Several payments companies are developing systems that let people electronically send each other money with mobile phones. These networks are big, but they are not connected, and though observers said that this limitation is not a big issue today, it will have to be addressed before the technology can become a mainstream financial utility.
The newest player to enter the fray is Fiserv Inc., which gave a first look last week at its upcoming P-to-P transfer service. CashEdge Inc., which introduced its own service in June, said last week that four banks, including one of the top 10 by assets, are expected to be offering it by yearend.
They join a growing number of financial companies — including Citigroup Inc., MasterCard Inc. and Visa Inc. — that are developing or testing mobile phone systems to route money in and out of users' bank accounts.
For their part, recognizing that other electronic communication tools are just as crucial in the modern world, Fiserv and CashEdge have also incorporated e-mail into their systems.
Jeffery W. Yabuki, Fiserv's president and chief executive, said these early movers are seeking ways to capture business from Generation Y, those 20-somethings who are the first Americans to have grown up with mobile technology and e-mail as integral parts of their lives.
"That group is going to transact in a way that is different from the way I transact," the 48-year-old Yabuki said.
Though Gen Y accounts for only 9% of transactions today, he said, its members are likely to be making 40% of transactions in five years. "P-to-P payment services are likely to be one of those vehicles that are used by that group as a regular part of their day."
Fiserv said it expects to introduce the service formally next month at the Bank Administration Institute's Retail Delivery conference in Boston. Steve Shaw, Fiserv's director of strategic marketing, said that when the service becomes available in the first quarter as many as 2,500 financial companies will be on board, letting customers send funds to people with accounts at any of the other participating banks.
This is the model prevailing today; Visa is developing a system that would let people send funds to and from any Visa account (except anonymous prepaid cards), and U.S. Bancorp is testing Visa's Money Transfer service.
MasterCard announced in June its MoneySend service, which would let customers of participating MasterCard issuers send each other money, though it has yet to announce any bank that is offering this capability.
And Citi has tested a service that lets its customers send funds to one another.
As the range of options grows, it is becoming increasingly obvious that each network exists as an island, but with no bridges between them, said Richard K. Crone, the founder of Crone Consulting LLC in San Carlos, Calif. Visa or Citi may be pretty big islands, but they are not everywhere you might want to be.
However, Crone said, for now, these independent islands may be big enough. "If Fiserv can launch with 2,500 institutions, they can create their own network."
Yabuki said that these nascent networks are still evolving and most likely will eventually link up. "Those questions will be answered over time as these networks grow up and become material enough to make that happen," he said.
