Owe a friend some money? What you need to know about mobile money transfers

By Marianne Curphey

Have you ever owed a friend a few pounds, but kept forgetting to withdraw cash to pay her back? You can pay for nearly everything else using your credit or debit card, but making the time to go to a cash machine is a chore -- one that mobile money transfers may soon eliminate.

UK consumers could soon be using their mobile phones to exchange money with friends, pay for taxis, settle accounts with tradesmen and split restaurant bills.

A quick way to send and receive money
Mobile money transfers allow you to transfer money from your bank account to someone else's without making a trip to the bank. Moreover, you don't need to know someone's bank account details to send money -- you just need to know that person's phone number. mobile-transfers

Two major technological developments have just advanced the mobile payments front in the UK.

First of all, Barclays launched a new app called Pingit, which lets users send money to anyone with a bank account and mobile phone number -- just by using the recipient's mobile number. It is free, and you don't even need to know the other person's bank details. At first, just Barclays customers will be able to send money by downloading the phone app, but soon all banking customers will be able to send and receive up to £5,000. You can register online to receive money if you are not a Barclays customer, and the app is protected by a PIN that you choose yourself. 

The second major development is a move from the Payments Council. Later this year, it plans to launch a central database linking mobile phone numbers to account details. All banks will be able to join, and consumers who sign up will be able to make and receive payments using their mobiles without needing to know a recipient's account details. The database is completely optional -- consumers have to register themselves.

Are mobile money transfers safe?
Security concerns have been a big issue for UK consumers, says Sandra Quinn, head of media communications at the Payments Council. However, it's not possible for users to get other users' bank account details because that information won't be loaded into the phone -- it will be like accessing an app, and the app will act as an intermediary.

When you make a payment, there will be several steps throughout the process to increase security. According to Quinn, mobile transfer apps will likely include a confirmation message to the sender and recipient before any money changes accounts. She also expects that users will have to enter a passcode both to get into the app and to send money.

But what if you lose your phone? Mobile companies keep a record of lost or stolen phones and their corresponding phone numbers, Quinn says. The Payments Council database will be updated with these numbers.

"This will ensure that a payment is not being sent to a phone that is not in the owner's hands," Quinn says. "If security is not top notch then customers will not use it."

Mobile transfers might be slow to take off
Despite the convenience mobile transfers offer, consumers may be cautious. Although person-to-person mobile transfers are relatively new in the UK, mobile payments between customers and merchants have been around for a couple years. And, if a recent study from consumer research company Intersperience is any indication, UK consumers are wary of using their phones to make payments.

Intersperience CEO Paul Hudson said the research found that consumers were fearful about buying products or sending money via their phones for security reasons -- and for other, more emotional, reasons.

"Only about 8% of people have ever bought anything using their mobile phone," Hudson says. "People fear making a decision too fast or buying the wrong thing. Companies are creating apps that make buying online simple, but customers are scared that this means they are going to buy too many things or regret making the purchase later on."

Roughly a quarter (24%) of people surveyed by Intersperience were concerned that they might lose out financially if they had their bank details linked to their phone and it was stolen.

"To change people's mindsets, the benefits of mobile payments need to outweigh the risks," Hudson says.

See related: Mobile purchases of Christmas gifts set to double; UK targeted by bank-robbing malware


Published: 23 March 2012