Proxy Payment
Pay by Proxy – Citi.com
Author
William Artingstall,
Emerging Payments and
Business Development Director
Proxies make payments simpler by connecting payment details to mobile phone numbers or email addresses.
Well-designed retail payment systems should incorporate ‘pay by proxy’ to help electronic payment adoption.
Organisations are encouraged to adopt proxy management strategies to enable payment ubiquity.
Making electronic payments might be more inclusive if we did not have to enter
complicated information when making them. Entering credit card or account
information at checkout is tedious and a friction point that can lead to lost sales.
The need to know the banking details of someone you want to send money to is
not only inconvenient, it is a security risk. Enter proxies. Proxies make payments
simpler by doing away with the need to know beneficiary bank details – all you
need is their mobile number or email address. QR codes for paying businesses
are another example of proxies – you don’t need to know bank details, just scan
the code and the payment will reach its destination.
A clear benefit of the Fintech revolution has been a sharpened focus on user
experience. Nobody wants to handle bank account information. Nobody
wants the anxiety of sending a payment to the wrong beneficiary. The proper
development of proxies has the potential to lead to much better payment
experiences, but only if regulators and market participants go about it in the
right way.
Addresses Old and New
When payments were first automated there were no mobile phones nor internet.
Banks began to exchange electronic files between each other bilaterally and
then through centralised Automated Clearing Houses (ACHs). These ACHs were
electronic postal exchanges that routed messages with structured addresses
comprised of codes that represented banks, bank branches and individual
account holders.
Using a comparison, imagine that when you sent an email you needed to enter
the full postal address of the beneficiary. It would seem very complex now
that we have become accustomed to the ubiquitous email address system, but
in some ways the world of payments is like that. We are forced to use the old
address system when better alternatives are available.
Fintechs have sought to do away with legacy banking frictions. Payment to
email address or mobile number has been a feature of several electronic money
payment systems for many years. As new instant payment schemes have started
to replace tradition ACH systems, the latest development is the attempt to make
‘pay by proxy’ a ubiquitous feature of national payment schemes. There is quite
some way to go. Pay by proxy is a feature of national clearing systems in some
places but not others. The QR code has enabled a number of Asian Fintechs to
create vast alternative payments networks.
What is clear is that a concerted effort is needed across regulators, banks,
Fintechs and merchants to make ‘pay by proxy’ the norm, so that payments can
adopt their true form – invisibility.
“ADOPTION OF REAL-TIME PAYMENTS AROUND THE WORLD IS TIGHTLY COUPLED WITH CONVENIENCE, SIMPLICITY, AND
REMOVAL OF FRICTION. WITHOUT A PROXY FEATURE, ALLOWING PAYERS TO SEND PAYMENTS TO OTHERS USING ONLY WHAT
THEY ALREADY KNOW ABOUT THEM, LIKE A CELL PHONE NUMBER, THE GROWTH OF REAL-TIME PAYMENTS IS SERIOUSLY
HINDERED. IN ADDITION, PROXY ENABLES MANY MORE USE-CASES AND MAKES THINGS LIKE ACCOUNT SWITCHING, OR
INTEROPERABILITY BETWEEN BANK ACCOUNTS AND WALLETS MUCH EASIER. ”
Jan Pilbauer, CEO, BankservAfrica
Why Proxies?
They provide significant improvements in convenience, forget complicated
banking details – they make payments to familiar, short addresses easy and
simple. They also provide opportunities for inclusivity. While electronic payments
may be exclusionary when they are complex. ‘Pay by proxy’ makes them simpler
and easier for a wider section of society. Lastly they provide data management
benefits. Bank details can change, which results in businesses facing a challenge
to keep their records up to date. Proxies tend to be more static and keeping
them up to date is typically in the hands of the beneficiary.
Reaching true payment ubiquity
Considering how frequently proxies are used, they are a critical component in
being able to make a payment to a beneficiary in any of their payment methods
of their choice (payment ubiquity). Meeting the beneficiaries preferred payment
method is increasingly being seen as a differentiator, especially for technology
platforms and the digital economy. Payment ubiquity also brings with it the
need to operate at scale and failed payments need to be serviced. As a result,
completion rates are a critical metric for many in the digital economy, but
getting a proxy to a “clear status” that is ready, owner confirmed and able to
receive a payment of that type is a critical part of improving completion rates
and reducing fraud risks. In summary, having numerous proxies available with
some form of validation process that includes the beneficiary will improve both
payment ubiquity as well as payment completion rates before the payment is
even made.
Where are they being used?
