This week Zapp announced the confirmed support from five UK banks and building societies - HSBC, First Direct, Metro Bank, Santander, Nationwide. I've been following Zapp for a while now and this support from leading UK banks takes it beyond the concept stage and starts to make it a reality.
Zapp will allow consumers to pay in store or online, using their mobile phone and without the need for cash or cards. What makes it unique is that it operates outside the card schemes’ payment rails and it has the backing of major financial institutions who already have customers using their mobile apps. Because Zapp is part of VocaLink, the organisation that manages inter bank payments in the UK, it always looked likely to be a mobile POS scheme that would get some market traction.
However the big question is will significant numbers of consumers start using Zapp? Will they make the jump from using cards to using phones? Whether you pay with Zapp or with a debit card, the funds come out of the same account. Debit card transactions are typically free to the consumer and Zapp transactions will presumably also be free. The banks will likely try to incentivise stores and online merchants to promote Zapp by making it a cheaper form of payment to accept (no card scheme interchange fee to be paid), however no one should ever underestimate consumer inertia.
The key factor to making it a success will be the consumer experience - any friction and a card will feel like a simpler option. One advantage phone based payments have over cards is the ability to provide a consumer with information at the point of purchase; that can be transaction based information, e.g. this month you’ve spent £50 so far in Caffe Nero, or promotional, e.g. there’s a half price croissant in-store today if you buy a coffee. However because Zapp will be integrated into the banks’ own mobile apps, rather than being a separate app, it will be up to individual banks to consolidate and provide that sort of information and do they have the systems to do it? Being part of a banking app will help adoption from customers (like me!) who make extensive use of banking apps but alone it won’t be enough. Zapp claims the payment process is more secure than existing methods because customer credentials are tokenised and not shared with the retailer in the way a card number is. Whether this will resonate with consumers remains to be seen - I suspect ease of use is what will make or break Zapp as far as consumers are concerned.
And of course, what about RBS NatWest, Barclays, Lloyds and TSB? Will they jump on board?