A new mobile payment service will launch on Tuesday 29 April, allowing bank customers to send and receive payments quickly using just their mobile phone number.
This will help UK consumers who mount up an average of £255.81 each year in IOUs and other informal loans to each other, according to new research commissioned by the Payments Council.
A total of £12.6 billion is totted up each year by consumers for day-to-day expenses, such as lunch with friends or paying household bills.
Unsurprisingly, consumers are most likely to ask their family for a small loan. More than half of IOUs are between family members, with parents accounting for £3.7 billion per year or 30% of the total.
The Paym (pronounced 'Pay Em') service will be integrated into existing mobile banking or payment apps so there’s no need to register for Paym separately.
It will allow customers who have registered their phone number to their current account to transfer money between each other just by tapping in the payee’s phone number from 29 April.
They will also be able to check the name of the recipient before confirming the payment, so they can be sure they are sending it to the right person.
The money will arrive in the recipient's account almost as soon as the transfer is made, using existing Faster Payment technology.
From 2 April, registration is being rolled out for customers of Bank of Scotland, Barclays, Cumberland Building Society, Halifax, HSBC, Santander and TSB. Customers of Danske Bank can register from 25 April.
Later in the year, Clydesdale Bank, First Direct, Isle of Man Bank, NatWest, NatWest, The Royal Bank of Scotland and Yorkshire Bank all plan to join the scheme – at which point Paym will be available on more than 90% of UK current accounts.
Nationwide Building Society plans to join the scheme in early 2015 and Metro Bank and Ulster Bank are finalising plans to join the scheme.
Safe and secure payments
Adrian Kamellard, chief executive of the Payments Council, said: "Our IOU research suggests that every adult in the UK is lending just under £5 per week to someone they know. Small sums like this soon add up, so it’s great that Paym will give people a new option of quickly and securely paying someone back - whether it’s for lunch, a train ticket or just a cup of tea.”
Tony Prestedge, Nationwide's chief operating officer, added: "Paym allows our customers to make safe and secure payments directly to other people's bank accounts, just by using their mobile phone number. The service utilises the Faster Payment technology already in place, meaning the money should arrive in the recipient's account almost as soon as the request is sent."
While Paym is the first time that the majority of banks will take part in a mobile phone payment service, this technology is not new. A service called Zapp, from payments company VocaLink, already provides the same service for people who want to pay businesses or retailers.
Meanwhile, PayPal has provided person-to-person mobile payments for the past eight years in the UK via text messages. You just need a phone number or email address for the person you’re sending the money to.