At least 12 countries and regions (36 countries if SEPA is included), have
launched, are launching or have some version of a proxy identifier scheme
and that excludes the large number of Fintech’s that effectively use proxies
to enable their solutions. Some payment schemes are taking an ambitious
approach. In India proxy identifiers are built directly into the payment stack to
act as an enablement layer where bank account information is not known. As
the Payments Association in South Africa looks to revolutionize the payments
infrastructure, they plan to include a proxy service where banks will maintain a
centralized, validated set of proxies for each of their account holders to enable
a service called “pay by proxy”. It may offer some significant opportunities in
terms of payment ubiquity and overcoming last mile challenges. Beyond these
examples, there are broadly two different models under which proxy identifier
programs arise.
1. National Scheme:
These programs tend to be centrally managed or controlled databases that
participants contribute to. They enable the linkage of a proxy identifier like an
email address or mobile number to a bank account in order to enable payments.
A few examples are provided below
2. Walled Garden:
The second cluster are more closed loop in nature but are the backbone
for identifying and executing a payment on these platforms. They include
Safaricom’s M-Pesa, PayPal, Revolut and Mercado Pago.
Challenges with Proxies
Most organizations have already chosen the identifier that matters to them or
that supports their business model for executing payments, and for the most
part that is either a bank account or a card number. That is the identifier they
collect, that they store and that they spend time validating to ensure they can
execute transactions to and from their consumers. But, to reach true payment
ubiquity, organizations need to be able to make a payment through whatever
their beneficiary prefers. For this, they need to add to their existing identifiers
and take steps to manage the collection, validation and controls associated with
these other proxies within their treasury systems and processes.
“ONE ACRE FUND STARTED BY IDENTIFYING FARMERS USING THEIR PHONE NUMBER, BUT WE QUICKLY FOUND PEOPLE
SHARE PHONES AND NUMBERS. WE CREATED AN INTERNAL ACCOUNT NUMBER AS A UNIQUE WAY OF IDENTIFYING
FARMERS AND LINKING THEIR PHONE NUMBER TO PAY THEM. ”
Sean Moran, Systems Operations Director, One Acre Fund
Adoption of proxies is often challenged by the fact that many organisations
today simply do not validate or check this information for accuracy. This is
compounded by owners of proxies separating their personal and work lives
and may use different email addresses or phone numbers for work and personal
life. That means you can’t be certain that the proxy you currently hold is the
same one they use to get paid with. Another is sharing of proxies where more
than one person in a household may use the same phone. This challenge has
been seen in emerging markets by One Acre fund who used internal account
numbers linked to the proxies and made the proxy owner responsible for
capturing and updating the proxy information.
Adoption is not growing evenly in every location either. PayM in the United
Kingdom is a mobile payment system provided by banks where users are
identified by their mobile number rather than bank accounts. So why haven’t we
seen the adoption of PayM that we’ve seen in the U. S. or some of the examples
in Asia Pacific? A few likely reasons might be that in locations like the U. S.
there are still over 4, 500 registered banks, so there’s a benefit in only needing
to know one identifying piece of information, while the UK has a far more
consolidated banking industry. Another is that the UK has one of the highest
card penetration rates in the world so Fintech’s can easily provide services
attached to a card to drive the frictionless services that consumers want.
WHILE THE HUNGARIAN INSTANT PAYMENTS SCHEME ENABLES ALL MARKET PARTICIPANTS TO UTILIZE PROXY ID,
ADOPTION OF THE TOKEN HAS NOT YET REACHED CRITICAL MASS. ACCELERATION OF ADOPTION IS EXPECTED TOGETHER
WITH THE GRADUAL CHANGE OF CONSUMER BEHAVIOUR AS WELL AS ACTIONS UNDERTAKEN BY THE ECOMMERCE
COMPANIES AND FINTECH’S IN THEIR SEARCH FOR A BEST IN CLASS CLIENT EXPERIENCE.
Sebastian Kucharek, Treasury and Trade Solutions Head, CE5
The sign up challenge. Adoption holds a critical first step through the sign up
process. Connecting the email or mobile number to an account number securely
is essential and a confusing sign-up process could make this difficult to do. Users
are likely to be sensitive to having to input their account number numerous
times, which means the sign-up process has to be simple and secure to help
build confidence for the user.
Another is having the incorrect proxy for the intended use or not having
collected the data at all. This challenge exists in the adoption of a host of
new collection and alternative payment methods that are arising, as well
as reimagined existing rails such as instant direct debits. If today you are a
subscription service provider looking to take advantage of a cheaper new
instant direct debits method but you have nothing but a database filled with
card account numbers then again you have to go through a full migration
process in order to take advantage of a new collection method and that can
be a barrier, even when the reward of a change in methods is significant.
