Chase Finally Launches with ClearXchange as P2P Market Shifts

JPMorgan Chase is now live on clearXchange, a multi-bank person-to-person transfer network that it helped found in 2011, but the competitive landscape for P2P has changed a lot in the intervening years.

The other founders, Bank of America and Wells Fargo, have long been live on the clearXchange network, which also counts Capital One, U.S. Bank and Denver-based FirstBank among its members. Adding Chase would bring in 9% of all consumers in the U.S. with a savings or demand deposit account. Chase will also bring in about 9% of all online bankers and 10% of all mobile bankers, said Mary Monahan, executive vice president and research director for mobile for Javelin Strategy & Research.

"And it only took four short years," she joked. Capital One and U.S. Bank are also in the process of rolling out the service to their customers; FirstBank went live last year.

In the years since the initiative's founding, the P2P market has welcomed a flood of new competitors. PayPal now owns Venmo, a P2P service that looks more like Twitter than a banking app. Facebook's Messenger app, overseen by former PayPal president David Marcus, is rolling out a P2P capability; and SnapChat offers P2P capabilities using technology from Square. On the banking side, BBVA is working with Dwolla to speed P2P payments, COOP Financial Services is building a network among credit unions, and Shazam is building a bank network.

Though Chase took years to launch with clearXchange, it was never absent from the initiative, said Mike Kennedy, CEO of clearXchange.  "They've always been supportive of the network. They've attended all of the board meetings and advisory meetings," he said.

Chase has about 38 million online banking customers and 20 million mobile banking customers, Kennedy said. ClearXchange's member banks make up about 60% of the national online banking market, he said.

"Chase's addition will benefit us both for our historical P2P product and newer products that we launched last year and going forward," he said.

Kennedy referred questions on why it took Chase four years to go live to Chase. The bank did not make an executive available for an interview, but in an email, Chase spokesperson Lauren Francis talked up clearXchange's benefits for faster funds availability, user experience and security.

Chase announced its clearXchange launch alongside a series of updates on its mobile banking and payments activity. Chase has added Touch ID fingerprint authentication to its app for the iPhone 5, 6 and 6 Plus, and its active mobile customer base has surpassed 20 million, which is up 22% over last year.

Perhaps most important to clearXchange's model is the rapid 80% spike in usage of Chase QuickPay over the past year. Chase redesigned its in-house P2P system last year to improve usability.

QuickPay transfers normally take between one and five days, Monahan said, while clearXchange takes about three days after the payment notice has been received.

ClearXchange uses direct transfers to a recipient's email address or phone number, rather than an account number. The user's account data is protected by the bank's security system.  Chase's addition should additionally boost ClearXchange's evolution beyond P2P payments by using its rails for business to consumer payments and other use cases.

"JPMorgan is a large corporate bank," Kennedy said. "We'll see what they roll out [in terms of corporate payments] but it's a benefit to have the largest consumer and corporate banks as part of clearXchange. Payments is a two-sided industry."

Bank of America already uses clearXchange for corporate disbursements, a product used by Allstate for mobile e-payments. Wells Fargo uses clearXchange to replace government and corporate check dispersals, Kennedy said, and there were corporate clients besides Allstate that have not publically announced their participation.

U.S. Bank, a more recent addition to clearXchange, also sees the network as an enabler of broad payment services.

"Chase's addition gives clearXchange much greater potential," said Andy Schmidt, principal executive advisor for CEB TowerGroup. "When you have the top ACH banks all participating, you certainly have much greater pool to draw from."

The challenge, Schmidt said, is getting people to actually use the network. For example, rent payments have been slow to shift to digital technology. ClearXchange did not reveal specific uptake numbers, though Kennedy said the service was enjoying triple-digit year-over-year growth.

Given this progress, it's unusual that clearXchange was so underplayed in JPMorgan Chase's announcement today, which gave more attention to Apple's Touch ID.

"It's an odd release. Chase was one of the founding members. I wasn't aware of them not using it, though with the addition of Capital One and U.S. Bank, clearXchange is more attractive than ever," said Gareth Lodge, a senior analyst at Celent.