With the upcoming launch of a new system letting you transfer money to family and friends via a mobile phone, Vicky Shaw looks at how the value of the nation’s small, informal IOUs quickly adds up

SENDING money to family and friends is about to become a whole lot easier – forget cheques or lengthy online log-ins, all you need is a mobile phone and a current account.

Paym (pronounced pay em), preparing to launch later this month, eventually aims to link up every current account in the country with a phone number, letting you send cash to someone else simply by using mobile phone numbers, not a person’s bank account details.

Similar mobile payment services already exist, but the Payments Council, which is overseeing the initiative, said this is the first industry-wide collaboration in the UK which could potentially link up every bank account with a mobile number – by the end of the year, about 40 million people could be using the service.

But why do we need it? Do we really make small payments and loans to friends and family that often?

Apparently, yes.

Several centuries after William Shakespeare warned us in Hamlet to “Neither a borrower nor a lender be”, research by the Payments Council estimates that across the UK, we advance a total of £12.6bn in informal IOUs every year to help loved ones and acquaintances out financially, and that every adult lends about £255.81 in informal IOUs each year – that’s £4.90 each, every week.

People typically approach their family for “practical”

loans, and more than half (56 per cent) of loans handed out are estimated to be between family members, with a large chunk of this cash coming from the “bank of mum and dad” for such as to help out with bills, household costs and debt Leisure related IOUs, however, are more common between groups of friends, including informal spending on drinks, meals and transport fares. This treats and favours culture was particularly common among younger people, with nearly two-thirds (62 per cent) of 18 to 24-year-olds saying they have loaned money to close friends for a drink in a pub or a bar.

Although friends seem very willing to lend to each other, larger sums of money tend to be handed out between couples.

Some 44 per cent of those who had loaned their spouse money said they had handed them more than £200 in the previous six months.

This is all very well, and very generous, but the trouble comes over how and when these informal, and sometimes seemingly insignificant, loans are paid back – if they are paid back at all.

So, how will you use this new service?

Banks and building societies are joining up to the scheme in waves. You will need to actively register their mobile number alongside a nominated current account in order to receive money into that account through Paym.

You do not have to register in order to send money through the service, although your bank or building society does need to be taking part in the scheme.

The service will allow you to transfer cash payments on your mobile by using the recipient’s phone number rather than needing to know their bank account number and sort code.

It will be integrated into your existing mobile banking or payment app. To make a payment, you can either select the contact you wish to pay from your phone or key in their mobile number. The app will ask you to confirm the name of the recipient and the amount before the money is sent.

The service will go live on April 29, and you can find out more about registering by visiting paym.co.uk or asking your bank or building society.

Customers of Bank of Scotland, Barclays, Cumberland Building Society, Halifax, HSBC, Lloyds Bank, Santander and TSB can start to register their mobile numbers now, while those using Danske Bank can register from April 25.

By the end of the year,40 million people will be able to access Paym, when Clydesdale Bank, first direct, Isle of Man Bank, NatWest, Royal Bank of Scotland and Yorkshire Bank also come on board. Nationwide Building Society has confirmed its intention to join early next year, while Metro Bank and Ulster Bank are also finalising their launch plans.