Competitor: This article comes from Randy Mitchelson.
Entry Category: Cutting-Edge Banking Technology
Move over Western Union and MoneyGram. Competition in the money transfer space is heating up and the big winners are consumers who can send money for little or no cost.
Have You Seen This TV Ad?
You may have seen the television commercial from Chase Bank showing a large group of friends out to dinner. When the check comes one of the friends does the math and proclaims that everyone chips in $25.
Everyone then pulls out their mobile phone and presses a few buttons to transfer the money to the friend that paid the bill – except for the one “loser” who isn’t in on the plan.
The pretty woman sitting next to him whispers not to worry – that she will show him how to do it after.
Just some button presses – no checks – no routing numbers or check numbers! Very simple, very easy.
Big Three Banks Collaborate On P2P Payments
The Chase ad is the first of many you will be seeing to promote a new person to person (P2P) payment service launched by the big three banks in the United States. Bank of America, Wells Fargo and JP Morgan Chase formed a joint venture called clearXchange (CXC). This is a Paypal-like service (Paypal is owned by eBay), but Paypal is not a bank so you have to create a Paypal account in order to use it.
Chase Bank Out In Front With P2P Payments
Chase has branded its P2P payment service as “QuickPay”. You can send money to nearly anyone using their email address or mobile number. As long as both of you have a U.S. bank account and at least one of you has a Chase checking account, you will be able to send or receive money.
Will Peer to Peer Payment Services Be Free For Consumers?
At this time QuickPay is a free service from Chase. It remains to be seen if the other banks will make their version of the P2P service free or if they will start charging a fee once they get us all addicted to the convenient money transfer service.
One reason that they may chose to keep P2P payments free is because it makes banking relationships more “sticky”. In other words, it makes it harder for consumers to switch banks because they might have to set-up a whole new payment system. Similarly, bank services like direct deposit and online bill pay also create “sticky” relationships because it is inconvenient for consumers to switch over.
Brilliant Money Transfer Services Getting Cheaper And Easier
clearXchange is the first network in the U.S. created by and for financial institutions that lets customers send P2P payments easily and securely. With only the recipient’s mobile number or email address, customers can send funds directly from their checking and savings accounts without requiring sensitive account information.
In addition to the big banks moving into this arena of financial services, it is expected that other companies such as Google and Apple will launch their own payments platform to compete. Visit DailyDollar for more personal finance articles, videos and podcasts.
“This is an innovative game-changer in electronic payments,” said Mike Kennedy, EVP and Head of Payments Strategy at Wells Fargo. “We want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank. All our customers need to know is the email address or mobile number of a friend or family member and we will take care of the rest utilizing clearXchange.”
No New Accounts Needed
The key thing here is that you do not have to set up any additional accounts like you would on Paypal. The big three banks behind CXC have half of the online banking accounts in the United States! Starting with 50% market share out of the gate ain’t too shabby! There were $865 billion in P2P payments in 2010 so we are talking about a huge pie.
It is expected that other banks will sign-on to use CXC once it is fully rolled out by the initial three banks. CXC is another sign that our mobile phones are becoming the digital wallet promised more than a decade ago.