After false starts, some banks are again offering limited person-to-person money transfer services. But the most ambitious P-to-P seems to be coming from much smaller outfits - especially credit unions.
No large bank offers PayPal-style online transfers from one person's account to someone else's at another bank.
But more than 80 credit unions do, according to CashEdge Inc. of New York, which sells the technology and manages the risk behind such transfers.
Credit unions make up half of Digital Insight's customers but 60% of those that use its online cash transfer package, which combines person-to-person and account-to-account transfers.
Among the credit unions offering P-to-P transfers are the $3.5 billion Patelco Credit Union of San Francisco, which originally served employees of Pacific Telephone and Telegraph Co.; and the $2.5 billion Digital Federal Credit Union of Marlborough, Mass., which originally was for employees of Digital Equipment Corp., which is now part of Hewlett-Packard Co.
Michal Geller, a director of product management at Digital Insight Corp. of Calabasas, Calif., said credit unions "are quicker adopters of products like this."
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., agreed. "Credit unions tend to be pace-setters," she said
Banks have tried for years to crack the P-to-P market, which is dominated by PayPal Inc., the payments arm of the online auctioneer eBay Inc. Among the casualties have been Citigroup Inc.'s c2it and Billpoint Inc., eBay's joint venture with Wells Fargo & Co. (Billpoint was killed after eBay bought PayPal in October 2002.)
Citi and E-Trade Financial Corp. have long enabled customers to transfer money to their own accounts at other institutions. Bank of America Corp. and Wells plan to do the same, but meanwhile each has started letting some customers transfer money to others' accounts within them.
Citi, E-Trade, B of A, and Wells have 20.6 million online banking consumers.
It would be easy for the banking companies to offer services as unrestricted as those of the credit unions, said Sanjeev Dheer, the president and chief executive of CashEdge. B of A, Citi, and some Digital Insight customers are using his company's money transfer software and risk management service.
Unrestricted P-to-P is "a very simple extension of the services they've got, and it's based on the same risk management infrastructure," Mr. Dheer said.
Banks have been slow to broaden their services partly because they have not figured out who will use them, experts say.
"I don't think it's a risk issue for the banks," Ms. Litan of Gartner said. "I think it's more of a usage issue."
Banks' marketing has hinted at such uncertainty. Wells and B of A, for example, have suggested that families use P-to-P to send funds to their children in college - but many banks already permit such transfers through linked student accounts.
Mr. Geller of Digital Insight said that even account holders may not know what to use P-to-P for. One reason may be lackluster advertising, he said.
Demand is high, Mr. Geller said - customers "believe that they want it, and it's something that they'll toy with" - but they do not continue to use it.
But Ms. Litan said it should be clear that banking customers want unrestricted cash transfers and why they do - for use on the Internet. "We really do need a virtual replacement for cash," she said.
Small banks and credit unions are more clear about the issue, experts said. Mr. Geller said they consider it a way to compete against bigger institutions. And Beth Robertson, a senior analyst at MasterCard International's TowerGroup Inc. research unit in Needham, Mass., said some credit unions offering P-to-P, especially those connected to technology companies, have more tech-savvy customers.
Still, large banks have millions of online banking customers to whom they can target-market the service, Ms. Robertson said.
At least one credit union - Digital Federal - is charging $2 per transfer, and Ms. Litan said that is "a huge mistake."
Most Citi, E-Trade, B of A, and Wells transfers are free. Payers never want to pay to make payments online, Ms. Litan said, and any online payment company that tried to charge them instead of payees drove customers to PayPal.
Ms. Robertson disagreed. "Two dollars is way below what it costs to send a wire transfer," she said. "It's also less than what it would cost to FedEx a check. These are factors that individuals could weigh and say, 'Two dollars is worth it to me.' It's not that much."
Still, Ms. Robertson said person-to-person online transfers is not "a 'killer app' sort of service."
Mr. Dheer of CashEdge disagreed. "The next generation of online banking is going to be around facilitating money movement," he said.
