Jacksonville, Fla. banking and payments technology company FIS Global is seeking to solve the quintessential problem of the payments industry: How can you offer consumers faster payment transactions at a low cost? The company is launching a new transaction type that looks like an ACH payment, but moves cash quickly over a system that resembles a debit card network.
The new transaction type, PayNet, is cheap, about 20 percent cheaper than a signature-debit transaction, which is roughly 1.7 percent of the purchase plus a 12 cent transaction fee for the bank sending the payment, according to Peter Gordon, senior vice president of FIS' Payments Network Group. But PayNet is more expensive than an ACH network payment.
Its potential impact is huge.
"It's really a confluence of events that the market is really asking for," says Gordon. "Given the market need and everyone's personal user experience around the ubiquity of a mobile phone and the instant gratification of the internet, people are expecting their bank to be instant in nature and we are fulfilling that role."
Banks will, of course, have to opt into PayNet and certify those transactions in order to allow customers to send and receive this brand of payments.
Indeed, FIS isn't the only company trying to solve the problem.
Dwolla — a Des Moines alternative payments company that has been likened to PayPal — has its own brand of ACH-like transactions that competes with the network.
Its FiSync network opened its doors to the banking industry at the Finovate Spring conference this year in San Francisco. Banks get access to FiSync through an open application programming interface that allows developers to move money over Dwolla's network.
Already, at least two dozen banks have signed up for the service.
PayNet could also compete directly with money transmitter PayPal, says Brian Riley, a senior research director at CEB Towergroup.
"Think about it," he says. "PayPal can transmit internationally into a 100 different countries…. But [PayNet] keeps you in financial institutions, which is pretty good factor as far as safety. In a lot of markets, PayPal isn't regulated."
PayNet is, of course, in its early days. Currently, FIS is working with 200 financial institutions on the network's rollout. With the service expected to be available industry-wide in early 2013, "we have a solid roadmap going into 2013," says Gordon. "And we really feel like we are fulfilling a market need."