Top Three Debit Issuing Banks Form clearXchange to Dominate P2P Market

by Mercator Advisory Group 0

P2P payments have been on the industry’s screen for some time. For most of that period, P2P has been the province of non-traditional payment providers, especially PayPal. Bank-based initiatives from Fiserv and CashEdge have picked up a thousand or more FIs but these tend to be smaller organizations (with the exceptions of Chase, a long time CashEdge user). Today’s announcement by Bank of America, JPMorgan Chase, and Wells Fargo is a game changer for P2P and could portend sweeping changes for debit payments.

The clearXchange initial goal is to allow accountholders at these three institutions to readily send money to one another using e-mail and phone numbers as the identifier, instead of needing the recipient’s DDA number. That’s the approach that PayPal has used for years. From the CNN Money story:

For now, the person on the receiving end must belong to one of the three member banks, but they anticipate that other large financial institutions will soon join the venture, and that it will one day be possible to transfer money to anyone.

ClearXchange will charge each financial institution to use the service; each bank can then decide whether its customers need to pay a fee for using it. Currently, customers aren’t charged.

Bank of America and Wells Fargo are testing the new service for customers in Arizona, and Chase will join the tests soon. Soon after completing the pilot in Arizona, the banks will expand the testing to a second region.

By Mercator’s estimates, these top three banks hold just shy of 50 percent of DDA accounts in the USA. Mercator’s been writing on P2P payments for some time, and in our January 2011 report, US Person-to-Person Mobile Payments Market: Gee Whiz or Gee Why?, we made the point that ubiquity really matters for mobile person-to-person payments. Obviously, ubiquity matters for online as well as mobile as both blur into a single, always available channel. The collaboration of Bank of America, Wells Fargo, and JPMorgan Chase in the new P2P network clearXchange makes for a giant leap in ubiquity.

What will be very interesting is how these DDA giants expand that ubiquity to other FIs, either via CashEdge, ZashPay, the Clearing House, or other ACH-based specialist. The potential for CB payments, then, becomes impressive indeed. If these FIs figure out a way to do real merchant acquiring, coupled with Durbin-level pricing, the possibilities are endless.

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