The person-to-person payment business, which has attracted a number of new players already this year, grew more crowded on Tuesday with the announcement by CashEdge Inc. that it will launch a service later this year. Executives with New York City-based CashEdge, which specializes in supporting online account opening and account-to-account transfers for financial institutions, said they are working with a handful of client banks to introduce its POPmoney product, which is set to go onstream in the fourth quarter. “Probably between three and five [financial institutions] will go live this year,” Neil Platt, senior vice president and general manage for the banking group at CashEdge, tells Digital Transactions News. POPmoney is the latest in a string of services that have emerged in recent weeks that allow consumers to send money to each other electronically. Last week, for example, MasterCard Inc. said its first issuer was now live on a mobile version of its MoneySend P2P service, which is supported by mobile-payments processor Obopay Inc. (Digital Transactions News, June 17) And earlier, the three biggest wireless carriers in Canada announced a P2P service in that country (Digital Transactions News, June 15). CashEdge says POPmoney, which works on either a PC or a mobile phone, responds to consumer preference for a P2P service offered by banks. The company cites results from a survey it conducted earlier this year in which 77% of respondents said they would rather use a P2P service from a bank than from a non-bank service provider such as PayPal Inc. Some 73% said a bank-based service would be more secure than a non-bank service. “We saw that consumers are very interested in having these services provided by their banks,” says Platt. “And we also saw bank demand for it.” A PayPal spokesperson said the company, a unit of eBay Inc., does not comment on the products and services of other companies. That demand stems from banks' recognition of consumer interest and their search for new revenue, Platt says. P2P, he says, “is an interesting and lucrative source of revenue for our clients.” But banks are also responding to incursions non-banks have made in this market, he adds. “Banks have certainly watched PayPal over the last decade with a lot of interest,” he says. “No one likes to see their own potential revenue going into someone else's pocket.” Unlike PayPal, perhaps the best-known and most established of the P2P services, POPmoney doesn't rely on dedicated funding accounts. Rather, it lets consumers send money directly from their own demand-deposit accounts to those of recipients. But whereas PayPal and other services can be used by persons without bank accounts, POPmoney won't work unless both sender and receiver are banked. “The unbanked are not a main focus of ours and honestly not a main focus of our clients,” says Platt. Consumers initiate transactions on their banks' online-banking sites, using either a PC or a handset. The handset option also allows access via a downloadable application or via short-message service (SMS). Payments settle through the automated clearing house either next day or in three days. The three-day option, says Platt, permits banks to offer a so-called good-funds model, since the risk of insufficient funds can be controlled. Banks will pay CashEdge and reprice the service to their customers. Platt refuses to discuss CashEdge's pricing except to say it will likely feature flat per-transaction fees, rather than a percentage plus a fixed fee. The new service represents an extension of an existing CashEdge product called TransferNow Third Party, which allows individuals to send money to other persons. But while with POPmoney senders only need the receiver's e-mail address or mobile-phone number, TransferNow requires bank-account and routing-and-transit numbers. Still, banks using TransferNow have a leg up in adopting POPmoney. “All the heavy lifting has already been done,” Platt says. For non-users, integration time for POPmoney is 10 to 16 weeks, Platt says. He estimates that of CashEdge's more than 600 client institutions, most are TransferNow clients. While many P2P services have struggled to make money, Platt argues the market is now ripe for such a service. “There's a degree of consumer readiness” he says, now that consumers have become comfortable with online banking. P2P could also feed transactions to mobile banking. “The evolution of the mobile channel presents an opportunity that hasn't been there before with P2P,” says Bruce Cundiff, senior analyst at Javelin Strategy & Research, Pleasanton, Calif., in an e-mail message. “P2P could spur mobile-channel interaction and also generate payments-transaction revenue.”
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