Zapp: the inside story
On 25 June 2013, VocaLink, the operator of the UK’s national payments infrastructure, unveiled Zapp—a major new mobile payments initiative that will allow consumers to make real-time, 24/7 payments to retailers and businesses directly from their bank accounts.
VocaLink supplies the infrastructure for the Faster Payments real-time payments service alongside the Bacs and direct-debit schemes, as well as the switching framework behind the LINK scheme that connects over 65,000 ATMs. VocaLink’s systems currently process more than 90% of salaries, more than 70% of household bills and almost all state benefits within the UK. It is precisely this reach that makes the Zapp proposition so powerful, to potentially become the new standard for mobile payments in the UK.
Convenience, security and transparency are being billed as the main consumer benefits of Zapp: Consumers will be able to pay merchants without sharing long card numbers, while at the same time seeing their bank account balance before they pay for anything. To make this happen, Zapp will be integrated directly into consumers’ existing mobile banking apps and will provide consistent consumer-to-business payment capabilities across all commerce channels–mobile, online and in-store.
For merchants, Zapp’s main benefit is instant interbank mobile fund transfers that speed up payments, alleviating cashflow problems that small businesses and micro-merchants in particular, may currently experience. And the simplicity of the Zapp payment process may also lead to fewer abandoned shopping carts and higher customer conversion for retailers. Zapp also favours merchants by sidestepping the traditionally high rates of interchange with its direct bank-to-bank connectivity, which translates into a potentially cheaper means of accepting payments. This is similar to what we are currently seeing in the US with the MCX initiative, but the difference is that MCX has been retailer led.
At the POS, the ongoing debate about the optimum last-mile technology seems to have led to other recent mobile payment initiatives often basing their entire value proposition on the supposed benefits of the contactless system. Zapp, on the other hand, will remain open to integration with all relevant POS technologies (NFC, QR code or any other retailer system), and it is VocaLink’s real-time bank-to-bank platform that remains the focus for user adoption and ubiquity.
David Yates, CEO of VocaLink, says, “The UK financial system has a rich history of speeding up the movement of money and Zapp is the next evolution.” Zapp has recently announced a strategic partnership with the UK’s largest merchant acquirer, WorldPay, which moves it one step closer to a consumer launch in early 2014, with participating financial institutions and retailers currently being signed up.
Anthemis played a key role in making Zapp a reality. We were involved in identifying mobile as a significant opportunity for VocaLink, and shepherding the idea through from a high-level concept to a defined product proposition.
Zapp’s ultimate aim is to make payments easier for merchants and consumers, simplifying the retail payments value chain in the process. Zapp brings mobile payments to the mainstream—a first for the UK.