A few weeks ago, I went out to dinner with a bunch of my friends. When the time came to split the bill, I realized that I didn't have any cash. One of my fellow diners said he'd spot me $40, and I could send him a check. Of course, I forgot to do it, and when I got an email from my friend (politely letting the $40 I still owed him go unmentioned), it occurred to me: Why not just send him $40 electronically?

For the same reason that Internet person-to-person payment has failed to become the blockbuster consumer payment application everyone predicted when it was first introduced two years ago. It's still easier and cheaper to send a check.

Of course, I love the Web as much as the next gal. (Okay, maybe not as much as you do.) Yet, when I started looking at how P-to-P actually works, it drove me straight back to my checkbook.

Call me a fundamentalist, but I see payments as a banking business, and I like to do my banking with a bank. Tell me I have to give my checking account number to some technology company that's been around for as long as my 17-year-old niece has been driving, and I get as nervous as when she asks for my car keys. Many of these companies require users to set up an account with them-an interest-free, non- FDIC-insured account. PayPal, the market leader, forces both the sender and the recipient to open accounts.

And the few banks active in the market use groovy new brands for online services that play down their own more famous names. Look at eMoneyMail-it's tough to tell Bank One has anything to do with it. At least c2it tosses "By Citibank" under its logo. Yet it's precisely banks' long experience with consumer payments of all types that can win customers' trust.

I happen to bank at a technologically advanced behemoth that was one of the first out of the gate with P-to-P. In fact, you don't have to have an account there to use its person-to-person payment service. (You might, however, leave yourself open to its incredibly aggressive marketing by forking over your financial account information.) But trusting the service provider isn't the only barrier. There's also time, which can take days when consumers need to set up new accounts on both sides of the payment transaction.

So it seems as though the ATM network NYCE Corp. is onto something by helping its 2,400 participating financial institutions offer electronic person-to-person payment to their collective 47 million customers. (For more on this, see Maria Bruno's story, "P-to-P Payment Without the Delays," on page 39.) In the first transfer in NYCE's pilot, a Citibank customer sent $1,000 to a customer of People's Bank of Bridgeport, CT, through a specially designed Web site. Because it goes through the ATM network, not the credit card system or ACH, payment is nearly instantaneous.

NYCE requires the sender to provide the recipient's ATM card number to get the payment. While that's not nearly as intrusive as forking over your full account routing number for a wire transfer, some consumers might balk. And anyone who writes a check is already giving away his or her actual account number; the ATM card number, without a PIN, is one step removed from the account.

NYCE, Citi and others are very optimistic that person-to-person will become a mass-market phenomenon.

But other observers have doubts. Tower Group analyst Elizabeth Roberts points out that almost all Internet P-to-P payments today come from participants in online auctions such as eBay. Although she predicts swift growth for the field in the next five years, she believes that through 2005, 95% of the user base will still be online auction denizens.

Count me among the doubters, at least for now. My aversion to paying my friend over the Internet wasn't exactly logical; neither trust nor time was a factor. "Somewhere deep in our psyche, we like the idea of money," says Richard Oliver, the Federal Reserve System's retail payments product manager in Atlanta. "It's not a business issue but an emotional issue."

Miriam Leuchter is a consulting editor to Bank Technology News and a former managing editor of U.S. Banker.

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