Why cash could soon be extinct

Published:
23 January 2013
Topic:
News,Mobile Phones,Money,Current Accounts

Remember when mobile phones were for having conversations on? Soon, alongside all their other functions, they'll be playing a big part in the way we think about money.

Sending payments directly to a mobile phone number was a bit of a niche thing when it was introduced by some banks last year, but it could be taking off in a big way following a recent announcement by the Payments Council.

By spring 2014, all mobile phone users will be able to send and receive money by sharing their phone number alone. The Payments Council has been building and testing a new database to make it work.

Here's a closer look at sending cash to a mobile phone number, what this news actually means to you and me, and whether or not it's likely to take off on a large scale.

How will it work?

Ever been out for a meal with a large group and faced the hassle of splitting the cost between 10 or 15 friends? What if you could get all your friends to text you the money there and then so that you could pay the bill without clobbering your bank balance? Well, that facility will soon be widely available.

Actually, it's already possible, but it's only available to customers of banks which allow it. Barclays, for example, launched its Pingit app last year, allowing its mobile banking customers to send money to anyone with a UK mobile phone number and current account.

However, the new scheme, backed by eight major financial institutions covering 90% of UK current accounts, will be available to everyone with a mobile phone number and bank account, which will be linked in the database.

The Payments Council explains how the database will work in this video.

Put simply, you'll download your bank's app to your mobile, log in using a password, select a phone number from your list of contacts and enter how much money you want to send.

If you're not interested in sending or receiving payments to or from your mobile, your bank will give you the opportunity to opt out of the database.

The Payments council has Barclays, Cumberland Building Society, Danske Bank, HSBC, Lloyds Banking Group, Metro Bank, Royal Bank of Scotland and Santander on board already and is working to encourage other financial institutions not already signed-up to join.

Will it be safe and secure?

This is the big question that comes to mind for most of us. But mobile payment and online banking apps have already proven themselves safe and secure over the past year or so.

If anything, the new system could be safer as it removes the need to input store account numbers and sort codes.

Each bank's app will come with some kind of password or other security measure meaning only the phone's owner would be able to access the app and send money. Banks will also have the ability to disable accounts suspected of fraud.

The Payments Council has also suggested imposing limits on how much money you'll be able to send to a mobile number, but hasn't yet announced what it will be. This means that even if somebody somehow got hold of your password or pin and tried to send money to their own mobile number, the damage would be limited.

Powering the scheme will be Faster Payments, a service launched in 2008 which processes more than 85% of phone and internet payments.

Extra security

If and when you start using your own bank's app, it may be worthwhile downloading and/or installing security software to your smartphone to make sure there aren't any other malicious apps on your phone which could compromise your bank's app's security.

iOS devices (Apple's iPhones) tend to be secure as the software they run on is 'closed source', and apps have to pass Apple's strict vetting process before they make it into the App Store.

Android, on the other hand, is an open-source platform which means it can be more susceptible to malicious software. The screening process for the Google Play store also seems less stringent than Apple's, so it's well worth downloading a security app. AVG has a free Anti-Virus app that should do the trick.

With Android phones it's better to stick to apps from developers you recognise, or at least check the permissions the app is requesting to make sure it doesn't want to do something underhanded with your phone. There's a great summary of this here.

Finally, it's also a good idea to use the 'Find my iPhone' function or download an app like Where's My Droid for Android devices. Using these apps along with the GPS technology in your phone might enable you to locate your handset if it goes astray or is stolen.

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About This Author

Mark Hooson

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Senior Writer

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