ó U.S. Bank and Bank of America got together this
spring on a system that lets people instantly pay money
to a friend on a smartphone ó with a crucial
Bank charges $6.95 for the service. Bank of America
offers it for free.
already a bit of a discord between us and the other bank
that came out with one of the real-time payments,"
Richard Davis, U.S. Bank chief executive, told analysts
and investors earlier this year. "We have to make
sure that the business of banking doesnít become a
utility in the minds of the consumers where they expect
everything to come without a value price to it."
conflict highlights an upheaval in banking around the
emerging service known in tech and banking as
peer-to-peer payments. Fast-acting firms like PayPal,
Venmo and Square have already attracted millions of
users and handled billions of dollarsí worth of
transactions in which people pay someone else with a tap
on a screen rather than handing over some bills and
firm that becomes dominant in peer-to-peer payments will
help shape the future of transactions with merchants,
who long have yearned to escape the control of card
networks like Visa and MasterCard.
the moment, PayPal has 179 million users worldwide, and
its mobile subsidiary, Venmo, reported $3.2 billion in
transactions in the first quarter, more than double the
volume a year ago. Snapchat and Square both let people
send cash to their friends quickly. On Snapchat, all
users do is type the amount in a message and it shows up
in the other personís bank account. Facebook Messenger
also is rolling out its own payments service.
nationís largest banks, which jointly own a network
called clearXchange, still have major advantages.
control most customersí cash accounts. They alone can
offer true real-time service for now. And they believe
they have the potential clout with clearXchange and its
28 million registered users to attract customers from
many more financial institutions and develop the
critical mass to muscle out the competition.
they have lost ground, particularly among young people,
to slick apps that allow customers to move money ó not
instantly but quickly enough. And in September, payments
through apps not controlled by banks will be able to get
faster, when the Automated Clearing House adds two new
windows for payments to clear during the day.
is definitely something that the banks have taken their
eye off of," said Michael Moeser, an analyst with
digital financial consulting firm Javelin. "As
consumers begin to use other apps like Venmo, Square
Cash, Snapchat and Facebook, thereís a degree of
disintermediation ó Iím not using U.S. Bank, Iím
Quickpay and Wells Fargoís SurePay both already offer
peer-to-peer payments, though not in real time, and not
with the elegance or simplicity of an app like Venmo,
which has caught fire with college students.
Bankís standard peer-to-peer payment service, which
closes transactions in up to three business days, is
free. But the bank is charging for instant payments ó
which it believes customers want ó because offering
the service required investment and the company sees the
option as a premium feature.
principle of charging for speed and convenience is
obviously not something that we invented," said
Gareth Gaston, a U.S. Bank executive vice president.
"The principle of offering a base service for free,
thatís completely fine, and if you have a need to
speed it up, then you pay for more."
Fargo will likely be the third large bank to offer
instant payments on the clearXchange network, expecting
to roll out the service this summer, company officials
said. They would not say whether the service will be
free. Then Wells Fargo, Bank of America and U.S. Bank
customers will be able to send each other money
instantly. The network will be more valuable as more
banks and their customers use it.
to person payments can only work if you have a large
network of people using that network," Gaston said.
itís not clear that most consumers need most payments
to be instant, and itís a rare transaction that
justifies a $6.95 charge, said Moeser, the analyst with
Javelin. A last-minute bill payment, for instance, might
a great product for somebody who is late on a payment or
someone who really needs to make sure that payment gets
done today," Moeser said. "At that price
level, though, itís not going to attract consumers who
want to make it part of their regular payments."
Bank and Bank of America are still in the early stages
with their instant payment service, and wonít say how
many people are using it. Gaston at U.S. Bank said he
believes most people will be moving money to other
people with their phones within five years, and added heís
confident that banks will be at an advantage.
sure, customers trust banks more than they trust
startups," Gaston said.