The online account-to-account transfer market will soon have a new provider.
Yodlee Inc., a Redwood Shores, Calif., company whose account aggregation software is already widely used by banks, has announced that it will start offering a funds transfer module this quarter.
Archie Emerson, Yodlee's general manager of funds transfer, said last week that it plans to offer the transfer software by itself or as a part of an upgraded version of its aggregation product, OnCenter.
More than 150 companies are using Yodlee's aggregation software, including Bank of America Corp., HSBC Bank USA, JPMorgan Chase & Co., Wachovia Corp., and several other major banking companies.
Some of Yodlee's customers already offer transfer services using software from CashEdge Inc. of New York, which is considered the leader in the transfer market. Mr. Emerson said banking companies that are using Yodlee for aggregation and another vendor for funds transfers might use Yodlee for funds transfers after the upgrade is introduced.
"Funds transfer is an integral part of that upgrade," he said. "That was the force behind creating it - as an upgrade to aggregation."
Dan Schatt, a senior analyst for the Boston market research firm Celent Communications LLC, said that Yodlee's transfer software "could be a big threat" to CashEdge, which "has been the only game in town."
However, he also said that Yodlee will face a well-entrenched competitor with a well-proven technology.
Sanjeev Dheer, CashEdge's president and chief executive, said he is unconcerned about the new potential competitor. CashEdge has more than 250 bank customers, he said, including four of the ten largest U.S. banking companies: B of A, HSBC, Citigroup Inc., and a fourth that he would not name. Two more top 10 banking companies will soon go live with CashEdge's software, he said.
CashEdge's strength is its risk model, which evaluates transfers for potential fraud and has been in use since the company introduced its first transfer software four years ago, Mr. Dheer said. "This is a very mature product."
Though demand for transfers has grown slowly in the past several years, the pace has picked up dramatically in the past 12 months, Mr. Dheer said. But at the same time, online fraud has also become a much bigger problem, and using the Internet to initiate fraudulent transfers between accounts "is a growing problem," he said. "The easier you make it for people to move money," the more likely it is that criminals will try to use the service to steal money.
However, Mr. Dheer said CashEdge's anti-fraud techniques have managed to keep its loss ratios "at an insignificant amount."
CashEdge's transfer volume reached an annual run-rate of almost $3 billion at the end of last year, and that figure should be close to $6 billion by the end of this year, he said. Some companies that use both vendors' products say they have no plans to switch to Yodlee's transfer software.
Betty Riess, a spokeswoman for B of A, said Yodlee's transfer software will have "no impact" on the person-to-person transfer service the Charlotte banking company introduced in October. "We've got an existing P-to-P function, and we're very happy with it. It's doing really well," she said.
Stephen Cohen, a spokesman for HSBC, said it never comments on speculation about vendor relationships. HSBC has been using CashEdge for transfers since February, and "it has been a very successful feature," he said.
Beth Robertson, a senior analyst at MasterCard International's TowerGroup Inc. research unit in Needham, Mass., said consumer demand for transfer services is growing. She predicts that people will initiate 194 million transfers this year, almost five times the 40 million she documented in 2001. (Both figures include transfers between banks and those between a customer's accounts within a bank.)
"It makes sense that people will want to do this, because most people do have multiple financial services relationships," she said. "It's easier than mailing a check."
Most banks offer a "me-to-me" service that people can use to move money between their own accounts at different banks, Ms. Robertson said. But no bank offers a true person-to-person transfer, which would let customers send money from their account at one bank to another person's account at another bank, she said.
Mr. Dheer said that he is working with a large bank on just such a service, which "will go live later this year."
