Related Links

Fast fact:
'The European prepaid mobile market is worth €35bn Euros in revenues to mobile operators'

M-Payment Solutions - Helping banks in the current climate

Mobility is the answer to challenges like late-payment charges, cross-border integration and hyperinflation. It even saves banks money, says Simon Joyce of Upaid

London, UK, 26 September 2006: The banking climate in Europe is set to change radically over the coming years. The onset of interest charges for late payments from 2007, and the move towards a single European payments area (SEPA) in 2008 hold enormous advantages for banks and their customers, yet banks across the continent have been reluctant to profit from the mobile payment channel. They 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 expedite processing and generate efficiencies.

Many expected the banks to become the obvious players to turn the mobile into the ultimate payment tool - even just for domestic bills. EBPP - the online delivery of bills to customers, with electronic payment - is growing on the web, but growth in Europe is 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. So why are merchants and banks still missing an opportunity to develop a cost effective, efficient and more convenient payment method?

Europe's banks should look to other regions for inspiration on mobile payments. Brazil, for example, had a ten year fight with hyperinflation from 1987 to 1997. Consumers disposed of cash as quickly as possible because it lost value almost immediately. Bank savings were non-existent.

Ultimately, this hyperinflation forced banks in the region 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 are two such initiatives. Upaid recognised this opportunity, and now provides electronic point-of-sale transactions in kiosks throughout the country, working with the major international and local banks and operators. In May 2006, 1.6 million point-of-sale transactions were facilitated by Upaid.

In Europe, banks are setting the tone and pace of cross-border financial integration with the advent of the Single Euro Payments Area (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; merchants will be able to accept payment from cards in all SEPA countries. Upaid sees these developments as the perfect launch platform 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 consumer credit is dated, inefficient and involves a third party. A paper cheque does not provide payment guarantee; when it bounces, the bank is put in debt. Upaid's text-cheque™ accelerates payment and facilitates a more "real-time" credit control regime via credit card. It is widely known that customers with a history of bad debt are likely to pay the most convenient bill first. Text-cheque™ does just this by using simple text messages over SMS. Paper cheques will soon become a thing of the past, and as banks move away from this payment instrument, text-cheque™ will facilitate a transition to a chequeless society.

The mobile has the potential to revolutionise the way people bank and the services banks offer. With new legislation coming to the fore which encourages 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.

(This article will appear in SIBOS Magazine Vision 2010 in October 2006)


> Back to archived headlines > Back to top