After years of setbacks related mainly to technology and risk management, the person-to-person payments business is finally taking off for banks.
Believing banks are now eager to offer tools that let people pay each other electronically, CashEdge introduced a P-to-P transfer service earlier this summer. The announcement came at the same time as MasterCard's introduction of a mobile phone transfer service to its issuers. In addition, three Canadian telecom providers also recently introduced a similar mobile P-to-P payment service, and said all major Canadian are considering offering it to consumers.
"Banks have been interested in this for a long time," says Neil Platt, CashEdge's svp and general manager of banking. But they "haven't found the right way to implement it."
Marc DeCastro, a research manager at IDC Financial Insights, says P-to-P transfers could help bank' customer acquisition and retention efforts.
"Banks are saying, 'This isn't just a fad, this is something we need to be prepared for,'" DeCastro says. "Just because it didn't take off the first time around doesn't mean it was a bad idea."
He compared P-to-P transfers to bill-payment services, which took off slowly at first but eventually became a must-have feature.
CashEdge is one of the largest providers of account-to-account transfer services, which let people move money between their own accounts at various financial companies. The company's customers include nearly a quarter of the top 100 banking companies, such as Bank of America and Citigroup.
CashEdge plans to offer the new POPmoney service initially to existing customers. A handful of banks have agreed to offer POPmoney, though Platt would not name them. Though none of the deals have been finalized, he said he expects some of the banks to introduce the service this year.
CashEdge has been testing an earlier version of POPmoney with a regional bank it would not name, and that P-to-P payments have grown to half of that bank's online transfer volume. The earlier version required the sender to know the recipient's bank account number; POPmoney requires only that the sender know the recipient's mobile phone number or e-mail address.
Several banks have tried to launch P-to-P payment services in past years, but many of these early efforts - including Citigroup's c2it, BankOne's eMoneyMail and Wells Fargo and eBay's BillPoint - fared poorly.
Bruce Cundiff, a director of payments research and consulting for Javelin Strategy and Research, says while fraud as a problem with earlier P-to-P systems, many of them "failed because they were very single-bank focused, and you need the network to survive."
CashEdge's system can address this issue, he said. "CashEdge has a lot of large-bank clients and may be able to be the connection - the network creator."
CashEdge, too, has had some misfires in the P-to-P field. It introduced a service in 2002. "At that point our architecture wasn't really built to support it," Platt says. Usage was low, and there were risk issues that CashEdge had to resolve before it could move forward with its new product.