Over the past several months, I have had several discussions with clients, both in Spain and in the UK, who are interested in implementing a simple, straight-forward P2P service which would allow two persons to quickly and easily exchange money via mobile phone. Many interesting user cases have been discussed: splitting the cost of a meal between friends, loaning money to a family member, and even paying for goods and service with shopkeepers or trades people. 

The service could be implemented today with existing technology, without the need of NFC. The mobile app would allow the transmission of information between the handsets, either by geo-location (this is how “bump” works) or 2D QR codes (one user generates the QR code which is then read by the other). The application would then be able to send information to the bank to execute the transaction.

For payments between clients of the same bank, the server-side application could easily receive the amount and the identification of the two clients (a registered phone number would be sufficient; account details would not need to be sent over the air), and then execute the transaction internally.

This model, however, has a major problem which up until now has kept our clients from going forward. The problem is that no one bank has enough customers to provide sufficiently broad coverage to make the application useful. Consider the case of 8 persons going out to dinner in the UK, the chances are that each person could only exchange money with only one other – obviously that wouldn’t be very useful.

Of course, transfers between banks could also be possible, but one entity would have to take responsibility as the application administrator. Another way to make P2P work is to extend it to P2B (person-to-business). The bank could offer a service connecting its bank customers to its commercial customers (merchants) and offer a value-add service to both, thus gaining customer loyalty.

All our clients agree however, for P2P to work, UK banks need to form a consortium and centralise the administration of the application. Without this consortium, it will be companies like PayPal (who already has an app which extends their popular money transfer service to mobile) or Apple (who is reportedly working on a iPhone app to allow transactions between credit cards or bank accounts) that will step in to take over mobile P2P. The banks will lose out on the opportunity to offer a novel service to their customers and once again, it will be the tech companies that take a piece of the pie. 

Karl Rieder, Delivery Manager, GFT