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Banks offer person-to-person pay

By Marcie Geffner ·
Saturday, July 23, 2011
Posted: 12 pm ET

Consumers who want to send money to a friend or relative or make a payment to a business that doesn't accept credit or debit cards will soon have another option, other than cash or a personal check.

The new service will allow customers of Bank of America, JPMorgan Chase, Wells Fargo and potentially other banks to transfer funds directly from a checking account to a recipient using his or her email address or mobile phone number.

The three banks formed a joint venture to offer the service, which will "roll out nationally" and be expanded over time to include other financial institutions, according to a press statement. (News outlets have reported that a pilot program was started in Arizona.)

The technology behind the person-to-person payment service is clearXchange, from the same-named company headquartered in Charlotte, N.C. The banks will pay clearXchange for the service.

ClearXchange offers the potential to replace cash and personal checks in everyday situations such as splitting a restaurant bill, tipping a hairstylist or paying a home repair contractor. The service also could be a competitive threat to middle-man technologies such as PayPal that offer electronic person-to-person payments at a cost.

Customers won't need to set up a third-party account or use bank routing and account numbers to make a payment to someone.

Whether the three banks, and any others that may join the system, will offer the service free to their own banking customers along with their checking account or will charge a fee, either monthly or per-transaction, remains to be revealed. Questions about fraud protection, error correction and so on are also yet to be answered.

Other banks already offer person-to-person payment services. ING Direct, for instance, recently introduced a "bump" technology that allows checking-account customers to transfer payments between Apple iPhones. The bank also offers an email-based person-to-person payment service for customers who use other mobile devices.

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