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ClearXchange Goes National But Faces Rivalry from PayPal, Fiserv
May 29, 2012

A year after its birth announcement, the clearXchange person-to-person payments platform finally is set for its first national rollout through a new service called Send & Receive Money from one of its three big-bank owners, Wells Fargo & Co. But clearXchange, whose other owners are Bank of America Corp. and JPMorgan Chase & Co., could find the going tough in a competitive market that features offerings from PayPal Inc., processor Fiserv Inc. and various tech companies.

Still, Wells’s new service is a sign that clearXchange will be a force to be reckoned with, given that its three owners account for about half of all Americans who use online banking. And it may not confine itself to serving only its three founders. “There’s been tremendous interest from other banks,” Mike Kennedy, executive vice president of Innovation and Payment Strategy at Wells and chairman of clearXchange, tells Digital Transactions News. “We’ve received a lot of inquiries, we have had deep conversations.” Kennedy, however, won’t say yet if or when any new users would be ready to sign on with clearXchange.

Wells’s new Send & Receive Money service enables the San Francisco-based bank’s checking and savings account holders to send payments to other Wells and BofA customers without knowing their bank-account numbers. Wells customers can use the service after signing up for online banking and agreeing to the P2P service’s terms and conditions.

A sender using a desktop computer, laptop, or mobile device needs only to enter the recipient’s e-mail address or mobile-phone number. Funds move via the automated clearing house and are available to Wells recipients in one business day. BofA recipients’ funds aren’t available for three business days. All recipients get an immediate notification that they’re receiving money.

Wells customers have been able to transfer money to one another online since 2003. The bank first enabled money transfers through mobile browsers in 2007. Wells extended the service to apps for Apple Inc.’s iPhone and iPod touch in 2009, and to apps for Android, BlackBerry, and Palm mobile devices in 2010. (Wells currently has 7.7 million customers registered for mobile banking; it doesn’t reveal its total online-banking customer base.)

The hitch, of course, was “you needed to know the recipient’s account number,” says Kennedy. “That was not good for customers.”

Thus, the reason for clearXchange. Kennedy says Wells first began testing the new system in Arizona and over the past year expanded it to California, Oregon, Minnesota, Texas, Colorado, and Nevada before its recent national rollout. Once recipients sign up to access their funds, they also can send money, something Kennedy refers to as “the viral nature” of the new service that has helped boost adoption. Kennedy wouldn’t disclose usage figures from the seven test states, but says, “We’re very happy with the results.”

Kennedy expects BofA to introduce its own service based on clearXchange next with Chase to follow, both on their own timetables. Each bank will set its own pricing; Wells currently makes the service free.

Chase already has a P2P service called QuickPay that uses a proprietary platform. The service has been live for about a year online and for six months on mobile devices, and requires only one of the transaction participants to have a Chase account, according to a spokesperson. Money moves via internal transfers or the ACH. How QuickPay will work with clearXchange isn’t publicly known yet. “We are working with clearXchange and will release more information as we get closer,” the spokesperson says by e-mail.

ClearXchange will succeed only if its banks put sufficient marketing resources behind their individually branded P2P products that use it, and make such services simple for customers to use, according to George Peabody, director of the Emerging Technologies Advisory Service at Mercator Advisory Group Inc., Maynard, Mass. “P2P has certainly been a topic for a number of years, but traction is still modest,” he says. “So the issues are marketing support, and how do they make it available.”

P2P services also will benefit if banks could speed up funds availability, Peabody adds. Younger consumers who use debit cards heavily and checks lightly are especially likely to value faster clearing, he notes. “Immediate access to funds does mean something,” he says. “Any lag is definitely unwelcome.” Banks are discussing so-called same-day ACH, but its development has been bogged down by operational issues and differences within the banking community about the need.

Those with a head start in P2P include PayPal and bank processor Fiserv Inc., which last year bought P2P provider CashEdge Inc. and now enables such payments among about 1,400 banks. Fiserv serves many small and mid-size financial institutions, while Kennedy says clearXchange is talking mostly with larger banks as prospective platform users.

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