Consumers in the U.K. are being encouraged to sign up for a new payments system that will allow person-to-person transfers to a mobile phone number.

The Paym system, an industry-wide collaboration initiated through the Payments Council, will go live on April 29 as an addition to many banks' mobile banking applications.

The Payments Council has worked on the Paym project (pronounced "pay me") since 2008 by conducting feasibility studies. It decided in late 2011 that its system would be a viable payment option for bank customers, says Payments Council spokesperson Doriena Koldenhof.

"Paym is not a standalone app and it will be integrated into a customer's existing mobile banking or payment apps as an additional way to pay," Koldenhof says.

Bank of Scotland, Barclays, Cumberland Building Society, Halifax, HSBC, Lloyds Bank, Santander and TSB bank are the first banks to offer Paym. Customers of Danske Bank can begin registering April 25. More banks are expected to offer Paym later in the year.

Each bank handles its own customer service for Paym payments, Koldenhof says.

Paym uses the country's Faster Payments Service infrastructure to transfer money, and the Payments Council views Paym as the first service with the potential to link every current account in the country to a mobile number, Koldenhof says.

After registering for the service, customers would choose a contact from their mobile phone or key in a phone number for a payment. Paym asks the customer to confirm the recipient's name and the amount of the payment before the money is sent.

The Payments Council expects consumers to use Paym for small-value money transfers, such as splitting the cost of a meal or ticket. Paym allows users to transfer at least £250 (U.S. $415) a day, and individual banks can determine if they want to allow higher caps.
Paym accounts are protected by the security used by the customer's mobile banking app.

If Paym proves to be a success with U.K. consumers, the country's commitment to the Faster Payments scheme will have much to do with it, says Zil Bareisis, a London-based senior analyst for research firm Celent.

"Faster Payments is a great enabling infrastructure that allows different services to be built on top of it," Bareisis says.

Initially, the Faster Payments scheme focused on bank transfers initiated from the Web, with the sender needing to know the recipient's bank account details, Bareisis says. Paym makes that process easier by linking the bank account details with the phone number, he says.

As the database from Paym grows, it will eventually enable other services, Bareisis says.

Barclays U.K. offers a similar service in Pingit, and the bank supports Paym as a multi-bank option. Barclays customers can use a Pingit account to log into Paym. When a customer signs up for Paym at one bank, it registers them for money transfers to any consumer at other banks.

Barclays tells those who register for Paym to provide name, mobile phone number, bank account number and sort code, which Barclays in turn provides to the Mobile Payments Service Company Ltd., which will operate Paym countrywide.

Many banks talked about building services on top of Faster Payments in the past, but only Barclays did with Pingit, which has been valuable to Barclays, says Gareth Lodge, also a London-based industry analyst with Celent.

"Most banks did the bare minimum for Faster Payments, so they couldn't easily do anything," Lodge says. "The Paym system was an effective preemptive action to appease the regulator."

Australia is planning a real-time payment system designed to benefit from technology such as Paym, and India already has such a system in place, Lodge adds.

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