Zapp made some further progress by bringing onboard major banks.

When it comes to e-commerce, Zapp could indeed represent a compelling value proposition if they do three things:
(1) offer consumers the same protection as conventional credit cards;
(2) provide e-merchants with liability shift in respect of chargebacks; and
(3) extend Zapp to credit products from their partner banks - I am talking about Zapp-fronted virtual credit cards for online payments here.

As for the physical retail, the merchant benefits are less clear. Zapp claims their s/w-based solution is safer than "chip and PIN". Um.. Eh... Ah... Never mind... (See the last paragraph below on that subject.)

It's the user flow that bothers me most.

I am surprised that Zapp are still talking about "typing in a six-digit code provided by the till operator". Won't happen. Full stop.

NFC is a good option, but... "In each case, to complete the payment the smart device owner will need only to tap a button in the banking app." Well, it more like: tap to choose the banking app (if you have more than one); then tap five times to enter your PIN, then tap to select the account to charge (as per Zapp's video); finally, tap to confirm. 

How is that better than pulling out a contactless bank card out of my wallet (which I will still need to carry around as Zapp cannot be used for transit payments and cash withdrawals from ATM)?.. 

Last, but not least: Zapp allows customers to say at the checkout point, "I've got this much money in my account, shall I go ahead and buy this product or not?". Just ask any merchant about shopping card abandonment and impulse purchase...

To sum it up, if Zapp is looking to simply replace Visa/MasterCard, it's a tough sell - especially in physical retail. 

Were they to focus just on e-commerce (as Step 1), Zapp value proposition could be strong. In fact, they can steal the limelight from Visa and MasterCard by becoming the first company to offer "card present, PIN verified" e-commerce payments. 

On a related note, I am surprised that Zapp didn't extend itself to ATM cash withdrawals... After all, Zapp was masterminded by VocaLink - the company that runs the UK's ATM network. Using a smartphone for cash withdrawals - if done right - is indeed safer and more convenient than using a card. That ubiquitous use case would be - by far - more popular than patchy and questionable retail payments, and a good foundation for positive user experience and service uptake.