The battle for supremacy in mobile person-to-person payments is raging. To date, its primary ordnance has been limited to the press release and the corporate event, most of them volleyed by big-name operators of existing payment networks, like PayPal, Visa, and MasterCard, among others - plus, um, Google. But as the presence of that last contender indicates, the stakes are high. The prize is a controlling position, or at least a first-mover advantage, in the consumer's mobile wallet. It goes without saying that gaining such a position would yield benefits well beyond payment fees.
Banks have for the most part been sitting on the sidelines of this war, watching carefully to see which side appears to be winning so they can pick a partner when the time is right.
But in the scorching Arizona desert, a more forward-thinking group of banks is quietly preparing the enter the fray. Since May, JPMorgan Chase, Wells Fargo and Bank of America have been developing a mobile payments platform of their own. The system, known as clearXchange, has just entered the testing phase. If all goes according to plan, clearXchange would let consumers send money to each other by mobile device, from one bank account to another, with no fee.
Mike Kennedy, Wells Fargo's executive vice president of enterprise payments strategy, is leading clearXchange's charge as the joint venture's chairman. In a rare interview, Kennedy talked about the project's ambitions and made the case for bank cooperation in the mobile payments arena.
"This is an innovative game-changer," he says. "We want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank. We're looking for ubiquity."
Until recently, "the means [of P2P] had been a computer at a desk," says Kennedy, who joined Wells Fargo in 2004 with the Wealth Management Group and has also served as head of strategy and implementation. "But mobile sites have become more secure, and people always have their phones with them. They don't always have their checkbooks."
ClearXchange lets customers use their mobile banking apps to send money via ACH to another party's mobile banking app after an initial registration - provided both parties have accounts at Bank of America, Chase or Wells Fargo. Each bank will decide on issues like fees and presentation. The service is expected to be free, a savings of the $12 or so charged for traditional wire transfers. Kennedy says the Arizona rollout has gone well so far and a national rollout is in the works for next year.
Challengers On All Sides
Kennedy and clearXchange are under pressure. ClearXchange is battling the Kleenex of P2P payments, PayPal, which already owns about 90 percent of the existing P2P market and is making aggressive tech moves of its own, including offering proximity "bump" payments and developing contactless payment technology. PayPal's maneuvers not only suggest a further penetration into other financial services, but also a burgeoning innovation spree that could allow it to compete with clearXchange's main competitive advantage - the ability to offer direct bank-account-to-bank-account mobile P2P transactions. Google has plans through its mobile wallet to chew on the $1 trillion yearly American P2P market as well. Telecom consortium ISIS, Twitter spinoff Square and startup mobile payment company Dwolla are just three of the newer formidable mobile payment competitors.
And while clearXchange is the first venture of its kind, a broad bank-led P2P market is not an entirely new concept. Other attempts to bring efficiencies to ACH payment processing - which could have eased the execution and cost burdens of the cash transfers involved in account-to-account payments - have stalled in the past. Citigroup's C2it, a low-cost international operation that allowed users to transfer money via the web, even if they didn't have a Citi account, closed up shop during the last decade, and most recently a joint Wells Fargo/Bank of America venture called Pariter, which was designed to make transfers more efficient via joint ACH processing, was discontinued a couple of months ago.
