US banks unite to take on PayPal with clearXchange joint venture

US banks unite to take on PayPal with clearXchange joint venture

Bank of America, JPMorgan, and Wells Fargo have joined forces to develop a clearing house for person-to-person online payments transfer via mobile or e-mail.

In an initiative designed to wrest back control of the PayPal-dominated P2P payment market - and head off the encroachment of newcomers such as Google - the three banks say the clearXchange platform will enable customers to send money to others directly from their online bank account using just an e-mail address or phone number.

Mike Kennedy, executive vice president and head of payments strategy at Wells Fargo, says users do not have to establish a new account outside their primary bank to receive funds: "All our customers need to know is the e-mail address or mobile number of a friend or family member, and we will take care of the rest utilising clearXchange."

The founding banks will own the venture, but plan to expand it to other financial institutions in the near future. Bank of America's John Feldman has been appointed to act as clearXchange general manager.

The move comes as Google prepares to unveil its own NFC-based service for users to spend money and redeem coupons and loyalty points at retailer check-outs. The search engine giant is planning to preview the technology at an event in New York, Thursday. With trials slated for New York and San Francisco, Google is rumoured to have signed up big name retailers such as Macy's, American Eagle Outfitters and the Subway fast-food chain, as participants.

Comments: (4)

Brett King
Brett King - Moven - New York 25 May, 2011, 11:02Be the first to give this comment the thumbs up 0 likes

Classic banking response 11 years too late...

Nick Collin
Nick Collin - Collin Consulting Ltd - London 25 May, 2011, 11:37Be the first to give this comment the thumbs up 0 likes

This could be massive.  I've always thought that if the banks got their act together they could use direct credit payments via ACHs (Automated Clearing Houses) to create a P2P service to rival PayPal and indeed the card schemes.  It would need to be global though.  I wonder if Vocalink is thinking along the same lines?  Does anyone know if the founding US banks are talking to non-US banks or ACHs?

Aaron McPherson
Aaron McPherson - Independent - Newton 25 May, 2011, 17:15Be the first to give this comment the thumbs up 0 likes

The key question I have is whether these transfers will be real-time; if not, then they are not going to be significantly better than what exists today.  A system that requires you to belong to one of a select group of banks is starting at a disadvantage anyway.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 May, 2011, 12:32Be the first to give this comment the thumbs up 0 likes

Given the deep pockets top US banks have, it's not too surprising that they've chosen to create a solution on their own instead of simply tying up with a PayPal or FiServ ZashPay who already offer such solutions. As I'd written in my personal blog at the time ZashPay was launched over a year ago, "...since it (FiServ ZashPay) has the potential to cannibalize the ... alternative fee-generating products already offered by banks, it remains to be seen if FiServ can gain widespread adoption among banks". 

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