* Bank officials discuss linking payment networks
* Goal is critical mass to promote payments by mobile phone
* No need for bank name to wire money, email will do
By David Henry
NEW YORK, Sept 12 (Reuters) – The four biggest U.S. banks
are in talks to link their digital payment systems to allow more
consumers to easily transfer money with mobile phone messages
and emails instead of cash and checks.
A link-up could be a key step toward revolutionizing the way
consumers pay one another, like when roommates pay one another
for rent. Electronic payments would cut banks’ processing costs
by reducing the cash they have to handle and the checks they
have to process. Over time, banks may also be able to boost
revenue from electronic transactions by charging a nominal fee.
Banks and other companies have been unsuccessfully pushing
electronic payments for years, but with younger consumers wed to
their smart phones, there may be new hope, analysts said.
Three of the four biggest U.S. banks — JPMorgan Chase & Co
, Bank of America Corp and Wells Fargo & Co
— have already agreed to operate through a system known
as clearXchange, while Citigroup Inc and some 1,400
smaller banks are on a system known as Popmoney. That business
is managed by Fiserv, a provider of processing services
to the banking industry.
The banks hope that by connecting the two systems they will
create a network with a critical mass of customers who can use
the systems to pay one another without a second thought.
Customers of Popmoney and clearXchange combined account for
roughly half of deposits owned by individual consumers.
Sanjeev Dheer, the Fiserv executive in charge of Popmoney,
confirmed the discussions between the systems, as did another
person with direct knowledge of the matter who declined to be
named. Neither would provide further details because the talks
are confidential.
It’s logical to link clearXchange with Popmoney, said
Vincent D’Agostino, head of payments strategy and business
development at JPMorgan Chase and one of three board members of
clearXchange.
“We want to make moving money to people with other banks
really seamless,” said D’Agostino.
The Popmoney and clearXchange platforms could link up within
18 months, said Dheer of Fiserv.
When electronic payments are pervasive, a person will be
able to easily open a mobile phone app and click to send money
to a friend’s phone or email account. The funds will land in the
friend’s bank account, saving the sender from writing a check or
carrying a wad of cash and the receiver from having to make a
deposit at a bank.
A SLOW START
Electronic payments among consumers have failed to catch on
after years of hype. This year, according to research and
consulting firm Aite Group, people will use computers and mobile
phones to make about $50 billion in payments to other consumers,
or just 6 percent of the roughly $900 billion of total
person-to-person payments. The rest is done with cash and
checks.
Even if consumers routinely pay businesses online, they have
had no single platform for paying other consumers, and getting
banks to work together is hard. JPMorgan Chase spent years
developing its own QuickPay tool before agreeing in 2011 to join
Bank of America and Wells Fargo to form clearXchange.
Chase plans to connect QuickPay with the two other banks in
the coming months. Extensive tests must be done first to make
the links fail safe. Today for a Chase account holder to send
money to a Wells Fargo customer the recipient has to sign up
with QuickPay to get the money.
In the late 1990s, a series of banks and Internet companies,
from Citibank to Yahoo Inc launched electronic payment
offerings. PayPal, now part of eBay Inc, was the only
one to take, but it mainly handles transfers from consumers to
businesses, or among businesses.
The hope for electronic payments may be with younger users,
many of whom seem umbilically attached to their phones, said Ron
Shevlin, senior analyst at Boston-based Aite. Among Generations
X and Y, 20 percent of 1,115 consumers surveyed used electronic
systems for personal payments, compared with only 11 percent of
baby boomers, an Aite survey found.
Transfers often happen among family members, such as parents
paying a child’s allowance. Moving beyond the family is a big
hurdle to jump, Shevlin added.
Fiserv’s Dheer said banks must advertise the tools more
before people will routinely pass money digitally. Citigroup and
JPMorgan Chase have stepped up television and radio advertising
this year, with Citigroup promoting its Popmoney offering and
Chase its QuickPay, he noted.
Funds will have to be delivered faster, too, Dheer said. Now
it usually takes at least a night for money to be moved between
banks within a network.
“When you can do this real time, it will become a substitute
for many of the cash transactions that happen today,” he said.
If people found the services convenient enough, they might
not object to paying 10 cents or more for each payment, which
would add up for the banks, said Aite’s Shevlin.
