PIN debit networks will soon boost the speed of the online person-to-person payment systems Popmoney and ZashPay — letting people send money in real time, and giving banks a greater range of payment options to offer their customers.
Today, CashEdge Inc.'s Popmoney and Fiserv Inc.'s ZashPay handle payments primarily over the automated clearing house system. This streamlines the payment process, but the method's weakness is speed, or the lack of it, particularly as the expectation for an Internet-based service is that it be immediate.
To this end, CashEdge said that it will form a partnership with NYCE Payments Network LLC. Fiserv, a Brookfield, Wis., financial technology company, said it will leverage its Accel/Exchange network to speed ZashPay.
"The vision has always been to enable low-cost, real-time payments, and this helps us make low-cost, real-time payments ubiquitous through NYCE," said Neil Platt, a senior vice president and the general manager of U.S. banking at CashEdge. "This is a major step in helping us get there."
NYCE offers links to 3,000 financial institutions, and Accel/Exchange connects to 2,800. Representatives from both companies said real-time payments would be available to people through these banks within six months.
"We are making ZashPay even faster with integration to Accel/Exchange," said Erich Litch, a senior vice president and the general manager of consumer services at Fiserv. "We have been actively working on this integration since ZashPay" was launched in June 2010. Most of its payments arrive the next day, Litch said.
Platt said that CashEdge is in talks with banks about distributing the real-time product. He said at least one bank had expressed interest. Experts said both companies are hoping to tap banks' need to generate more revenue from payments, in view of the severe regulatory pressure they are under regarding fees they can charge credit card customers and the debit card interchange they charge merchants.
"With regulatory changes, P-to-P payments have become a lot more important, and from a consumer perspective, there is a lot more interest in mobile and online capabilities to transfer money," said Ron Shevlin, a senior analyst at Aite Group LLC. Distribution through the debit networks was a natural evolution of P-to-P payments, he said.
NYCE said it is approaching the deal as a nonexclusive arrangement, and Fiserv said it would pursue partnerships with other networks.
Emmett Higdon, a senior analyst at Forrester Research Inc., said real time P-to-P payments are increasingly important to banks, since "consumer expectation is clearly that money movement is in real time; they don't have a good appreciation for the delays in a batch system like ACH."
Brian Riley, a research director in the bank cards practice at TowerGroup, said banks also need to make themselves a more viable alternative to PayPal.
"There is apprehension about the growth of PayPal, and a level of apprehension of how closely you want to align yourselves with them," he said, adding that it was a strategic ploy on the part of Fiserv and CashEdge to align themselves with processing networks.
"The relationship with [processing networks] remains a very strong one, and leveraging from that perspective gives [banks] a foothold that PayPal does not have," he said.
Industry observers said real-time online payments offer banks a strong revenue opportunity if they pass on the transaction costs to consumers.
"Most financial institutions will charge their customers for this," and they would charge a higher fee for real-time payments, Litch said.
Higdon said that customers are used to free online banking, though many institutions charge for ACH transfers. Even if real-time P-to-P transfers work as a cash replacement, banks might not be able to charge for them.
"We need to move this to real time because that is what is necessary to see mass consumer adoption," Higdon said. "And for this to be a cash replacement, [banks] need velocity."