Payment Transactions of the Future: Innovatively Paying with the iPhone

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2018 has it all: in the coming months, financial institutions will surprise us with numerous innovations in payment transactions. We introduce them!

Evil tongues claim that the ATM was the last innovative idea of ​​the banks – and the financial institutions since then digitization Whether that’s true or not, like so much else is left to the eye of the beholder, however, the fact is that the first generation of ATMs introduced in the UK in 1972 was the first computer terminal that was accessible to broadband populations even before home computers The banks have pioneered digitization very early on work by providing online access to the bank account through Deutsche Post’s popular BTX service in the 1980s.

However, it is obvious that banks have underestimated many technological and business developments. The best example is Paypal, which has solved a glaring customer and dealer problem in online trading: easy payment on the Internet with the most common payment methods – for the customer associated with a payment guarantee to the dealer for immediate shipment. How difficult it is to regain lost terrain once again, the big financial institutions with their payment service Paydirekt currently experiencing painful: Even in the third year of existence, Paydirekt has not yet triggered the hoped “hype” with customers and dealers.

After all, you have to concede to the banks that they have finally awakened from their slumber, in order not to leave the field without a fight to the other payment service providers. On the one hand, this is due to the second European Payment Services Directive, which will allow external service providers to access the bank account with customer approval in the future. On the other hand, the banks have since recognized for themselves that the settlement of banking transactions by means of smartphones or tablets is becoming increasingly popular.

Mobile Banking

The banks have recognized this trend, of course, and in recent years consistently expanded the mobile access channels to the bank account. And that the financial institutions did not do their homework thereby not too bad, shows a survey of the opinion research institute Forsa on behalf of Schufa from the year 2017. According to it, although only 8 percent of respondents do their banking mobile using a smartphone or tablet, but at least use Of these, 74 percent of those surveyed use the house bank’s own app. Therefore, it makes sense to equip the mobile devices for the cashless payment of products and services.

The potential for this is huge, but the hurdles are currently almost insurmountable. In addition to banks, many other payment service providers, mobile operators and Internet giants want a piece of the cake. The variety of different providers has hitherto prevented a uniform standard for retailers and consumers from gaining wide acceptance.

Paying for Mobile Phones

Surely you have already experienced the moment in Instead of cash, you simply wanted to transfer money to your bank account – be it in the restaurant, sharing the bill, or collecting money for a birthday present. Paypal has been offering such a feature for quite some time – but only in its own payment “ecosystem” and without direct link to the bank account. The banks therefore followed suit last year and integrated a mobile-to-mobile payment function into the Paydirekt app. The free function is available to the customers of most private banks and gradually to those of the cooperative financial group. At the time of going to press, however, it remained unclear to what extent the savings banks would link their own money transfer function Kwitt to the Paydirekt payment function. This is the only way to ensure cross-bank accessibility.

To send money, simply select the payee’s e-mail address or mobile phone number in the Paydirekt app. If the recipient is already registered with Paydirekt, he will receive the money directly into his bank account. The advantage is that the sensitive account data is not transmitted to the payee. If he has not yet registered with Paydirekt, he will receive an e-mail or SMS notification about the payment, which he can accept in the Paydirekt app. Only then the money is actually transferred from the bank account.

Since the Paydirekt app triggers an ordinary bank transfer, the money is credited to the payee within the normal execution deadlines. This may well be the same day depending on the bank, but not within a few seconds, as one is used to the cash. But here, too, the banks are finally promising a faster solution.

With the introduction of the SEPA credit transfer a few years ago, banks have considerably accelerated payments not only in Germany but also in many European countries. The much-quoted myth that banks allow time for a referral or stay on the money has since definitely been history. Nevertheless, one wonders in the digital age, why an e-mail arrives in seconds, but a transfer in the worst case only on the following day arrives.

The European Central Bank (ECB) and recognized the European banks asked to set up a common payment system for real-time payments – with success: in a surprisingly short time, the European financial institutions have agreed on a single set of rules and christened the child “Instant Payments”. Instant Payments are real-time transfers that can be credited to the payee’s account in just a few seconds, 24 hours a day, seven days a week. The recipient can therefore immediately dispose of the credited amount.

The real-time payment system went into operation throughout Europe in November 2017. However, many German banks will only offer this fast payment procedure to their customers during the current year. It can be assumed that instant payments will fundamentally revolutionize payment traffic and eventually retire the slower SEPA credit transfer.

Account Information and Payment Services

In the second version of the Payment Services Directive, the European legislator has broadened the scope of regulation and established provisions for the so-called “third party payment service providers” that were previously not covered by law and operated in a legal gray area.
The Payment Services Directive informs third party payment service providers in payment and account information services. A payment initiation service, for example, is about having a buyer initiate payment directly on the internet when completing an online purchase. In the case of the business models of some service providers, the customer is forwarded by the online retailer to the website of a third party. The third in turn accesses the customer’s house bank to his bank account. After the payment has been triggered, the third party will send the merchant a message indicating whether the payment has been made. If this message is positive, the online merchant will ship the merchandise immediately.
Account information services allow the user to retrieve information about accounts held at various banks. For this purpose, the third party payment service provider gains access to the data of these accounts. The user therefore does not have to gather his information individually by opening various online banking accounts, but can have the information brought together by a provider and has it available at a glance.

Glass Bank Account

Another revolution will trigger the updated Payment Services Directive, which has come into force since January 13, 2018, in all member states of the European Union. The European legislator wants to promote the competition in the European payment traffic and curtail the monopoly of the banks with exclusive access to the bank account. In the future, the banks will have to grant so-called third-party account access for the collection of account information and the triggering of transfers. The precondition for account access is that the customer explicitly allows the third-party provider to access his bank account and thus leaves them with their access data for online banking.

How critical this legal regulation is, among other things, from the point of view of data protection and IT security considerations can be observed in the passionate discussions between banks and third-party providers in the design of the new interface. Since the third party providers have to legitimize their access to the bank in the future, the good old screen scraping, ie the technical readout of the banks’ websites, will soon be a thing of the past, because the banks can not technically identify a third party via this access route. In addition, the Payment Services Directive only allows access to payment accounts, but not to securities accounts or credit accounts. This in turn displeases the third-party vendors who base their business models largely on the overall view of all the accounts and custody accounts maintained by a bank.

In addition, the third-party vendors are concerned that they have won a Pyrrhic victory by lobbying for the Second Payment Services Directive , After all, the banks are slowly becoming aware of the business policy options available for expanding their own product range with the Payment Services Directive. The more unwanted competition could take the third-party airborne. After all, the banks still enjoy a high degree of trust among their customers, which they will undoubtedly throw into the balance.

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