Wells Fargo & Co. announced Monday that it is joining the growing list of banks offering free person-to-person money transfers.
Though bankers have long feared that making fund transfers easy would prompt customers to move out their deposits, a flurry of such services seems to indicate that some banks consider them a competitive advantage.
But analysts say banks seem unsure whom to target with them.
Wells Fargo’s service enables customers to transfer money to other Wells customer accounts. It is available now, and next year the San Francisco company plans to let customers use it to transfer funds to and from their accounts at other banks.
Bank of America Corp. introduced a similar service in September. Citigroup Inc. and E-Trade Financial Corp. also have transfer services.
Jim Smith, Wells’ executive vice president of consumer Internet products, said people are likely to switch to transfers because they are faster than checks. “What used to take days now takes seconds,” he said.
He also touted the service as a way for parents to transfer money to students without having to set up linked accounts. In September, Bank of America also said that its new person-to-person transfer service could be useful for families.
Wells already had a linked-account option for transfers between accounts owned by parents and their children.
Banks that promote linked accounts say they make customers more valuable by encouraging them to use the Internet, a lower-cost channel.
Mr. Smith said Wells has been testing the service in recent weeks with its employees. He would not say how much they used it.
Gwenn Bezard, a senior analyst for the Boston market research firm Celent Communications LLC, said that “account-to-account transfers are going to become the key component of online banking applications,” and that banks will find it “increasingly difficult for them to stay away from the trend.”
Twenty percent to 25% of the checks that consumers write are to other consumers, but fewer than 10% of online “bill payments” go to consumers, Mr. Bezard said. (Most online bill-payment services have “pay anyone” capabilities, which allow consumers to initiate payments to other people.)
Consumers realize that they can often get money to people faster by handing them checks than by initiating “bill payments” that require banks to create and mail checks, Mr. Bezard said.
But the instantaneous speed of account-to-account services might attract consumer interest and save banks the cost of processing checks, he said.
The new services would not replace all personal checks, Mr. Bezard added. Few people are likely to start paying their babysitters or gardeners with an online transfer instead of with cash or a check, he said.
Banks do not know how to market P-to-P transfers, Mr. Bezard said. Most are promoting parent-to-student capabilities because “they have had a hard time imagining what other types of transactions consumers could do with account-to-account transfers.”
