Mobile person-to-person payment options seem to be expanding exponentially, but who needs them?
Discover Financial Services’ Pulse electronic funds network on Feb. 23 became the latest to announce the availability of person-to-person payment capabilities in a deal it inked with Obopay Inc. (
Pulse joins as many as a dozen players already marketing similar offerings, despite the fact that widespread consumer demand seems to be lacking, as does a clear business case for financial institutions.
First Data Corp.’s Star network in September 2010 began offering capabilities from Obopay similar to what Pulse announced (
Obopay has long offered person-to-person funds transfers directly to consumers via mobile phones using the automated clearinghouse system, but the transfers can take more than a day to clear through that avenue.
With its Pulse offering, financial institutions on the Pulse network may offer the person-to-person and account-to-account transfer services based on the Mobile Money for Banks and Credit Unions offering from Obopay. Participants’ accountholders also can receive funds from other institutions to their debit card accounts instantly, the firm says.
“The idea is that more banks can offer their customers mobile account-to-account transfers in real time, and as people increasingly want to move money instantly it’s a plus for banks,” Mike Diamond, Obopay senior vice president of business development, tells PaymentsSource.
But Pulse’s offering is far from unusual as P2P offerings continue to mushroom.
Numerous other providers, including PayPal Inc., Amazon.com Inc. (TextPayMe) and American Express Co. (Serve) also offer various P2P payment services, as do Zashpay, Mpayy, U.S. Bancorp and JPMorgan Chase & Co. (QuickPay). Some are free; several have fees ranging from 25 cents up to $1.
While widespread consumer demand for P2P is not yet obvious, it is an important seed for banks to plant as they hedge their bets on emerging mobile-payments technology, analysts say.
“P2P right now still lacks an audience, but within two or three years it will likely catch on with consumers widely as a more efficient way to move funds around, and banks want to have a foot in the door as that begins to happen,” Brian Riley, senior research director with TowerGroup, tells PaymentsSource.
And as announcements about new mobile-payments schemes mount, banks are eager to position their mobile-banking services to look more like emerging mobile payments, Beth Robertson, director of payments research at Javelin Strategy & Research, tells PaymentsSource.
“As consumers become more comfortable using their smartphones for banking, banks want to be there with services that move them along the curve to mobile payments,” Robertson says.
In a survey Javelin conducted online in October 2011 involving 3,210 consumers, 23% said they had used some form of P2P funds-transfer within the previous year, she notes.
But many gaps exist before P2P becomes ubiquitous, chiefly the lack of connections enabling quick payments between consumers using different banks or payment schemes, Riley notes. Most existing bank-offered P2P products enable immediate transfers only between a bank’s customers or rely on slower ACH connections, he says.
And while many P2P services within banks’ systems are free now to initiate, “the more inclusive P2P gets, the riskier it gets and the more it will affect pricing,” Riley notes.
So far, it is difficult to know how much consumers would be willing to pay for P2P services, Dara Khan, an associate with Linthicum, Md.-based First Annapolis Consulting, tells PaymentsSource.
“It’s very early in the evolution of this product, and banks are still vetting its value,” Khan says.
But while the business case is still developing, “many banks have a strong interest in it,” he says.
In a May 2011 report, First Annapolis Consulting compared several such offerings, including the time needed to complete a single P2P transaction via a mobile handset.
Amazon’s TextPayMe ranked first in the First Annapolis test, at 90 seconds, while most others took around 2.5 minutes to complete a transaction. It took 2.9 minutes to complete a transaction using Obopay’s service and MasterCard's MoneySend took six minutes, First Annapolis reported.
“For P2P payments to catch on, it has to at least be easier and quicker than cashing a check, and there must be access to most banks or payments systems,” Khan says. “And banks’ interest in P2P is indicative of their desire to migrate from offering mobile account-management features to more transactional offerings.”
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