"Dialing for dollars" could take on new meaning this year.
At least four mobile transfer systems are set to go live in the next few months, enabling people to send one another cash with their phones. Though the idea has been kicking around for years, bankers say the convergence of two technological advances makes these systems much easier to use, and could turn the phone into an electronic cash replacement. Some executives predict people will be willing to pay for mobile transfers, providing a valuable new source of fee income.
"We absolutely see it as a revenue opportunity, both for us and for banks," said Josh Peirez, MasterCard Inc.'s group executive of innovative platforms. "People say they don't want to pay ATM surcharges, but millions of people do it every day. When they see the convenience of mobile transfers, they'll be willing to pay for it."
MasterCard announced its Mobile MoneySend service in May. Peirez said "significant name-brand banks" will offer it to customers this year.
Transfers are initiated through mobile phones. The funds can be drawn from, and deposited into, users' MasterCard credit and debit accounts.
MoneySend is available now, but only through prepaid cards issued by Bancorp Bank. This format requires people to establish a new account just to send one another money, making it similar to existing transfer services such as Obopay Inc.'s mobile phone system and PayPal Inc.'s online service.
However, Peirez said that connecting MoneySend to debit cards lets people send and receive money through their primary bank accounts. This is a key advance, because it could make electronic transfers more appealing to potential users, he said. "The ultimate view for the product is for anyone with an existing MasterCard account to be able to link it to the service," he said. "You will see this with more than one bank in 2010."
Erich Litch, the senior vice president and general manager for Fiserv Inc.'s consumer services unit, agreed that people don't want to "establish any kind of holding account" for transfers. "Customers clearly prefer to access these services through their banks."
In November Fiserv announced a person-to-person transfer system that it plans to start offering next quarter to the more than 3,100 banks that use its online payment service. Customers of banks that offer the service will be able to initiate transfers by phone or online, and the funds will move directly in and out of their bank accounts.
Though no banks have agreed to offer it, Litch said the Brookfield, Wis., vendor's clients are interested in what they see as an emerging payment format. "No financial institution yet has said they are not interested in the category of personal payments."
The second important advance is delivering transfer by phone. Some banks have offered online transfer capabilities for several years, but Mark Moore, S1 Corp.'s vice president for strategy and development, said people often need to make payments when they are not in front of a computer.
S1 said in November that it would connect its mobile banking software to PayPal's transfer service, enabling people to use their phones to send money from bank accounts to recipients' accounts with PayPal, a unit of eBay Inc.
For example, people could use their phones to make purchases at garage sales, to pay a baby-sitter, to contribute money to a club or team or to repay money to a friend; there are many reasons people must each other money in their daily lives, and cash is often the only option. "People will like the convenience of sending money immediately from a mobile device to anyone in the world," he said.
Mercantile Bank of Michigan plans to introduce the S1 service this quarter.
"Mobile person-to-person transfers are more important than desktop transfers," said John Schulte, a senior vice president with Mercantile and its chief information officer. "People live through their phones, and this seems like a natural progression."
Payments executives are divided over whether to charge a fee for mobile transfers. Moore said that S1's technology is built into its mobile banking software, and though his company will not charge banks a fee for transfers, he expects some financial companies will see the service as potential source of revenue.
Schulte said Mercantile has no plans to charge users. He noted that there are costs associated with every type of transaction, and cash and checks — the payments that mobile transfers could replace — "are both more expensive to us."
More important, fees could discourage people from using the service. Schulte said Mercantile considered a fee, but quickly concluded that a simple, electronic transfer service could become an important payment service. "We didn't want any barriers to adoption," he said. "P-to-P payments can, and should be, free."
Howie Wu, vice president of virtual banking at BECU, agreed. The Tukwila, Wash., credit union plans to offer POPmoney this quarter, the first financial company to use the CashEdge Inc. mobile service, which was announced in June. "We want our customers to be remote delivery channel users," he said. Mobile transfers are "the next logical step in the evolving payments landscape."
Neil Platt, CashEdge's senior vice president and general manager of banking, said he expects some banks to charge for POPmoney. "There is a very real value proposition" for fees, he said. CashEdge charges banks a per-transaction fee to handle the payments, which are sent across the automated clearing house network.
PNC Financial Services Group Inc. and First Hawaiian Bank were the first POPmoney clients, introducing an online version last month. At PNC, it is free, and First Hawaiian charges senders $1 per payment. (Both are considering the mobile version.)
Jaylene Tsukayama, First Hawaiian's vice president for home banking, said the fee stems from its 2008 introduction of another, online CashEdge transfer service, and that the charge was seen less as a source of revenue, and more to "discourage people from haphazardly doing transactions."
She said the bank was initially concerned that the transfer service would siphon off deposits, which was why it did not charge customers for incoming transfers.
However, the transfer service did not lead to an exodus of deposits, and if the banking company moves forward with the mobile transfer service, "I'm sure we'll look again at fees," she said.
"Mobile is the future. The question is when," Tsukayama said.