banking, the potential to use this to pay small retailers such as independent stores and taxis will raise an interesting question about charging. Will it see pressure to reduce existing payment charges, or will we see new charges introduced here as well? How will existing money transfer solutions such as Paypal react? And how much will banks use this increased acceptance of banking by mobile to increase marketing over mobile phone as well?
For me, this is undoubtedly a major development in the UK banking market and we can expect to see comments from the Payments Council and other leading High Street banks in the near future. As for smaller independent banks and building societies, it provides yet another challenge to address with rising customer expectations in the digital era.
What are your thoughts? Are you a Barclays customer and signed up? We’d love to hear your thoughts.