Can Wells Build Business Payments on P-to-P Tech?

As the banks behind Early Warning's clearXchange network start to flex its muscles, one of their important tasks will be to convince business clients it's worth it to collect funds through a process designed for person-to-person payments.

Consumers are accustomed to sending funds to their peers through apps like Venmo, Facebook Messenger and Square Cash, which pluck recipient info from a contact list rather than requiring detailed bank account information. The system is less common with business payments, which tend to be far more formal — and far more tedious.

Using the clearXchange system "is a double whammy; there's the benefits of faster payments at less cost and you don't have to collect the bank account information. It's just an email address and a phone number," said Brad Stewart, senior vice president and group product manager for treasury management at Wells Fargo.

Wells Fargo is planning to deploy Payment Manager B2P in early 2017,allowing businesses to pay consumers through clearXchange, which means to payments can be executed mostly through email addresses and mobile phone numbers.

Use cases such as tax refunds and insurance payments are still reliant on checks but can benefit from a digital makeover, said Stewart. Universities could also use the service to dispense financial aid, or the process could work in reverse for collecting rent or tuition, he said.

ClearXchange has its roots in person-to-person transactions as a bank-built counter to PayPal, though the banks behind the venture have long touted the system's ability to provide near-real time payments with minimal information sharing.

The banks gradually built in real-time processing for P-to-P transactions, then introduced the capabilities in a rapid-fire series of announcements over the past couple of months, primarily to embed clearXchange within their own distinct services.  

Wells Fargo introduced real-time P-to-P in late June. JPMorgan Chase added the technology, which is considered a key support for mobile payments, as the bank preps to launch its new Chase Pay app. Bank of America and U.S. Bank added real-time P-to-P payments this spring.

While most of the focus has been on consumer transfers, the banks have a much broader view of clearXchange in mind, and are developing other ways to benefit from the network.

Like Wells Fargo, BNY Mellon is using clearXchange to power treasury management functions. BNY is talking up the system's security, combining the network and tokenization to reduce data and other sensitive identity information that's traditionally included in other business payments.

Wells Fargo's Stewart said that beyond the security benefits, there's also the ability for banks to allow traditionally paper-based business transactions to meet the expectations of the digital world that the consumer occupies.

"This speed is important for treasury customers for many of the same reasons it's important to consumers," he said. "Consumers today value and expect immediacy, simplicity and security. And for treasury management it's also about providing solutions that not only get money out quickly but also help with back office processing."

The technology behind clearXchange is not complex or new but can inform an argument to replace paper-based payments for corporates, according to Andy Schmidt, an executive advisor at CEB, noting the model is similar to Pariter, an older Bank of America and Wells Fargo-driven attempt to remove inefficiencies from electronic transactions through a shared system.

"Connecting corporate payments to clearXchange increases the volume on what is largely a proprietary network," Schmidt said. "The concept and the technology are not difficult."

The challenge will be to convince corporations to change an existing workflow for transactions. "'Ease of use' is always a beneficial argument, but there is also a need to inform payers that the new tech is available and there's a benefit to change."