Five major banks to roll out Zapp mobile payment system

Five major banks have announced they will offer mobile payments through the Zapp mobile payments platform when it launches later this year.

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Five major banks have announced they will offer mobile payments through the Zapp mobile payments platform when it launches later this year.

HSBC, First Direct, Nationwide, Santander and Metro Bank, which represent 18 million UK customers, will enable users to make payments in real time using a smartphone app linked directly to their bank account.

Zapp integrates with existing bank apps, meaning that consumers will not need to download third party software or sign up for new service, and it is claimed that the payments process is more secure than traditional payments as customers don’t need to reveal financial details, such as account information, during a transaction.

“Our customers want the choice to be able to pay on the go using mobile technology, and the Zapp proposition is second to none with its capabilities,” said Steve Pateman, executive director, head of UK banking, Santander.

“Zapp helps us meet the growing demand from our customers to use their mobiles to pay for goods and services swiftly and securely.”

Zapp has been building momentum ahead of its launch in September, and has already signed up a number of payments providers to support the platform, including WorldPay, Optimal Payments and SagePay.

By partnering with WorldPay, for example, Zapp users will be able to make payments at retailers including WH Smith, Lidl, Superdrug and McDonald's.

Zapp said that it intends to continue to recruit more partners ahead of its launch.

The payments platform runs on an Oracle software and hardware stack. The Zapp web application and database servers will run on Oracle x86 and SPARC hardware, with the software behind the Zapp mobile payment eco-system being built on Oracle’s database, WebLogic, enterprise service bus, GoldenGate and data integration technologies.

The company was set up as a subsidiary of the UK’s payment network provider, Vocalink, which has established schemes such as Link for ATMs and BACS payments, with a development cost of £100 million.

Fragmented mobie payment market

The launch of Zapp is an attempt to provide an industry-wide scheme to support mobile payments in the UK.

Barclays was the first to launch a mobile payments system, offering person to person payments in 2012, before recently upgraded its service to offer mobile payments in September last year. Nationwide has also partnered with Visa to use it’s V.me payments system, with RBS expected to follow.

Traditional financial institutions have also seen competition from other quarters, such as mobile operators, but this has been met with mixed success, and last week Telefonica announced that the O2 Wallet service would soon be discontinued.

Mobile payments have also come under scrutiny from payments regulators both in the UK and the EU ahead of an expected increase in mobile transactions this year, with concerns over potential security issues.

Industry-wide solution

According to Eden Zoller, principal analyst in Ovum’s consumer team, Zapp has taken good steps towards introducing mobile payments to a wider audience, but will still need to continue to gain traction with other leading financial institutions in order to provide an industry-wide platform.

“Zapp has taken its time and put in place a solid foundation for its mobile payment service ahead of the launch, instead of rushing to market with a half-baked offering,” said Zoller. “Integrating Zapp with existing financial services is a good move as these are the brands that consumers trust the most to deliver m-payments.”

Zoller added that despite a "promising start", the "ability to provide scale" will be critical to the platform's success.

“To succeed in its ultimate goal of becoming a single, industry wide m-payment platform, Zapp will need to get the other major UK financial institutions behind it, such as Barclays that has its own Pingit application that is proving popular in its own right.”

“Alongside this with more countries and regions developing faster payments like infrastructure, if Zapp proves successful in the long term, it could prove to be a model for other markets. Visa and MasterCard will likely be watching developments closely.”