Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. on Wednesday announced the launch of clearXchange, a person-to-person payments service that will let their customers send money directly to each other using an email address or mobile phone number.
Bank of America and Wells Fargo began rolling out the service, which customers access through the banks’ websites, to customers in Arizona in late April. JPMorgan Chase will begin making it available to customers soon, and the three banks will gradually roll the service out during the next year, Michael Kennedy, the chairman of clearXchange and head of payments strategy at Wells Fargo, said in an interview on Wednesday.
“What we all found was our customers were increasingly looking for ways to safely and conveniently be able to send money electronically to other customers and they want to do so from the convenience of their current online banking sites using their current checking and savings accounts,” Kennedy said. “They didn’t want to set up new accounts. They didn’t want to have to go to a different site.”
Bank of America and Wells Fargo are currently offering the service for free, though the banks could charge customers for the service, said John Feldman, the general manager of clearXchange and a Bank of America executive.
Several P2P payments services, including eBay Inc.'s PayPal, Fiserv Inc.'s ZashPay and CashEdge Inc.'s Popmoney, already allow consumers and businesses to send money to each other using email address or mobile phone number. PayPal, traditionally viewed as a competitor to banks, requires consumers to set up a separate account and link a bank account to use it.
Credit card network Visa Inc. earlier this year announced a service that lets customers send money from one Visa card to another through banks that issue the network's cards.
ClearXchange, which is being offered to banks through a joint venture with the three banks, is taking aim at PayPal’s market but it could also pose competition for ZashPay and Popmoney.
“This is bigger news for those guys than it is for PayPal,” Emmett Higdon, the founder and president of payments consulting firm Prizm Strategy and a former Citigroup Inc. executive, said.
Both services, developed by third-party vendors, have been seen as more bank-friendly because they integrate with banks’ existing websites.
Neil Platt, the executive vice president and general manager of banking and payments at CashEdge, said he does not view clearXchange as competition. In fact, CashEdge and clearXchange have discussed integrating their services in the future, Platt said.
“This is about a bank-centric P2P network coming together,” Platt said. “It’s not about competition between the application provider, which is us, and a couple of large banks forming their own network, which is what clearXchange is.”
Integrating a service like Popmoney with clearXchange would eliminate the need for end users of each service to have to create separate accounts to make money transfers to each other, Platt said.
Banks "are essentially trying to regain the ground that they've lost ... and time that they've lost and wasted over the past 10 years by not really competing with PayPal," Gwenn Bezard, a research director with Aite Group LLC, said in an interview on Tuesday.
Some banks, including Wells Fargo and Citi, had offered their own P2P services several years ago to compete with PayPal, though those efforts ultimately floundered.
"They were so focused on competing with one another that they ignored essentially the threat of PayPal," Bezard said.
However, they still have a shot to regain that ground, he added.
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