UnderPressure,BigBanksVieforInstantPaymentMarket

VenmoadvertisementsonasubwayinManhattan.MoreAmericansareturningtoserviceslikeVenmo,PayPal’sinstantmobilepaymentservice,becausetheyconsiderbankstooslow.JOSHHANER/THENEWYORKTIMES

By MICHAEL CORKERY and NATHANIEL POPPER AUGUST 1, 2016 Inthisdigitalagewhenalmostanythingcanbehadinaninstant,themovementofmoneycanseemglaringlyslow.Mostpeoplepayingahousekeeperorcollectingmoneyforanofficepoolstillusecashoracheck,whichcantakedaystogothrough—arelativeeternitythatbankingregulatorsworryisimpedingcommerceandeconomicgrowth.TheslownesshasledmanyAmericanstonewmobileservices,likePayPal’sVenmoorSquareCash,whichmakeitpossibletopayafriendinstantlywithjustaphone.Now,thebanksarecatchingup.OnMonday,WellsFargojoinedJPMorganChase,BankofAmericaandUSBankinallowingcustomerstosendmoneyinsecondstooneanother’sbankaccountsusingjustaphonenumberoremailaddress.Customersofthebiggestbankscannowusetheirmobilephones,say,tosendmoneyinstantlytoachildincollegewhoneedscash.

“Wepayattentiontowhatcustomersareaskingfor,andwearedoingallthethingsweneedtostaycompetitive,’’saidBrettPitts,wholeadsdigitalinitiativesatWellsFargo.Thestakesarehigh:BanksareunderbroadpressurebothfromtheFederalReserve,whichhasa“fasterpaymentscommittee”aimedatrequiringimmediateimprovements,andfromtechcompanieslikePayPalandApple,whoseApplePayservicewasabrightspotinitsrecentearningsreport.Allthesecompanies,andVisaandMasterCard,arecompetingtobuildandcontrolthepaymentnetworkofthefuture.Banksarepromotingtheirnewservicesascoolandconvenient:OneChaseadvertisementshowsthebasketballstarStephenCurrydribblingabasketballwhilemakinganinstantpaymentonhisphone.AmericanbankexecutivesfearthattheycouldlosegroundtopluckypaymentcompanieslikeVenmo,apopularchoiceamongmillennialswhowanttopayeachother—andsendemoji-filledmessagestotheirfriends.Thebanksworrythatiftheydonotrespondwiththeirowninstantpaymentofferings,theywillberelegatedtoperformingless-profitableback-officefunctionsforhipnewpaymentcompanies,whichmaketheirmoneyprimarilybychargingsmallfeestocustomerswhopaybycreditcardratherthandirectlyfromabankaccount.Theperson-to-personpaymentmarketisvaluablebecauseitallowsfinancialcompaniestogainthefirstpointofcontactwithaconsumerandthentrytosellthemotherproductslikeloans.Analystspredictthateventuallythenewpaymentsnetworkcouldbeextendedtoconnectconsumerswithmerchants,providingapotentiallylucrativesourceoffeesforbanks.“It’slikeowningatollroad:Youaregoingtogetpaidbyeverybodythatusesit,”saidGarethLodge,apaymentsanalystatCelent,afinancialconsultingfirm.MastercardandVisa,whichhaveatightgriponpaymentsmadewithcreditanddebitcards,arealsotryingtogainafootholdinthesenewnetworks.Latelastmonth,MastercardacquiredamajoritystakeinVocaLink,thecompanythatoperatesamobileandinternetpaymentnetworkintheUnitedKingdomandishelpingtodevelopanevenbroadersystemintheUnitedStates.Also,VisarecentlyannouncedabroadpartnershipwithPayPalthatwillmakebothoftheirofferingsmoreinstantaneous.Instantperson-to-personpaymentissomethingthatpeopleinmanyothercountrieshavebeenabletodoforyears,andtheabsenceoftheserviceintheUnitedStateshasbeenamarkeroftherelativebackwardnessofAmericanbanks.Thebanksbegandevelopingthesystembeingintroducedthisyearin2011,whenBankofAmerica,JPMorganandWellsFargocreatedanetworkcalledclearXchange.Thatsystemhasalreadyallowedbankcustomerstosendeachothermoneyusingjustanemailaddressorcellphonenumber,buttransactionswerenotinstantuntilthisyear.Inadditiontopaymentstechnologythatthenation’slargestbanksarerollingoutthissummer,banksthatbelongtoanindustrygroupcalledtheClearingHousearedevelopinga

broadernetworkthatwillallowbusinessesandevengovernmentstomakelargeinstantpayments.Afastandefficientpaymentnetworkalsohasimplicationsfortheeconomy.Federalofficialsandanalystssaythecurrentlagtimebetweenwhenapaymentissentandwhenthemoneyisclearedtospendcanhinderbusinessesfrombalancingtheirbooksandmanagingtheirsupplies.ThelagalsoputstheUnitedStatesatadisadvantagecomparedwith,say,Europe,wherebanksarefaraheadinmakingpaymentsinstantaneous.Thebanksnowfaceachallengetomaketheirreal-timetechnologyeasyenoughtolurecustomersawayfromstart-upslikeVenmo.WithVenmo,ausercansendmoneytoanyonesimplybytappingintotheappandenteringaphonenumberoremailaddress.Bycontrast,customersofJPMorganChase,forexample,mustlogintotheirChaseappusingtheirpassword,thennavigatethroughaseriesofsomewhatclunkytabstoinitiateatransactionwithQuickPay.ThebanksalsolackthesocialnetworkingcapabilitiesthathavehelpedmakeVenmoahit.TalieBaker,apaymentsanalystattheAiteGroup,abankingconsultancy,saidthatevenherfriendswhohaveChase’sserviceoftendonotthinkitisworthusing.“Ican’tgetanybodytoacceptaChaseQuickPaypaymentfromme,”shesaid.“Banksareprobablygoingtostartlosingmarketshareiftheydon’tmaketheirapplicationsaseasytouseasVenmois.”Chaseandtheotherbankssaytheadditionalstepstheyaskofcustomersprovidemoresecurity.ThebanksalsosaytheyarealreadyhandlingsignificantlymorepersonalpaymentsthanVenmoandothercompetitorslikeSquareCash.Chasesaidthatlastyearitprocessedabout$20billioninso-calledpeer-to-peerpayments,whileVenmohandledabout$10billion.PayPalasawholemadeabout$40billioninsuchpayments,thecompanysaid.Thebanksshouldhaveasignificantadvantageovertechnologycompanies,giventhesheernumberofcustomerstheyalreadyhave,paymentindustryanalystssay.PayPalandthebankssaythemostimmediateopportunityisnottakingbusinessfromoneanother,butcannibalizingtheenormousnumberofpaymentsthatarestillmadebycashandcheck,whichrepresentmorethanthree-quartersofallpeer-to-peertransactions.BillReady,whooverseesVenmoatPayPal,saidhewashappythatAmericanbankswerefinallycatchingupwiththeprogressthathasbeenmadeinmostotherdevelopedcountries.“Therestoftheworldhasalreadybeenherealongtime,”hesaid.“Toseeanindustrymoveisagreatthing.”Linkfororiginalarticle:http://www.nytimes.com/2016/08/02/business/dealbook/banks-mobile-payment-wells-fargo.html?