Mobile Payments And The Future Of Banking

D/SRUPTION interviews Marieke Flament of crypto finance company, Circle

Mobile payments are on the rise. By 2019, we can expect global mobile payment revenue to surpass $1tr – more than doubling what the sector was worth in 2015. As our world becomes increasingly cashless, connected, and smartphone reliant, legacy banks are scrambling to adapt to this next chapter in financial history.

In a shake up of the traditional banking space, however, online banks and FinTech startups have muscled their way onto the scene. Their provision of fast, seamless payments caters to growing customer demand for convenience and instant money transfers. D/SRUPTION spoke to Marieke Flament, Managing Director Europe of crypto finance company Circle, for her thoughts on why mobile payments are such a hot topic, as well as the wider mobile money space.

Money makes the world go round

We’ve all been there. You’re out for a drink with a friend, she settles the bill, but you don’t have any change to pay her back. You could get her bank details and make an online transfer, but that’s a lot of effort for a small amount of money. It’s probably easier to just let her pay – you’ll get the next one, right?

Maybe, but there are easier ways to transfer money between friends. Circle’s peer to peer payment system – Circle Pay – is specifically designed for such use cases. As Flament explains, it takes the hassle out of exchanging small amounts.

“Imagine you and I go for a coffee and I pay, so you want to reimburse me £2.50,” she says. “Since I’m already signed up to Circle Pay I can send you a request using your email address or your phone number. You’ll receive an email or an SMS message prompting you to either download the Circle Pay app or go on our webpage and register. From there you can create an account or even log in with your Facebook details if that’s more convenient for you.”

“You’ll then link your credit or debit card to the account, accept the request I sent you for £2.50, and the money will automatically be sent to my Circle Pay account. The whole process is seamless – it takes less than one or two minutes. Then the next time we go out, I’ll be able to see on Circle Pay that you’re nearby and I can automatically send you money.”

Crucially, these money transfers happen instantly. Users can then allow the funds to sit in their Circle Pay account for future instant transfers via the app, or they can cash out the balance into their bank account.

“Because we use faster payments,” says Flament, “if you decided to cash out, in most cases you would receive the money from your Circle Pay account into your bank account in less than twenty minutes.”

Modern lifestyles, modern payment systems

Unsurprisingly, Circle Pay is very much designed with a younger demographic in mind. Younger generations are – on the whole – more receptive to mobile solutions. This is particularly noticeable where the sending and receiving of money is concerned, with older people still more likely to put their trust in physical cash. Interestingly, however, it is the lifestyles of young people as well as their attitudes which play a crucial factor in the usefulness of peer to peer money transfer systems.

“What we found is that particularly at universities, it’s extremely practical to use Circle Pay,” says Flament. “When you live together in a household, you need to be able to make small payments constantly, whether it’s 50p, or it’s £1, £2, or £5. With Circle Pay you can do this back and forth without having to ask any questions. Therefore the best use cases are folks who live or are constantly around groups making small payments.”

With more young people now attending university, and numbers of individuals in rented house shares on the rise, there are more of these kinds of groups than ever. This makes money transfer services like Circle Pay the right product at the right time. Such systems are ideal for those small, frequent kinds of payments where asking for reimbursement seems like too much hassle, but you still really do want the money. After all, the cost of a few bottles of washing up liquid really does add up…

The tokenisation of everything

As the world moves further down the path of digitalisation, more and more businesses are adapting their offerings for the digital age. For Flament and her team at Circle, digitalisation is more than just a passing concern, but rather a defining principle of their business.

“We believe in tokenisation of everything,” she says. “What that means is we believe that every asset, every contract, everything that can be will be digitalised over time.”

Circle’s emphasis on the tokenisation of everything, and the reliance on blockchain technology that this ultimately implies, makes sense in the context of the early stages of the business.

“When we started Circle Pay it was actually just a bitcoin wallet,” Flament says. “What you could do with Circle Pay was send and receive bitcoin to anyone, anywhere, just by knowing their email address or their phone number. Over time we added fiat currencies because we realised that this was what most people were using to make payments. At the moment, bitcoin fluctuates way too much.”

The origins of Circle Pay in the cryptocurrency space ensured that the company has the underlying capabilities to link fiat currencies with crypto. Importantly, this now enables Circle Pay users to send cross currency payments free of charge.

“One of my favourite use cases for Circle Pay is actually using it for cross currency transfers,” says Flament. “My Circle Pay wallet is in pounds, but I have the option to send euros, pounds, or dollars. This is done at the exact FX rate that you would find on Google. There is no markup, and there are no fees.”

Mobile money talk

Today, there’s no doubt that for many of us – our mobiles have become our banks. So what next for fintech and this dynamic mobile money space? Flament believes that banks as we know them will fundamentally change.

“The way we see that is that the bank of the future is probably not the bank that we know today, digitalised,” she says. “It’s much more than that. It’s actually rethinking how assets and money and value can be exchanged and tokenised and therefore put over the blockchain.”

“Sending and receiving money will be part of this, but then you could also invest in art, you could actually fund a business, you could send a token of appreciation for something that you liked to someone else. The blockchain is a new way to handle your assets, to send and receive value.”

This model of the bank as a platform will require a serious shift away from legacy financial service structures and behaviours. This year’s Open Banking reforms were a small step in this direction, but there’s still much more work to be done. For one thing, the field of blockchain and cryptocurrency remains mostly unregulated. This is preventing the technology from entering the mainstream, as it makes it difficult for traditional institutions to work with blockchain companies. It also translates into a lack of protection for consumers – keeping blockchain and cryptocurrency, for now, the preserve of adventurous early adopters.

With things changing so quickly, it’s an exciting time to be in FinTech. Companies such as Circle are providing textbook examples of disruption in action, as they catalyse digital innovation in the centuries old financial system. This being said, Flament is sympathetic to the difficulties faced by legacy banks – and businesses in general – who have to keep up with the pace of change.

“It’s difficult. It’s not just the financial industry,” she says. “It’s just difficult when you’ve created very solid, successful businesses and there is technology that is so disruptive that comes so quickly. That’s the challenge.”

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