Depositors at some of the largest US banks are finally going to get the chance to do something quick and simple: send money to another person’s account instantaneously by mobile phone.
The idea has been in the works for at least five years, and in the meantime, Silicon Valley has made incursions into the industry’s role as a payment intermediary. But now, big banks including JPMorgan Chase & Co, Bank of America Corp., Wells Fargo & Co and US Bancorp are starting to plug into a system they jointly own, called clearXchange, that will allow each others’ customers to transfer money in a flash when they split a dinner check, rent payment or vacation bill, Reuters reported.
While technology companies like PayPal Holdings and Facebook Inc already offer snazzy payment apps that appeal to young consumers, the banking industry has a crucial advantage because it controls how quickly money actually moves between bank accounts. Individuals transferred some $200 billion to one another using mobile phones and computers last year, according to Javelin Strategy & Research.
Bank executives and analysts who closely track payment systems say that if clearXchange is fast, functional and user-friendly, banks can make up for lost ground.
Bank of America plans to announce on Wednesday that its customers can transfer funds instantly through clearXchange with customers of US Bancorp, which said last week that it was plugged into the speediest part of the network. JPMorgan Chase & Co and Capital One Financial Corp representatives told Reuters they plan to offer the service later this year.
Analysts expect Wells Fargo & Co and PNC Financial Services Group Inc to do the same. Their representatives declined to comment.
Those six banks are among the seven largest by deposits in the United States. Regional bank BB&T Corp is also one of the seven owners of the network, but is not ready to announce its plans, a spokesman said.
Citigroup, which has the fourth most U.S. deposits, has not joined clearXchange. A spokeswoman declined to say why. Citigroup uses an older network called Popmoney, which is owned by Fiserv Inc, for person-to-person payments.
For clearXchange to be successful, it needs to reach a critical mass of participants so that depositors will be able to transfer funds among most of their friends, relatives and colleagues. Until more banks connect to provide immediate service, the network has little value.
Banks in other parts of the world are making similar moves. In the UK, for instance, there is an app called Paym that allows individuals to transfer up to £250 ($355) to another user’s bank account. Nordic countries are leading the way toward a cashless society, with mobile payment apps Swish in Sweden and MobilePay in Denmark.
Analysts expect the mobile banking market to keep growing as consumers become more aware of apps, and as the technology improves.
