Automated Clearing House payments are cheap, but compared to other payment methods they are slow, and companies are constantly developing adaptations and alternatives to make such payments in real time.
Dwolla, of Des Moines, is the latest company to talk up cheap real-time transfers. It began developing its product, FiSync, last year. This week it is opening it up to more banks and credit unions.
Dwolla, an alternative payments company, says its system moves money at least as fast as a credit card payment but at a cost that rivals ACH. The company is offering free software tools to allow banks to link to FiSync, though banks must first register as developers. FiSync transfers will also be free during a promotional period.
And FiSync seems to work as advertised: In a demonstration shown to American Banker, Ben Milne, the founder and chief executive of Dwolla, used FiSync to move $4,000 to a Dwolla account in a matter of seconds from an account at Veridian Credit Union of Waterloo, Iowa.
"It's the equivalent … [of] bank transfers, which are real-time, so it takes out the delays and we built this whole framework into a product," he says.
If FiSync takes off, it could reduce banks' need to work with card associations and processors, Milne says.
The technology requires a network effect — for transfers to take place, enough banks must agree to use FiSync, properly integrate it into their core banking systems and accordingly market the capability to consumers.
"If they can do this, it would be fairly revolutionary," says Aaron McPherson, a research manager for payments at IDC Financial Insights. "But they have set themselves a very high bar."
Veridian's participation is a good start, he says, but it's not a sign of momentum.
"Typically with stuff like this, you get a couple of community banks to do it, but it's hard for them to move beyond that," says McPherson. "You can always find someone to trial it, but it sounds like the level of integration required would pretty much limit it to that."
Dwolla's competition includes the Federal Reserve Banks' FedACH, which provides banks with same-day transactions over the ACH network.
Fiserv (FISV) is working to adapt its Popmoney person-to-person payment system to allow real-time payments by tapping into the Accel/Exchange PIN debit network.
Australia's central bank also offers a similar technology called the Electronic Funds Transfer at Point of Sale system.
"I think it's really exciting," says Brian Riley, a research manager in the cards and retail banking practice at CEB TowerGroup. "You are starting to see a lot of these [types of innovations] where the networks can get moved out of way."
For its primary person-to-person payment product, which Dwolla offers to consumers, it charges its users 25 cents for any transaction over $10, regardless of amount.