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Consumers would send a text or e-mail address to move money.
Three of the most powerful players in U.S. banking—Bank of America N.A., JPMorgan Chase & Co. and Wells Fargo—have banded together to create a person-to-person payment system dubbed clearXchange. Now in testing in Arizona, the system enables the banks’ customers to transfer money to other customers of any of the three banks using a mobile phone number or e-mail address. ClearXchange users in the test do not pay fees for transferring funds.
But clearXchange faces a field of competitors that includes PayPal Inc., CashEdge Inc. and Fiserv Inc. They all offer person-to-person services that enable an individual to send funds from his account to someone else’s account, replicating electronically the process of writing a check.
Details of how customers enroll and use the new service are sketchy, but a Wells Fargo spokesman says its customers will use the existing Wells Fargo mobile app and web site. Neither Bank of America nor Chase would provide details of how consumers will use the service.
“Our customers want easy, safe and innovative ways to send and receive funds electronically,” the Wells Fargo spokesman says. “The most natural way to do that is with your bank, where you keep your money.”
But bank involvement is no guarantee of success in person-to-person mobile payments, says Beth Robertson, director of payment research at Javelin Strategy & Research, though she grants banks may have some advantages over others. Because these banks already have internal systems for moving money and managing the risk that entails, they may be able to process person-to-person payments less expensively than their competitors may, she says.
ClearXchange also may benefit from the sheer size of the potential customer base, Robertson adds. For example, Chase alone has 26 million checking accounts held by individuals and small business owners, a spokesman says.
ClearXchange’s formation is emblematic of an overall effort to turn cash and check transactions into electronic ones, says Patricia Hewitt, director of the debit advisory service at Mercator Advisory Group Inc.
Banks are anxious to convert cash payments to credit and debit card transactions, she says. “The opportunity for growth in spend just isn’t there in the U.S. economy,” Hewitt says. So, these firms turn their attention to cash. “It’s all about how you make cash electronic.”
Part of clearXchange’s success will hinge on how quickly it can move money between sender and recipient, Hewitt says. “To replace cash you have to have an equally convenient and speedy method of payment,” she says.