With demand surging for person-to-person transfer systems, payments companies are developing ways to make the transactions settle faster.
The concept was considered little more than an interesting idea a year ago, but hundreds of banks are installing P-to-P systems now in an effort to attract the growing number of people, especially young people, who see mobile phones as a critical component of their modern lives.
Several companies that operate P-to-P systems are planning to make the money move faster by hooking in to credit and debit networks, and they say these accelerated transfers could offer banks a new source of fee revenue.
"People are used to paying for speed," said Jeff Lewis, the president of Fidelity National Information Services Inc.'s e-payment solutions division. Person-to-person payment systems "give banks a new way to charge fees and a new revenue stream."
The Jacksonville, Fla., banking technology vendor said its first bank user would begin testing this month the person-to-person transfer service it announced in November, the result of a partnership with PayPal Inc. Lewis would not name the bank. Four other financial companies have agreed to use the system, and FIS has gotten "quite a few inquiries" from both its current bank customers and noncustomers, he said.
Users can initiate payments online or by mobile phone and can route the money to a recipient's e-mail address or mobile phone number. The funds are sent through PayPal's network; if the sender knows the receiver's bank account details, the money can be directed across the automated clearing house system directly into the account.
Lewis said the PayPal option offers real-time payments but ACH payments typically settle the next day. (PayPal is the payments unit of eBay Inc.)
However, he said that many consumers expect electronic transactions to happen immediately, and FIS is working on two options to accelerate its P-to-P service. The Federal Reserve banks are working on a same-day ACH service, and Lewis said FIS has developed a version of its transfer service that will use it, once the payment format goes live.
FIS is also working to connect its P-to-P service to NYCE Payments Network LLC, the debit system it acquired in October when it completed its purchase of Metavante Technologies Inc. That feature is "almost ready," Lewis said, and will offer real-time settlement for P-to-P payments sent between accounts at banks that use NYCE.
Lewis said that final pricing has yet to be worked out; some banks, including the one that is testing the FIS system, will charge users fees for P-to-P payments, but others might offer it for free. Faster payments are more likely to command a fee, much as the expedited bill-pay services offered by some banks to deliver last-minute payments to billers.
"Speed and usability are the key components in establishing price, and not all systems are equal," Lewis said.
Other vendors are seeing even more customer activity.
Five banks are using the POPMoney transfer service that CashEdge Inc. introduced last June, and Neil Platt, the New York company's senior vice president and general manager of banking, said last week that 165 more should go live by midyear.
"Everyone is putting a lot of weight behind P-to-P," he said, and demand for the service is "ahead of where we thought it would be."
POPMoney payments can be initiated by phone or online and funds move across the ACH network; recipients are notified of the transactions immediately. Platt said his company is planning to work with credit card networks to develop a real-time service, possibly by yearend. He agreed that banks would be able to offer faster P-to-P payments as a premium service that would charge fees.
CashEdge has also struck a deal with the mobile banking software vendor ClairMail Inc., which is incorporating the POPMoney service into its software. The transfer feature will be available to all of ClairMail's bank customers, and Reetika Grewal, the Novato, Calif., vendor's director of product marketing, said the first one should begin offering CashEdge's transfer service in June. ClairMail has about 40 bank clients, including six of the top 10 U.S. banks.
Grewal said that the growing use of smart phones is driving interest in mobile P-to-P services. Consumers are realizing that phones can do much more than handle voice calls, and banks are keen to turn phones into financial tools.
P-to-P payments systems and mobile remote capture applications, which let people deposit checks electronically by taking a photo of them with a phone's camera, are the features most requested by ClairMail's bank clients.
"You have to do mobile banking to get to mobile payments, and P-to-P is a natural first step," Grewal said.
ClairMail has a development deal with Visa Inc., though she would not say what the companies are doing together.
Fiserv Inc. is preparing to introduce a P-to-P payment service this summer called ZashPay. Geoff Knapp, the company's vice president for online banking and consumer insights, said 40 financial institutions, including two of the top 10 U.S. credit unions, are signed up and will be ready to go when the service goes live.
"Banks are clamoring for this service," he said, because it appeals to younger customers who like to handle their money electronically and rarely, if ever, write checks.
ZashPay will route payments between accounts at the more than 3,100 financial companies that also use Fiserv's bill-pay network. "We come out of the gate with a network of 16 million users," Knapp said.
As with bill payments, the money moves through the ACH network, and he said Fiserv has no plans to develop a faster version. "We have a good network now," he said. "We aren't going to invest in another network." Though the money does not move in real time, recipients are notified immediately that the money is coming, and he said this can often satisfy users.
"Speed, and perceived speed, is everything in the payments game," he said.
Knapp said he expects banks to charge a fee for the ZashPay service, perhaps 50 to 75 cents to send a payment. Though he was uncertain whether P-to-P payments will always be something for which people are willing to pay, banks should initially charge fees before they lose this option. "Once it goes all the way to free, you can't go back," he said.