The power of proxy-enabled paymentsApril 1, 2020 | By Hayden Harrison
At Mastercard, we believe that the more people and businesses we can include in the digital economy, the better it will work for all. Hence our recently expanded commitment to include one billion people, 50 million small businesses and 25 million women entrepreneurs by 2025.
But getting people to engage with new payment solutions is about more than just providing access to them — it’s about ensuring digital payment solutions are more convenient, safer, and more intuitive to use than the alternatives.
One way we’re making digital payments more intuitive is using the power of proxy services — allowing people and organisations to send (and receive) payments using an alternative to bank details, such as a mobile number or citizen ID.
As evidenced by the widespread adoption of our proxy-enabled payment solution in Thailand, this technology can help overcome people’s resistance to try digital payments, and make them more accessible for excluded populations. Proxies also enable further payment innovation to fuel continued growth of the digital economy.
Overcoming barriers to adoption
Proxy or alias look up services address three linked challenges in driving adoption of digital payments: overcoming established — and often cherished — mechanisms and behaviours such as the use of cash; combatting the risk of human error when entering a recipient’s bank account information; and people’s resistance to sharing their sensitive account information with a counterparty.
People are largely accustomed to sharing their mobile number or citizen ID, either to prove their identity, access information or benefit from a service, so using these identifiers as proxies for bank accounts is an extension of established behaviours rather than the adoption of new ones. At the same time, the prevalence of smartphones among both the banked and un-banked population makes a proxy look-up service a logical as well as an easy solution for many.
From a shared restaurant bill, or a gift from grandma, to receiving government benefits or paying for goods or services, this method of payment provides people with a quick, convenient, and therefore viable alternative to cash or cheque. When financial institutions come together to implement a proxy-enabled payment solution at a network-level, it provides more universal access than a closed-loop solution.
Driving the transformation to a digital economy
National payment schemes using a proxy look-up service operate in a number of markets around the world, including the UK, Sweden and Denmark, but one of the most transformational is PromptPay in Thailand, which Vocalink, a Mastercard company helped to launch in 2017. As of June 2019, PromptPay registrations total 49 million, including over 30 million with a Citizen ID and 16 million with a mobile phone number. Uptake has grown steadily, while usage has accelerated from a mere 57,000 transactions per month at launch to now average 4.5 million transactions a day. The Bank of Thailand reports that it has significantly contributed to the 83 percent volume growth in digital payment transactions since 2016.
PromptPay comprises a real-time payment infrastructure and proxy look-up service, our Multi Proxy Service. Multi Proxy Service works by securely storing and mapping a person or business’ alternative unique identifier(s) to their bank account details. When a sender addresses a payment using a recipient’s alternative identifier, our service provides the financial institution with the recipient’s bank account details to complete the payment transaction. Typically, the recipient’s sensitive data is tokenised, meaning it’s been substituted with a non-sensitive equivalent that has no exploitable meaning or value. It does all this in less than a second. Our service also provides confirmation of the recipient’s name to the sender so they can be assured they’re paying the right person, helping to combat authorised push payment fraud.
The success of PromptPay is attributable not only to the convenience and safety afforded by proxy-enabled payments, but to three additional factors: mandated implementation of PromptPay by all financial institutions, enabling people and businesses to send and receive money between any Thai bank account; consistent and brand-neutral marketing of PromptPay across these financial institutions to build equity and trust in the name, and the Thai government’s decision to use PromptPay as its one of its main channels for instant benefit disbursements and tax rebates.
Proxy-enabled payment solutions are particularly well-suited to mass disbursements. Government agencies want certainty that funds are reaching validated recipients – in particular avoiding so-called ‘ghost’ accounts where deceased citizens continue to receive payments – while recipients want fast and easy access to their money. Both parties seek to remove the costly and sometimes criminal involvement of third-party intermediaries. Linking payments to a unique personal identifier addresses all of these issues, ensuring payments reach the intended recipients immediately, and without the risks inherent in cash transactions.
In Thailand, it's estimated that 70 percent of personal tax rebates are paid using a proxy. The use of PromptPay for government payments has driven registration, built engagement with the platform and helped to establish new behaviours that have carried over to other types of transactions.
Fuelling further payment innovation
PromptPay has been a powerful tool to address financial inclusion in Thailand. By drawing more people – especially those in receipt of benefits – onto a digital platform and normalising digital payment, it has fostered exposure to, and adoption of other digitally offered financial services and supported further innovation in these channels. For underbanked populations – women, elderly, disabled and those in remote locations without easy access to a physical banking infrastructure – and for those seeking to transact with them, proxy-enabled payments have the power to erode costly dependency on cash and ultimately to displace it.
Adjacent innovations in Thailand, underpinned by our Multi Proxy Service, allow retailers in off-grid communities to receive payments using QR code, with three million QR payment points already rolled out in markets with street vendors and for motorcycle taxis, enabling digital payments at low cost. There are other solutions that allow people to request payment using an alternative unique sender identifier. Use cases are growing all the time.
As PromptPay has shown, proxy-enabled payment solutions are so much more than a cool function for digitally savvy millennials: through industry collaboration and a coherent strategy for implementation, proxy or alias-enabled payments can help make the digital economy work for everyone, everywhere.