Since its inception, the concept of a mobile payment system promised to fundamentally change the way people pay for goods. A few years ago several mobile commerce initiatives were springing up around the world, with many thinking that the mobile would become the new credit card. In Asia one such initiative even allowed people to pay for a round of golf from the mobile, as long as you were a member of the club and had an account it could be booked to. So why did this stop? Did the industry get bored with parking voucher at vending machine mobile payment applications?

In the financial world many thought that the banks would become the obvious players to turn the mobile into the ultimate payment instrument - even just for domestic bills. Electronic Bill Presentment and Payment (EBPP) to the mobile is a relatively simple concept, reply to the text and the bill is paid from the bank account. The MEBPP 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. Yet despite this simplicity, UK banks have only continued to use the mobile for micro applications such as SMS balance messages. Mobile banking offers convenience for the consumer and a fully electronic payment for the biller. Security and ease-of-use on both sides are strong arguments for banks to become part of the mobile commerce value chain.

The uniqueness of the mobile phone becomes apparent when the consumer is on the move. There is the technology and infrastructure is in place to allow consumers to pay bills in response to SMS reminders, make impulse buys or transfer cash to relatives using their mobile phone anywhere in the world. By tying the unique mobile phone number to a bank account and adding a password, banks put a secure payment instruction and authentication device directly into the hands of their customers. Unlike credit card purchases of ad-hoc items from the Internet, users would not pass banking or payment information over-the-air. Mobile payment fraud is a non-issue because consumers create pre-registered accounts with pre-identified payees. The only challenge that remains is convincing UK banks to move forward. Perhaps PayPal’s entry into the market will galvanise the internal think tanks into action rather than allowing their business to be eroded before they get started.

In France the store card for Galeries Lafayette, Cofinoga, already allows its customers to pay their bill via SMS and choose the exact amount of the outstanding balance they wish to settle. Its customers choose to make payments for domestic bills using a 'text cheque', by sending an SMS reply to a request for payment. Since its launch a year ago, half of those who signed up have made payments between €100 and €500, with the single largest transaction surpassing €5,000.

UK banks have been surprisingly timid in providing these new services. HSBC and First Direct’s system, MoniLink set to launch this summer is a start. It allows customers to check their bank balance, receive mini-statements and top up their pre-pay call time using their mobile phones. However, the US banking sector may fast-track ahead into leading this business. With the momentum of the massive growth in mobile usage following a late start to mobile text messaging in the States, banks across the Atlantic are keen to become players in m-payment.

However, the most likely growth will come from the emerging economies in both Asia and in Eastern Europe where mobile phone penetration has far outgrown bank account ownership as cash has historically been the dominant payment method. In China there are already 200 million mobile users and the banked population is growing fast. The Chinese central bank has been promoting credit card ownership but missed its end-2003 target of 200 million credit card holders as the incentive to consumers to switch from cash to card is not yet attractive enough. Banks in these regions have begun to use mobile payment as a means of acquiring customers in their quest to establish a payment infrastructure.
Evidently mobile banking has the potential to revolutionise the way people bank and the services banks offer, yet despite this advantage UK banks have been slow to benefit from the mobile payment channel.

With such strong examples of mobile payments and banking taking place all around the world, it is time for UK banks to offer their customers the flexibility and security mobile banking has to offer.