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From next year, it will be possible to send a payment to someone else's account only with the knowledge of the owner's phone number, the Czech banking association has announced.
The Czech Banking Association (CBA), in cooperation with the Czech National Bank, is working on a new mobile proxy-based project, which it calls contact payments, that will simplify the sending of money between people.
Instead of the need to enter a bank account number, users can simply use the mobile phone number from their contacts list to make a payment.
Testing of the new system will start this summer, it has been confirmed.
The Czech National Bank (CNB) will maintain the database of registered mobile numbers that are paired to account numbers. The central bank will also manage requests received from the payer's bank, confirming if a telephone number is registered to a bank account and communicating the corresponding beneficiary's account number to the inquiring bank.
The use of stand-ins for a bank account are widely used around the world, adding both convenience and a layer of security for consumers.
For example, one of the earliest and most successful examples of a mobile payments services that allows a stand-in for a bank account number is the Swedish-based Swish, which has more than 8m users, equivalent to more than 90 percent of the adult population.
Another example is the US-based Zelle, part of an interbank-owned Early Warning Network. Launched in 2017, Zelle has grown to be one of the largest P2P processors in the US. It processed 1.8bn payments, worth $490bn, in 2021.
Faced with increasing competition from non-bank providers, services such as this can be important mechanisms for helping ensure banks stay front and centre of the consumer payment experience as well as growing usage of digital payments.
“We anticipate that we will be able to launch the service from the new year if testing does not reveal unexpected complications and the individual banks currently participating in the project are ready,” said Oldřich Dědek, a member of the CNB Bank Board who oversees the risk management and business support.
Ensuring widespread availability across the country’s banks at launch can be a key factor helping to build momentum and ensuring a successful launch.
In the UK, for example, a similar service called Paym, which launched in 2014, has largely failed to replicate the success of services such as Swish. A disjointed launch, with many key banks launching at different times and lack of cooperation in how to market the service has resulted in the service failing to gain traction among consumers.
In particular, with too few customers signed up and actively using the service, it meant that when a user tried to make a payment using a mobile phone number, the transaction bounced back because the intended beneficiary was not registered. Eventually, if this scenario happens too many times, users stop trying.
Future developments
Although the industry and regulator are starting with mobile numbers, in the future, the system could be extended to include other possible contact stand-ins for an account number, such as email addresses, he continued.
The scheme, if successful, could be a way of growing instant payments in the Central European country, as well as reducing cash.
For example, P2P payments is considered an ideal use case for the development of mobile payments through enabling easy, instant sharing of bills and expenses, such as when you are in a bar or restaurant. As well as providing a convenient alternative to cash, it can also help to establish new payment habits and expectations around particular channels.
Instant payments, which first launched in the Czech Republic in 2018, are currently offered by 12 banks in the country. According to the CBA, instant payments are becoming increasingly popular among users.
Commenting on the new service, Tomáš Hládek, the CBA's payment system expert, said "by copying or rewriting the account number, clients often make mistakes that banks have to deal with.
“At best, an incorrectly entered account number does not exist, which bank systems can detect. Unfortunately, it happens that by entering the wrong bank code, the money arrives in a completely foreign account.”
With payments to contact, “in addition to greater convenience for clients, we promise fewer such mistakes and further speed up the payment system.”
