Wells, B of A and JPM Look to Shake Up P-to-P Payments

A new product from the clearXchange joint venture of Wells Fargo, Bank of America and JPMorgan Chase may rattle the highly competitive person-to-person payments market.

Send and Receive Money, which went into production this week, is pretty much just what it says, and given the considerable size of its backers (38% of banked consumers), should have plenty of reach. It allows Wells Fargo and Bank of America customers to send and receive funds transfers from other customers by using an email address or mobile phone number. Although the free service is driven by clearXchange, consumers will use it by registering on their existing online banking or mobile apps with Wells Fargo or Bank of America.

"ClearXchange will shake up the P-to-P market. … This is a big-play," says Mary Monahan, executive vice president and research director for mobile with Javelin Strategy and Research.

It's all about the brand, says Mike Kennedy, executive vice president and head of enterprise payments strategy and chairman and co-founder of clearXchange. "People trust their banks and want to do transactions with their banks," he says.

Upon clearing a security process during registration, consumers of the two banks will be able to send money to each other without exchanging account numbers or other banking information. While JPMorgan is expected to also be part of Send and Receive, it has not yet publicly announced its participation. JPMorgan and Bank of America "will triple the network that people can send person-to-person payments to," Kennedy says.

But that still leaves a lot of the bank-driven P-to-P payments market — 62% based on Javelin's numbers — on the outside and accessible to competitors, a closed network challenge that clearXchange, which has been around for more than a year, is still working hard to fix. It hopes the new person-to-person application will help in that regard.

"We are longing for ubiquity, where we can tell our customers, 'Just say you want to send money to someone and we'll get it there.' The most natural way to do that is to bring banks into the network, and we are in discussion with large, medium and smaller banks to bring them into the network," Kennedy says.

For now, clearXchange will have to do with its three founders and owners.

The venture is under pressure from lots of well-known competitors good at generating buzz. PayPal, which controls about 90% of the existing P-to-P market, has developed a number of contactless and mobile payments products over the past year. Other players include the telecom consortium Isis, Bump Labs' new product and other new outfits that use mobile phones to receive payments, such as Square and Dwolla. Fiserv, with its ZashPay and Popmoney offerings, and Western Union are also active in mobile P-to-P.

Kennedy contends clearXchange's advantage is familiarity with banks and the lack of work required on behalf of customers to use clearXchange. "First and foremost customers are using their existing checking accounts, Wells' mobile app and website," he says. "That's a huge differentiator. We're not asking people to open a new account or go to a site that they may not know."

PayPal did not respond by Friday morning to a request for comment on clearXchange's product, but it has disputed clearXchange's claims of superior execution in prior interviews with Bank Technology News, a sister publication of American Banker.

PayPal said it offers its financial institution clients a standard messaging format that executes payments directly between bank accounts, which allows direct payments rather than via separate accounts set up for PayPal transactions. PayPal says it also fronts payments to recipients, then settles with the bank later, which allows for faster execution in line with bank competitors such as clearXchange.

Javelin has reported that of the top 25 banks, 23 offer mobile banking and 22% of those 23 banks offer mobile P-to-P.

"More interoperability is needed and there is a move to this," Monahan says. The clearXchange product "is a large step forward in that direction."