In order to start it would be good to introduce what exactly is Paym. Paym (pronounced “Pay-Em”) is a relatively new addition to the world of payments, having launched in April 2014. It allows bank customers to initiate payments using a mobile number, known as a Proxy.
The level idea is that you use your existing bank or building society, who are known as Participants, to set up the payment much like you do today with your account number and sort-code but instead you will use the mobile number. The usual security and validation checks are done by your bank. Once these details have been validated a look-up is done on a centralised database known as the “MPP” or the “Paym Database”. If the mobile number appears in the database it will return an account number and sort-code which is returned to the bank, however these details are never shown to the customer. Once the customer sees a confirmation screen of their payment details they submit the payment and a Faster Payment (FPS) is initiated. Of course, if the mobile number is not on the centralised database an error message is returned which is then presented back to the customer, in whichever format the bank determines best.
- Customer enters the amount, reference and the mobile number they wish to pay via their participant (Participant A)
- Participant A requests account details for the associated mobile number, known as a “Look-up”
- The Paym database returns the relevant account number and sort-code (assuming it is stored in the database – otherwise it will return an error message)
- Participant A submits a payment to Participant B via Faster Payments
- Participant B acknowledges the incoming payment
- Participant B notifies the receiver of the funds that they just got paid
The overall technical solution is quite straight forward as it reuses many of the existing measures for regular payments, but there are extra rules that ‘participants’ need to adhere to, known as the Scheme Rules. Some of these rules are more complex than you might think, to name a few:
- Prove the mobile number is possession of the customer – this is costly and quite hard as many participants don’t trust Mobile Verification Code (MVC) messaging (where a unique code is sent to the customer who has to then enter back) due to security concerns. Calling the customers isn’t great either.
- Periodically check the customer is in possession of the mobile number – this is pretty hard to cover as customer generally get annoyed if you constantly asking if they still have their number.
- Notify the customer once funds have been received in their accounts, which is great if you can use Push Notifications in an app but otherwise it looks like good old fashioned SMS messages, which costs money.
On the topic of costs, as we discussed in the previous post on how bank payments work, the bank or institution who is submitting the instruction to Faster Payments get incurred a charge, the same happens in Paym. As a whole the participant can get charged twice as they will need to pay for a Paym “Look-up” as well as the Faster Payment submit. This is of course not a great deal for the participants, but to make matters worse the overall maintenance costs of the scheme are shared across all participants according to how many registered proxies they have (for example of Participant A has 40% share of stored proxies, they will need to pay 40% of the maintenance costs). As you can see things can be not entirely good for those who register to be a participant, however it always seen as a good invent for customers who should hopefully find it easier to pay someone via mobile number than asking for an account number and sort-code, however this will most likely attract the younger population so it may take a few years to mature but overall it should become just as common as regular bank banks.
As simple as this scheme appears it does open it up to a whole host of questions on how things can operate in certain circumstances, I’ve tried to guess what you may ask and answered them below:
Q: What happens if you want to remove your mobile number?
A: All participants need to provide the capability to remove their number from the Paym Database, but the guidelines as to how this is actually done isn’t clearly defined which does make it difficult for customers to find a consistent way of doing this, regardless all participants that have the ability to add a mobile number to the Paym Database will also have a method for it be removed too. It is just a matter of how.
However, only a mobile number that has been registered via the customer’s participant can modify or remove the registration (for example: if a customer registered for Paym with Participant A then that customer can only edit or remove their registration via Participant A, even if they also bank with Participant B). There are, of course, always exceptions which leads us to the next question.
Q: What if a bank doesn’t remove my number?
Should a customer attempt to de-register from Paym via their Participant and is unable to register their number with another participant, they will be able to raise what is a called a Proxy Dispute in which one Participant will request the other Participant to remove the mobile number from the database. There is an agreed Service Level Agreement (SLA) to get
This can be the same process if a customer challenges that they actually own a particular mobile number, for example if a customer had their mobile number but then perhaps bought a new mobile number where the mobile operator has subsequently reused the number.
Q: What happens if a mobile number is registered for Paym but the account is gets switched to another bank?
For those of you who are not aware of Account Switching is a fairly new initiative that allows customers to move to other banks where the new bank will manage all the relevant paperwork and administrative tasks, such as change direct debits, etc… all this needs to done by 7 days.
So when an account is switched to a new bank, it is not necessarily known if the customer will want to re-register for Paym, so it generally required for the old bank to de-register the number and it is really up to the new bank to re-register that mobile number into the database, with them being the ‘owner’ of it. Generally it is really up to the customer to do this re-registration as it isn’t part of the switching process but some banks will ask you if you want to register.