Bucks: Person-to-Person Payments Get Easier at Big Banks

Three of the nation’s biggest banks introduced a service that will enable their customers to move money from their checking accounts using only an e-mail address or a mobile phone number.

Bank of America, JPMorgan Chase and Wells Fargo already introduced the transfer service, called clearXchange, in Arizona, and it will roll out in more markets in coming months. It will be available nationwide within a year.

The new service will improve upon banks’ existing person-to-person payment services, and it will compete directly with PayPal, which has shuttled money between consumers for years.

But the banks claim that their new service will be more convenient because it cuts out the middle man: PayPal isn’t a bank, so you need to fund your account with money from a checking or other account. With the banks’ service, the money will be ferried directly from your checking account to the person you want to pay. And it doesn’t require you to dig around for a routing or other account number, as some services require.

“The key thing here is that you don’t have to set up any additional accounts,” said Mike Kennedy, head of payments strategy at Wells Fargo and chairman of clearXchange. “People have a primary savings and checking account with their institution and that is what they want to transact out of.”

The new service should save consumers time — though paper checks and cash still work just fine. But it’s unclear how much, if anything, it will cost. Pricing is up to each participating bank. If banks do charge for the service, you’ll have to figure out if the convenience factor makes it worthwhile.

So how will it work? Let’s say you want to pay your friend back for dinner. If you both bank at any of the institutions in the network, you can reimburse your friend in a couple of ways. You can do it on the spot with your cellphone by accessing your bank’s mobile application or mobile banking site. Or, you can do it from your bank’s Web site on your computer.

Either way, you would then enter their name, mobile phone number or e-mail address, and the amount you want to transfer. There’s also an optional “memo” field to note what the payment is for.

After you hit send, the recipient will then get an e-mail or text message that alerts them of your payment with instructions on how to make sure it lands in the correct account. The first time they use the service, they will need to register their e-mail or phone number so it’s associated with their account.

That raised several concerns in my mind: What happens if you mistype your buddy’s e-mail address or mobile phone number and the wrong person gets the message – will they be able to retrieve your money instead? Or what if someone hacks into your e-mail account and finds the note that someone wants to send you $200?

In all of those scenarios, bank executives said the potential thief would need to have your online banking user name and password. If someone did manage to break into your online banking account, they could conceivably send your money to their own account. That’s not a new threat though. If a fraud were to occur, the banks said they would refund the person sending the money as soon as possible.

Many banks already offer person-to-person payment services. At ING Direct, for instance, you can send money from your phone or your computer using the person’s name, e-mail address and the last four digits of their bank account number; you can save their information on a drop down menu for future payments. (ING customers with iPhones can also transfer money to one another by entering the amount in the bank’s mobile app and “bumping” their phones).

But the banks that are part of the new exchange argue that their service makes the process even easier, for both senders and recipients. For instance, recipients in many existing services would need to enter their routing number on the bank site of the person sending them money. In the clearXchange system, they can retrieve their money using their own bank.

The exchange hopes to lure more institutions to its service – it’s already discussing those possibilities with other big banks – which would increase the population of people who can transfer money this way. And eventually, the banks said they plan to offer the same service to customers who want to send money outside of the network.

Would you use the new service? And would you pay for it?

Article source: http://feeds.nytimes.com/click.phdo?i=3f6f0c70389033306e4488e63a9b6243