Several banks offer person-to-person funds transfers through the automated clearing house network, but NYCE Corp. says it can move the money faster over its debit network.
The Montvale, N.J., debit company has offered this capability through automatic teller machines and kiosks since last year. Its extension last month to online banking systems is likely to attract more users.
Kam Wong, the executive vice president and chief financial officer of Municipal Credit Union in New York, said the debit transfer feature has an important advantage over the ACH version.
ACH payments typically settle in one or two days. "ACH is not real-time," Mr. Wong said, but people who use the NYCE network to send money "can do it tonight and … [the recipient] will have the money right away."
His credit union has offered debit transfers through in-branch kiosks since last year, and at the beginning of April it became the first financial institution to offer the service through its Web site.
The initial response seems to be positive, Mr. Wong said Monday. "So far we've processed 1,000 transactions, but without any kind of advertising."
The credit union will start advertising the service this month to its 300,000 members. By yearend, it will also add the service to its ATMs.
Steve Rathgaber, the president and chief operating officer of NYCE, said that fewer than 10 of the 2,244 banks and credit unions that are its customers cannot receive the transfers.
In effect the sender makes a withdrawal and sends the money to the recipient's financial institution by punching in the recipient's ATM card number, Mr. Rathgaber said. The sender need not know the recipient's PIN or account number or when the card will expire.
NYCE charges banks a base fee of up to 35 cents for outbound transfers plus 0.1% of the amount sent. Municipal will charge the sender $2 but waive it if the member's balance exceeds $2,000.
NYCE introduced the ATM transfer service in February 2004.
Mr. Rathgaber would not say how many banks can initiate transfers through NYCE's system. The number is "small but growing," he said.
Gwenn Bezard, a research director at Aite Group LLC of Boston, said one obstacle to adoption is that the transfers are limited to just one debit network. "You can only send money over the NYCE network from a NYCE account to another NYCE account," he said. By contrast, "ACH is entirely ubiquitous."
However, he noted that most large banks that offer ACH person-to-person transfers have imposed restrictions. Some route payments only between the customer's accounts at different institutions; others only between different people's accounts within the bank.
Because very few banks let their customers transfer funds to other people's accounts at other banks across the ACH network, Mr. Bezard said, the NYCE setup could prove more useful.
"The EFT step, I think, is a logical step and is a step I expect the majority of financial institutions to make in the next five or 10 years," he said. "But it is a very slow process. It may be two to four years before a large financial institution starts to use the EFT network" for person-to-person transfers.
Dan Schatt, a senior analyst for the Boston market research firm Celent Communications LLC, said that ACH transfer services, though restrictive, are already being adopted as a payment method by some online auction vendors.
Wells Fargo & Co. of San Francisco offers an ACH transfer service between its own customers' accounts. Mr. Schatt said Wells has observed that some businesses and merchants selling their goods online are advertising that buyers can pay through the service.
And because debit transfers are faster than ACH, "you're going to see more options moving in the direction that NYCE is moving in," he predicted.
