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Experts lament the demise of Paym as UK banks confirm the shutting down of the mobile payments platform first launched in 2014.
Paym services will cease in March 2023, Pay.UK has announced.
Paym was set up by 15 of the UK’s largest financial institutions including Lloyds, NatWest and HSBC.
The peer-to-peer (P2P) mobile payment service operates in a similar way to platforms such as Sweden’s Swish and Australia’s PayID, allowing users to instantly send funds to one another using just a mobile phone number.
Although Swish is a standout example of how a service can be built, marketed and developed, the same cannot be said for Paym. It has not been helped by the fast pace of change in the payments industry, as well as the fact it was hidden in bank apps.
“Not surprised in the slightest,” said Mark O’Keefe, director at Optima Consultancy.
For O’Keefe, Paym is “a good example of what happens when there is different branding, launch dates, participation and agendas”.
“A peer-to-peer system needs to be inclusive, ideally auto-enrol people and have consistent branding and promotion,” he said. “It was the complete opposite to this and doomed to fail.”
A former Vocalink employee, the company that built the mobile proxy database used in the service, told VIXIO: “It had problems from the start. There was no dedicated app and centralised marketing push, unlike Swish in Sweden, and most banks simply hid it within their own-branded payment and banking apps.”
Barclays, for example, did not want to undermine its then Pingit service so refused to offer the service under the Paym brand.
“It's a big shame because if you could find someone who was registered to Paym — the service worked wonderfully and even had a confirmation of payee to ensure you did not make a payment in error,” the former Vocalink employee said.
This lack of focus on developing Paym was a key issue.
For banks, it did not generate direct revenues and was just a cost, and there was no strategy or business model to grow and develop the service.
There were some attempts early on to expand. For example, HSBC launched a business focused version of Paym allowing companies to register up to 50 different phone numbers, but with limited success.
A limited user base dramatically reduced the value of Paym as a service because if money cannot be sent the to the person it is meant to go to, it is practically redundant.
“Network effects play an important part in payment services,” said the former Vocalink employee, “if there is user confusion over what the service is and who you can send money to, eventually people simply don’t bother.”
“Paym has been poorly marketed by the banks and it's therefore not surprising that its being pulled,” said another payments source.
For example, the most successful examples around the world have had a coordinated and centralised effort to promote the service. One such example is Norway’s Vipps.
The P2P service claims to have been the fastest growing brand ever in the country’s history, reaching 95 percent brand recognition in just three years after its launch in 2015.
“I think it's the banks who are at fault for the poor implementation, not Paym,” the source continued. “The banks are having their lunch eaten by Google Pay and Apple Pay and have missed a major opportunity here.”
They did, however, suggest that both the industry and regulator are missing a trick here.
“The Paym database should and could be used to validate a payee in Faster Payments thereby reducing fraud in payments,” the source said. “It would associate a phone number with your account. So if you are making a payment to a new payee for the first time an automated call could be made by a payer bank to validate the payee. It's that simple, and I think this is a major missed opportunity to close a loophole and shut down fraud in the UK.”
Paym currently has around 5.8m registered users, of whom around 500,000 use it regularly. However, registrations had declined, first by 10 percent in 2021, then a further 14 percent in 2022, leading to the decision to bring the service to a close.
“Paym has been an important service for nearly nine years. But the emergence of new products and services, driven by the UK’s world-leading payments sector, means it is time to make the move to faster, and better systems for consumers and businesses,” commented Dougie Belmore, chief payments officer at Pay.UK.
Belmore advised that any Paym customers with concerns about the change should speak to their bank or building society.
Pay.UK has said that as the service comes to a close, the needs of Paym users will be “front of mind”.
To minimise disruption, the retail payments authority said that banks and building societies will engage with their customers ahead of the closure date to make them aware of the changes and what it means for them.
