Online payments are becoming faster, as person-to-person payment providers forge ties with PIN-debit networks.
CashEdge Inc.’s Popmoney and Fiserv Inc.’s ZashPay handle payments primarily over the automated clearinghouse system and are designed for consumers to access directly from within online-banking sites. This streamlines the payment process, but the method’s weakness is speed, particularly as the expectation for an Internet-based service is that it be immediate, or in “real time.”
To this end, CashEdge says it will partner with NYCE Payments Network LLC (
Transactions switched through PIN-debit networks settle within hours, whereas signature-based card or ACH transactions can take a day or longer to settle.
“The vision has always been to enable low-cost, real-time payments, and this helps us make low-cost, real-time payments ubiquitous through NYCE,” says Neil Platt, Cash Edge senior vice president and general manager of U.S. banking. “This is a major step in helping us get there, and it will increase the usability and appeal of Popmoney.”
NYCE links to 3,000 financial institutions, and Accel/Exchange connects to 2,800. Representatives from both electronic funds transfer networks say real-time payments capabilities would be available to consumers through the banks within the next six months.
“We are making ZashPay even faster with integration to Accel/Exchange,” says Erich Litch, Fiserv senior vice president and general manager of consumer services. “We have been actively working on this integration since ZashPay launched.” Fiserv started offering ZashPay in June. Most of its payments arrive the next day, Litch says.
CashEdge is in talks with banks about distributing the product, and at least one bank has expressed interest so far, Platt says
Both companies are hoping to tap a bank need to generate more revenue from payments, as banks are under severe regulatory pressure for fees and the debit card interchange they charge, experts say.
“With regulatory changes, P2P payments have become a lot more important, and from a consumer perspective there is a lot more interest in mobile and online capabilities to transfer money,” says Ron Shevlin, a senior analyst at Aite Group LLC. Distribution through the debit networks was a natural evolution of P2P payments, he says.
NYCE says it was approaching the deal as a nonexclusive arrangement, while Fiserv says it would pursue partnerships with other networks as well.
Real-time P2P payments increasingly are important to banks because “consumer expectation is clearly that money movement is in real time; they don’t have a good appreciation for the delays in a batch system like ACH,” says Emmett Higdon, a senior analyst at Forrester Research Inc.
Brian Riley, a research director in the bank cards practice at TowerGroup, contends banks also should make themselves a more-viable alternative to Paypal, which has long dominated the P2P market. “There is apprehension about the growth of Paypal and a level of apprehension of how closely you want to align yourselves with them,” Riley says.
This was a strategic ploy on the part of Fiserv and CashEdge to align themselves with processing networks, he adds. “The relationship with [processing networks] remains a very strong one, and leveraging from that perspective gives [banks] a foothold that Paypal does not have,” Riley says.
CashEdge tends to work with top-tier banks, while Fiserv tends to have relationships with mid-tier and smaller banks, experts say.
Real-time online payments represent a strong revenue opportunity for banks, which could sell the new service and pass on the transaction costs to consumers, observers say.
“Most financial institutions will charge their customers for this,” Litch says, noting pricing models likely would be in tiers, with real time payments having higher fees.
Customers are accustomed to online banking being free, though many institutions charge for ACH transfers, Higdon says. Immediate P2P transfers would have to work like a cash replacement for banks to potentially charge for them, he adds
“We need to move this to real-time because that is what is necessary to see mass consumer adoption,” Higdon says. “And for this to be a cash replacement, [banks] need velocity.”
