Eight new ways to pay
How are you going to pay for things in 2015? Perhaps you'll wave a wristband or glove over a contactless reader in a shop or press a button on your smartphone to send cash instantly to a friend?
New technology means there are numerous innovative payment products being launched and each of them aims to do something slightly different. While many use contactless technology, some are designed to make online shopping quicker and others make it easier to pay friends. We've taken a look at the latest developments – and some more coming up.
In April 2014, the Payments Council launched Paym (pronounced "pay em"), a service with the potential to link up every current account in the country with a mobile phone number.
You'll need a smartphone to send money via Paym and the recipient will need to have registered their mobile number and the account they'd like payments made into.
"Paym lets you securely send money between 16 participating UK banks and building societies covering nine out of 10 UK current accounts, using just a mobile number – no sort codes or account numbers," explains Neil Aitken, spokesperson for the Payments Council.
"Paym isn't an app in its own right – it's integrated into your bank's existing mobile banking or payment app, so you get the same security password protection and speed of payment you're used to – and it lets you send a payment to anyone else who has registered, even if their account is with a different participating bank, building society or payment provider to you."
Paym payments are sent using the Faster Payments system, so should be almost instant. About 1.6 million customers and 16 banks and building societies have signed up for Paym so far – and that number is growing.
However, one thing that is confusing is that while some banks, such as HSBC and First Direct, use the Paym brand name, others have their own product name. The best known is probably Pingit from Barclays, while Bank of Scotland, Halifax and Lloyds, call it 'Pay a Contact'.
The following table shows the participating banks (in alphabetical order) and what they call Paym:
|BANK OR BUILDING SOCIETY||PAYM NAME||BANK OR BUILDING SOCIETY||PAYM NAME|
|Bank of Scotland||Pay a contact||Isle of Man Bank||Paym|
|Barclays||Pingit||Lloyds Bank||Pay a Contact|
|First Direct||Paym||TSB||Pay a Contact|
|Halifax||Pay a Contact||Ulster Bank||Paym|
Other banks including Metro, Tesco Bank and Nationwide plan to join Paym this year. Meanwhile, Snapchat, the photo-sharing app, is introducing Snapcash, which works in a similar way to Paym but it's currently only available in the US.
Another mobile phone app, Zapp, is due to go live some time in 2015. Unlike Paym, which is mainly used for paying contacts in your mobile phone, Zapp can be used in shops and other retailers that have signed up to the technology (Sainsbury's and Asda are among the big names that have already done so).
Like Paym, Zapp isn't an app in its own right. Instead, it's something that will be integrated into a mobile banking application – Nationwide, HSBC, First Direct, Metro Bank and Santander have all announced they plan to work with Zapp, and other banks are likely to follow suit.
When customers reach the checkout of a shop that accepts Zapp payments, they will have a special code sent to their mobile phone. The code will contain all the information about the transaction and the customer can accept or reject the transaction. The code will expire after three minutes.
According to research by Zapp, 21 million consumers say they would be willing to switch banks to access mobile payments. Some 28% of those surveyed said they had already used their smartphone to make a payment while one in five said they'd be happy to buy a house using a mobile payment within five years.
Peter Keenan, chief executive of Zapp, says: "The success of early forms of mobile payment and the buzz around forthcoming launches of mass market initiatives has clearly whetted consumers' appetites. This research shows that anticipation levels are running high and it suggests banks and retailers stand to gain significant competitive advantage from offering and accepting mobile payments early."
Rather confusingly, there is also a smartphone app called Zapper that can be used to pay in restaurants and taxis signed up to the service.
Customers scan a QR code on their bill with the Zapper app to pay, and money is paid from a debit or credit card linked to the app. The payer can easily add a tip or split the bill as they choose.
Both parties get an immediate notification of successful payment, and so does the retailer.
4. CONTACTLESS PAYMENTS
According to the UK Cards Association, there are about 32 million contactless debit and credit cards in circulation in the UK.
Contactless cards are ordinary debit and credit cards but they have a logo of four bold lines making a wave symbol. Unlike standard cards that require a PIN, they can simply be waved over a special card reader to make purchases of up to £20.
Most contactless payments are to shops and fast food outlets – they will display the logo of either Visa payWave or MasterCard PayPass.
In London, you can pay for buses, tubes, trams and trains using contactless bank cards as an alternative to Oyster (which is also contactless).
But it's not just cards that are contactless – there are wrist bands, key fobs and certain types of smartphones, too.
To make contactless payments, devices need capability known as near-field communication (NFC). NFC has been around for years – it's commonly used on security passes to get into buildings.
At the moment contactless payments can only be made up to a maximum of £20; if you want to pay any more than that, you'll need to enter your pin. But Mastercard has teamed up with Zwipe to launch a card that won't need a PIN for larger payments – they will be authenticated by fingerprint instead.
The Zwipe MasterCard includes an integrated biometric sensor and the Zwipe secure biometric authentication technology that holds the cardholder's biometric data (for example, your fingerprints). The card is due to launch this year.
Ajay Bhalla, president of enterprise security solutions at MasterCard, says: "Our belief is that we should be able to identify ourselves without having to use passwords or PINs. Biometric authentication can help us achieve this."
6. WEARABLE TECHNOLOGY
Rival Barclaycard has already launched a contactless wristband and has been trialling payments by glove.
The wristband, called bPay, can be preloaded with money in much the same way a prepaid plastic card can, and it can then be used to make payments for purchases of £20 and under wherever the contactless symbol is displayed.
In the run-up to Christmas, Barclaycard trialled a prototype of a contactless payment glove. It picked gloves above other wearable technology because market research revealed they topped the list of wearable items consumers would like to pay with.
Mike Saunders, managing director of digital consumer payments at Barclaycard, said: "The 'pay gloves' we're trialling are designed to let shoppers tap, pay and go even when their hands are full of shopping. If the prototype is popular, these handy winter warmers could be bringing some festive cheer to bag-laden shoppers by Christmas 2015."
7. MOBILE PHONE NFC
As well as cards and bands, some smartphone handsets also contact an NFC chip.
Probably the best-known handset manufacturer to get involved in NFC is Apple. It plans to introduce Apple Pay to the UK in 2015 and it will mean that iPhone 6 and Apple Watch users will be able to pay by waving their devices across a scanner and then putting their finger on the 'Touch ID' fingerprint scanner to identify themselves.
Payment is either charged to the credit cards on file with an iTunes account or users can use the 'Passbook' app to add another debit or credit card as a payment method.
Meanwhile, mobile network EE already uses NFC to provide its Cash on Tap service To use it, you need a compatible handset, an NFC-compatible SIM, an EE pay monthly account and the Tap Wallet app available from the Google Play store. You then need to register
a bank card and use it to load money to your Cash on Tap account.
8. CHEQUE IMAGING
For those people who still use cheques, new technology means you'll soon be able to pay a cheque into your current account by sending a smartphone image of it to your bank.
Barclays has been running a pilot of cheque imaging technology since June 2014 and has recently announced an extension of the trial and a new trial for corporate customers.
Ashok Vaswani, Barclays personal and corporate banking chief executive, says: "Innovations like this are all about giving our customers more choice, saving them time and money and ensuring they can do their banking where and when it suits them best."
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.