In Conclusion: Managing proxies
While we continue to see the development of various different models for
utilising proxies, we’d suggest a couple of practical proxy management
strategies that may be deployed today to improve the collection of this
information and help prepare organisations in getting closer to payment
ubiquity tomorrow.
1. Collect the data at sign up
This may be a more obvious one, but when a new user signs up to a platform or service ensure you
collect all their preferred proxy information upfront. It will help to improve the ability to make and accept
more payment types as needed in the future.
2. Create processes and validation steps now
If payment ubiquity is in your future roadmap and vision, then whatever you do, start now. The sooner
you collect the information you need and create the validation steps you need the sooner you can take
advantage of the benefits multiple and alternative payment methods offer. There are learnings from
users of proxies today, where leveraging internal accounts and making the beneficiary responsible for
the data allows you to operate at scale.
3. Offer a benefit to sharing more proxies or migrating
If you’re going to receive a benefit in the long run an upfront waiver or reduction in fees might be all the
motivation your beneficiaries or customers need to switch and provide you with a new proxy that enables
a more efficient payment or collection methods.
4. Manage the proxy at point of payment failure
This may make the most sense where risk of substitution is lower, and delivery of product/ service is
digital, so access can be removed, if a collection fails or stops. But, if payment data needs to be updated,
getting the proxy holder to update the relevant details is the only way to operate at scale.
“GETTING THE CUSTOMER TO MANAGE THEIR PAYMENT DATA IS THE ONLY WAY TO OPERATE AT SCALE, BUT IT HAS TO BE SEAMLESS
AND EASY, OTHERWISE THE RISK OF LOSING THE CUSTOMER ELEVATES. ”
Dean Jordaan, Director – eCommerce and Payments
5. Schemes that do pre-validation
Be aware of schemes that do the pre-validation step ahead of payment execution. Some scheme based
proxy-ID’s, like PayNow in Singapore, are pre-validated and fetch data points like account nickname or
account holder name, before the payment is executed, which helps to improve completion rates and
reduce failed payments.
As organisations look to achieve payment ubiquity, these four areas provide
a starting point in designing for multiple proxy identifiers with ubiquity
in mind, especially where that is the end goal. As more payment methods
emerge, enabling the method of your customer or beneficiary’s choice will
be a differentiator.
Proxy Pay – CalBank
Subscriber Guide To Register Proxy ID as a Corporate Client Dial *771#>> Select Option 7 (Other Services)>> Select Option 4 (Proxy Services)>> Select Option 1 (Register Proxy)>>Select Source Account>> Input text to use as proxy ID To Pay by Proxy ID Dial *771#>> Select Option 2 (Transfers)>> Select Option 2 (Transfer to Other bank)>> Perform Transfer using Proxy ID>> Enter proxy ID of recipient To Update Proxy ID Dial *771#>> Select Option 7 (Other Services)>> 2 (Update Proxy)>> Select proxy ID to update To Delete Proxy ID Dial *771#>> Select Option 7 (Other Services)>> Select Option 3 (Delete Proxy)>> Select proxy ID to delete To Display Proxy ID Dial *771#>>Select Option 7 (Other Services)>> Select Option 4 (Display Proxy Details)>> Select proxy ID to view details
Proxy Pay Service – GhIPSS
Proxy Pay is service built on the rails of the GhIPSS Instant funds transfer platform. The service allows a customer of a member financial institution to register an Alias/unique identifier which is then uniquely mapped to his or her bank account to receive payment via the alias.
Proxy Pay is aimed at making payments processes easier by eliminating the need for customers to exchange information such as bank account details and, instead rely on proxy identifiers such as mobile phone numbers or company names or abbreviations.
The Proxy Identifier will be linked to a single account number in one financial institution only. (One-to-one mapping). This is a security measure to ensure proxy identifiers are not compromised. The service is aligned with the 24/7 continuous operation model and service availability of the GhIPSS Instant Pay platform. Banks & Payment Service Providers are assured of up to speed system uptime.
Frequently Asked Questions about proxy payment
What is a proxy payment?
Proxy payment is a payment made by entering the recipient’s phone number. Proxy payment can be used to pay individuals or legal persons. … Proxy Payment can be used to pay individuals or legal persons.
What is a proxy on a bank account?
Proxy Pay allows a business client of a financial institution to register a mobile number or an alias that is uniquely mapped to their bank accounts. Payments from other parties to that account will require provision of the alias or phone number only.
What is proxy transfer?
Proxy Pay is service built on the rails of the GhIPSS Instant funds transfer platform. The service allows a customer of a member financial institution to register an Alias/unique identifier which is then uniquely mapped to his or her bank account to receive payment via the alias.
