Mobile money: Using your phone to transfer cash

                                          
     Mobile-to-mobile transfers could become the main payment method for people and small businesses

By the start of next year, every bank customer in the country may have the ability to transfer cash between bank accounts, using an app on their mobile phone.

Barclays became the first bank to launch such an app for its own customers last week.

Now the wider banking industry - in the form of the Payments Council - is in the throes of setting up a database which can link all bank accounts to their owners' mobile phone numbers.

This in turn will let every bank or building society plug their own systems into the database while offering their own apps to their customers.

"There's clearly a great demand for mobile payments, and our work will ensure that banks of all shapes and sizes can offer their own competitive service to their customers," said Adrian Kamellard, chief executive of the Payments Council.

"Whether you want to pay a friend or your window cleaner, we are laying the foundation to enable mobile payments to become a mainstream option."

How it will work

Once this grand scheme is up and running it should all be fairly simple.

Anyone wishing to move money from their account to someone else's will have to have registered with their bank and to have activated its app on a mobile phone.

The app will let them select the person they want to pay; knowing their mobile phone number is key here.

The recipient must also be registered with their own bank so they can receive any such payments, even if they do not want to use an app to transfer any money on their own behalf.

A payment using the app will probably go like this:

• choose the app on your smartphone screen
• enter a Pin number or passcode to log on to the app
• chose the recipient and select their mobile phone number
• enter the amount to be paid and any reference details eg "lunch" or "loan"
• enter a Pin number or passcode to confirm the transfer
• the payment is then made, details will appear on the recipient's app, and your account will show your reduced balance.

Under the new system, the money will be transferred instantly from your bank account to the recipient's bank account, using the banking industry's "faster payments" system.

No more hanging around for three days for a cheque to clear.

So if you are at home one evening and receive a call from your son or daughter at university, begging you for an extra £100 to tide them over, you could move the money from your account to theirs within a minute or so.

"The point is not only that it is very secure but that it is fast as well," Mr Kamellard says.

"It offers customers a different way of behaving."