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The clearXchange payments service owned by five of the nation’s six largest banks on Monday announced a real-time payments service that includes not only its original person-to-person payments franchise but also business-to-consumer payments.
Mike Kennedy, chief executive of San Francisco-based clearXchange, tells Digital Transactions News that the system is live now and that member banks and other providers would begin rolling it out over the coming year.
Prospective uses for the real-time service include fast payments to consumers of insurance claims, such as after an auto accident, or of government disbursements, such as reimbursing consumers for losses after a flood, rather than waiting for a check. “It’s great to have those funds immediately,” Kennedy says.
Monday’s announcement deepens clearXchange’s involvement in the fast-developing U.S. market for real-time payments. In addition to automated clearing house governing body NACHA and the Federal Reserve, other entities offering or working on faster payments include tech companies such as Dwolla Inc., Square Inc. and PayPal Inc.’s Venmo service as well as another bank-owned entity, The Clearing House Payments Co. LLC. Just a month ago, MasterCard Inc. unveiled its real-time MasterCard Send service that includes business-to-consumer payments.
The expanded clearXchange service will be available through the company’s owners—Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co., Capital One Financial Corp., and new owner U.S. Bancorp, in addition to non-owner participants such as Lakewood, Colo.-based First Bank Holding Co. First Bank recently said that some 16,000 of its customers have used clearXchange.
Kennedy says that clearXchange is not looking to bring on new owners, but it is now working actively to attract more non-owner financial institutions such as First Bank. He will not say how many more users he hopes to have by year’s end.
The person-to-person payments service already is available to 100 million customers who have online-banking accounts through its current members. Others can access it through the clearXchange Web site. Consumers can send funds to another consumer’s checking or savings account using only an email address or mobile-phone number.
Kennedy would not describe the inner workings of how clearXchange routes and settles transactions in real time, which has various meanings but typically involves crediting the receiver within minutes of the sender initiating the payment. The ACH, on which many P2P services including clearXchange have depended, settles payments on the next business day. “At this point we’re looking at it as a proprietary solution,” Kennedy says.
“The end result is what matters to users, so they have funds available in real time.”
Consultant Steve Mott of Stamford, Conn.-based BetterBuyDesign, however, says the owner banks likely have direct links to each other, “so that’s probably how they’re going to do it.” It’s also possible that clearXchange could be leveraging the technology of Early Warning Services LLC, a bank-owned risk-control company that has real-time connectivity, according to Mott.
Exactly what constitutes a “real-time” payment is a matter of debate in the payments industry, especially as NACHA moves to speed up ACH payments. For clearXchange, the big banks’ connections are a sign that the transaction data probably will move in real time. Settlement doesn’t necessarily have to occur at the same time, according to Mott.
“You can transact on a commitment; the settlement can follow,” he says.
Participating banks will set retail pricing for clearXchange services. ClearXchange charges a wholesale transaction rate to financial institutions; it’s up to them whether to pass on all or part of it to customers, according to Kennedy.
