Bank Agnosticism – the Future of Peer to Peer

No single peer to peer (P2P) solution has yet received universal acceptance amongst consumers. The solution is a bank agnostic architecture available to all – at least across all banks in a country. During the last decade, there has been a surge in new methods of making P2P payments – with new forums for commerce such as eBay and anincreasing desire amongstconsumers to instantly control their payments combining with technological advancements such as faster internet speeds, increased computing power and smartphones, writes Sascha Breite

No single peer to peer (P2P) solution has yet received universal acceptance amongst consumers. The solution is a bank agnostic architecture available to all – at least across all banks in a country. During the last decade, there has been a surge in new methods of making P2P payments – with new forums for commerce such as eBay and anincreasing desire amongstconsumers to instantly control their payments combining with technological advancements such as faster internet speeds, increased computing power and smartphones, writes Sascha Breite

But to date, no single P2P solution has been unanimously accepted by the public. A mixture of cash, bank transfers and, in certain countries, cheques, remain the most popular methods of P2P payment. Some banks provide P2P payment services but mostly restricted within their own customer base.

Non-bank-centric services such as PayPal have tried to provide a viable alternative to banks by requiring payees to open an account, linked to the underlying bank account, to sendand receive payments. Google provides a similar wallet service connected to the usage of G-Mail. Telecom and mobile network operators have also launched their own services like mpass in Germany in collaboration with O2/Telefonica, Vodafone and T-Mobile.

The result is a fragmented landscape. Not all banks and providers are signed up to the same scheme and not all consumers are interested in the service their bank favours – creating uncertainty over the usability of any one offering and impeding progress.

However, research suggests that consumers would be very willing to accept a solution, if it is easy to use and traverses banks and card systems. High levels of internet banking and mobile phone banking apps in Switzerland, for example, point to the next step of mobile P2P payments as being culturally acceptable. SIX Payment Services’ survey in 2013 indicated that 55% of mobile banking users would sign up to a P2Pservice, increasing to 74% if the service were free.

The current issue is that there is no simple, secure and universal system. The solution might be found in a P2Parchitecture that is bank neutral.

It could effectively be run by the payments provider and be integrated within the bank’s own system as required. The customers could see their transaction on a wallet ‘stored value’ basis or as a part of theirbank account balance. This level of flexibility would serve both bank and customer preference as to how services are presented and the ‘stored value’ proposition would provide an additional layer of security between the payment and the bank account or card details.

The most important facet of such an offering would be its bank neutrality, allowing customers to interact with each other regardless of who they bank with. For this to happen, any system must make full use of a common identifier, such as a mobile phone number, that can be linked to that person’s underlying bank details. Any proxy must also be secure and satisfy KYC requirements. There is clearly much value to be had in using a sensible and secure proxy identifier that works with all parties within the broader payments infrastructure.

Installation and sign up must also be easy. Customers are not interested in form-filling, but an app that is easy to download and swiftly verify with the bank could do much to promote broader acceptability.

For the future of P2P, customers need assurance that their paymentmethod can be used with anyone. They need to be able to install the P2Parchitecture and know that it is reliable, secure and works instantly. There is clearly room to innovate in this space but the above attributes are key for success.