Banks to finally embrace P2P?

It seems like we've been taking about person-to-person bank transfers, P2P, for the longest time; it's long been one of those technologies that's perpetually "on the verge" of taking off. But the fact is that banks have not had a lot of success with P2P. Citigroup, BankOne and Wells Fargo are among those who have tried and failed to establish this sort of service. 

So we find ourselves still "on the verge." 

CashEdge is doing its part to kick start things. It has announced that more than 100 financial institutions are adding its POPmoney service and will launch the email and mobile service by the end of the second quarter. It touts the service as the email and mobile P2P service for banks that enable customers to send an electronic payment directly from their online or mobile banking service, by simply using the recipient's email address, mobile phone number or bank account information. It comes in SMS, WAP and specific-application formats. 

It will have some wide-ranging competition. Fiserv markets a similar service and will formally launch it in the summer. And there are also, of course, the non-bank competitors. MasterCard has launched a mobile phone P2P service. And then there's PayPal. We've noted before that the online giant seems to have turned a new leaf. Not too long ago it was seen as an adversary of banks, but it now seems to be positioning itself as a partner via bank vendors. PayPal has announced a deal to link its network to Fidelity National Information Systems, which will integrate it into its vendor's bill-pay system; payments to merchants and individuals who cannot accept electronic transfers will now be able to send funds electronically to recipients' email addresses. In addition, PayPal has inked a deal with S1 Corp, which will link its mobile banking software to PayPal software to create a person-to-person transfer service via phones. 

But while consumer demand may be picking up, there are some institutional barriers to widescale adoption. The New York Times notes the view that banks have traditionally been worried "that interbank transfers may mean a loss of funds to other banks and may allow consumers to drain money quickly from their accounts in reaction to rumors about bank failure," which seems relevant now. But you would think this is sort of old-school thinking. To thrive, a bank has to be a lot more confident--you can't live in fear of losing assets. You've got to be much more confident than that. 

Banks are also concerned about fraud. Could this be another point of attack for hackers? That's a perpetual worry, and banks have had plenty of time to move down the learning curve. So perhaps we will finally start to see more banks really embrace this. Stay tuned. - Jim