E-wallets put money back in your pocket
Transferring money by mobile phone has some unexpected benefits, writes Neasa MacErlean.
Saturday 14 April 2012
Your 16-year old daughter is going out for a night on the town, and you are worried that she might run out of money. In the past few days a new solution has emerged. If need be, you can use your mobile phone to transfer money within seconds to her account, and she can then take it out immediately in cash from an ATM.
Barclays launched this transmission service for its smartphone users a few weeks ago and on Thursday extended it to non-customers. People have been signing up at the rate of 10,000 a day.
While younger people are far keener on mobile banking than the over-40s, there is little doubt that most of us are going to be affected by the forthcoming mobile revolution. "This is going to become the primary means of accessing your account," says Paul Makin, the head of mobile money at Consult Hyperion. He predicts that it will become the main way that 25- to 35-year-olds will use their accounts "within a couple of years".
If you are over 35 you may be shaking your head at the idea that you could use the small keyboard of a mobile to manage your money, even though the service is free for consumers. You might also be put off by the security issues, particularly what would happen if you lost your phone. But the banking and telecoms worlds are betting that millions of us will be persuaded when we see how convenient these arrangements can be.
Barclays has stolen a march on its rivals by launching its Pingit service for users of BlackBerry, iPhone and Android mobiles. Both senders and recipients need to register first with the bank. The senders can transmit up to £300 a day, simply by entering the mobile phone number of the recipient. While non-Barclays customers could only receive money from the launch date two months ago, they are now able to send as well.
The other banks will be able to follow suit from about the end of the year. They are using a shared scheme being developed by the UK Payments Council. "Everyone is coming into this," says Makin.
The Financial Services Authority (FSA) has a list of 18 organisations, including Starbucks and Google, which have been authorised in the past year to transfer money through smartcards and other electronic means. It is the policy of the FSA "to encourage the growth of the electronic money market", not least because there is a higher cost to using cash and slower transmission mechanisms.
The mobile phone companies are also about to enter the market, and there is speculation that they could rapidly move into offering banking services to rival the high-street banks. For instance, the O2 Wallet is being piloted with 750 users and is due for launch soon. It will offer "money messaging" and will be, according to a spokesman, "open to anyone, regardless of what mobile network they are on or what bank they are with".
Paul Makin says: "I would be surprised if O2 don't have broader ambitions."
He thinks O2 and its rivals Everything Everywhere and Vodafone could well be considering becoming players in the banking market, setting up hi-tech accounts which could be more efficient than traditional high street or online versions.
Young people are likely to become ambassadors of mobile banking in many families. Pingit was initially designed for users aged 18 and older. Phil Sowter, the UK head of mobile banking at Barclays, says: "We were not expecting to see a huge demand from 16- to 18-year-olds – but there was."
As Pingit was being launched, the bank became involved in online forum discussions with people from this age group who wanted to be involved. They complained that they were not well served by existing facilities in banking. "If you asked many 16- to 20-year-olds whether they want online banking, most would probably say no," Sowter says. "If you ask if they want mobile banking, most – over 80 per cent – will say yes." Barclays then dropped the age limit for Pingit to 16. It cannot be long before these teenagers start asking their parents to give them money electronically and instantaneously rather than using cash or online transfers or even cheques.
But many of us will find our own examples of when mobile money transfers are useful. The example most often cited is when a group of friends go out for a meal together and split the bill. With Pingit-style services, one person could pay and the others could immediately transfer their share to his or her account. The payer would also be able to check that all the money had been received before they left the restaurant.
Barclays plans to develop Pingit at a rapid pace. Use on joint accounts (not possible now) is due to start within a month; a service to make payments to charities will begin a month or so after that; more businesses will be allowed to take part (alongside the small organisations which can participate now); and international payments are also on the horizon. Longer term, Pingit will take on more features of a standard bank account, including enabling customers to pay bills. It may have incurred significant costs to develop Pingit but Barclays has scored a PR coup through its early adoption and it could also win new customers who are drawn by its commitment to high-tech services.
Pingit, the O2 Wallet and other services will let the UK catch up with Kenya and other countries, where mobile banking is already the norm. Paul Makin was the architect of the Kenyan M-Pesa system which now has 14 million subscribers, a third of the population. "It's been embraced by all sectors of society," he says. "Once people try it and have done a few transactions, a lot of concerns go away."
In Kenya, people could avoid carrying cash through dangerous parts of Nairobi, for instance, by loading their money on to their account before entering those zones and then taking cash out of ATMs when they were in a safe area again. In the UK, the same idea could apply, especially when people are out to let their hair down in clubs or over a few drinks.
Makin says that in Kenya "there were all sorts of uses that developed that we didn't expect when we started". He describes how individuals started getting small loans from friends and family as they became more familiar with sending money by phone. "Rather than going to loan sharks, people started to set up networks of friends and they could get the money immediately."
By Wednesday, more than 400,000 people had downloaded Pingit. That number should go through the 500,000 barrier very shortly and is likely to jump into the millions in 2013 when the other banks join in.
E-money worries: How to avoid problems
to protect your mobile phone, set the password/PIN option which prevents other people using it. You should also ensure that no one else can get access to the separate password which your bank will give you before you make banking transactions. If you take these steps, "you should be absolutely fine", says Paul Makin of Consult Hyperion. There are other measures you can take – such as activating BlackBerry Protect or Find My iPhone which help you locate a lost phone and, in the worst case, let you wipe all the information on it. Makin rates iPhones as "very secure", BlackBerrys as "pretty secure" and Androids as "getting there".
Make sure your typing is accurate when you input details of people you want to send money to. If you get a digit wrong and your £100 goes off to a stranger, it could take you a long time to get it back (if ever). The Financial Ombudsman says the legal position is that someone who is given money by mistake should say what has happened and pay it back, although many believe it is a case of "finders keepers".
The Ombudsman advises people to avoid revealing personal details (such as date of birth or the first school they went to) on Facebook and other social media, as these could potentially help to bypass banking security in some situations.
It also recommends memorising your PIN and passwords and making sure that online retailers are legitimate before making payments to them.
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