ClearXchange Gaining Security Elements Following Purchase by Early Warning

ClearXchange, a bank-owned person-to-person payments company that launched a real-time payments service in June, says its merger with Early Warning Services LLC will assuage concerns about security as more consumers and financial institutions use the service.

Scottsdale, Ariz.-based Early Warning announced Monday it will buy San Francisco-based clearXchange for an undisclosed amount. The deal combines Early Warning’s fraud-prevention and risk-management services with clearXchange’s payment service. The clearXchange name will continue to be the product name for the real-time payments service, but the company name is Early Warning. The deal is expected to close by the end of 2015.

Both entities are bank-owned. Bank of America Corp., JPMorgan Chase, Capital One and Wells Fargo share ownership in each company, with BB&T as the fifth owner of Early Warning and U.S. Bancorp as part owner of clearXchange. As part of the deal, U.S. Bank and PNC are expected to become co-owners of Early Warning.

“ClearXchange has peer-to-peer payments. Early Warning adds immediate availability of deposited items and a product designed for instant bill-pay capabilities,” Lou Anne Alexander, Early Warning chief market-development officer for payments, tells Digital Transactions News. She says Early Warning has approximately 1,100 financial-institution clients.

ClearXchange will benefit from incorporating Early Warning’s fraud-mitigation service into its real-time payments service, says Mike Kennedy, clearXchange chief executive. “As you move more and more to real-time payments, there’s less time to assess the transactions, to catch the bad guys,” Kennedy tells Digital Transactions News. Currently, about half of clearXchange’s transactions are real time, he says.

ClearXchange says it has more than 20 million registered users from more than 7,500 financial institutions. ClearXchange has direct relationships with eight member banks, which collectively represent 60% of mobile-banking customers, a spokesperson says. The remaining clearXchange users utilize the network via clearXchange.com.

Banks and credit unions that use clearXchange will not need to do anything to take advantage of Early Warning’s integration into the payments service, Kennedy says.

Such faster payment services are generating much attention now. The Clearing House Payments Co. LLC, which processes check images and also acts as one of two network operators for the automated clearing house, also announced Monday that it will work with VocaLink, an international payment-systems provider, to build elements of the Clearing House’s real-time payment system for the United States.

The Early Warning/clearXchange deal makes sense, says Sarah Grotta, director of the debit advisory service at Mercator Advisory Group, a Maynard, Mass.-based payments consultancy.

Such efforts are part of an industry-wide initiative to speed up payments. The Federal Reserve created the Faster Payments Task Force, which currently has 328 members, to develop a national framework.

“What the Fed is trying to do is to have a true, national solution,” Grotta says. The Early Warning/clearXchange deal may have accelerated that. “Here you have this group, but representative of a whole lot of customers in the United States, moving forward at a much faster pace.”

Earlier this year, BBVA Compass Bank became the first bank to use a tokenized, real-time payments service from Des Moines, Iowa-based Dwolla Inc.