Incredible, in this digital age most people paying a house cleaner or collecting money still use cash or a check. And checks are slow…The slowness has led Americans to new mobile services, like PayPal’s Venmo or Square Cash. But Big Banks are waking up.Wells Fargo joined JPMorgan Chase, Bank of America and US Bank in allowing customers to send money in seconds to one another’s bank accounts using just a phone number or email address. The real question is: who will control the payment network of the future? Fintech Players? Credit Card Operators? High Tech Challengers like Apple, Google and Samsung? Leading Banks? American bank executives fear that they could lose ground to plucky payment companies like Venmo, a popular choice among millennials who want to pay each other — and send emoji-filled messages to their friends.

1. Under Pressure, Big Banks Vie for Instant
Payment Market
Venmo advertisements on a subway in Manhattan. More Americans are turning to services like Venmo, PayPal’s instant mobile payment
service, because they consider banks too slow.
JOSH HANER / THE NEW YORK TIMES
By MICHAEL CORKERY and NATHANIEL POPPER
AUGUST 1, 2016
In this digital age when almost anything can be had in an instant, the movement of money
can seem glaringly slow.
Most people paying a housekeeper or collecting money for an office pool still use cash or a
check, which can take days to go through — a relative eternity that banking regulators
worry is impeding commerce and economic growth.
The slowness has led many Americans to new mobile services, like PayPal’s Venmo or
Square Cash, which make it possible to pay a friend instantly with just a phone.
Now, the banks are catching up. On Monday, Wells Fargo joined JPMorgan Chase, Bank of
America and US Bank in allowing customers to send money in seconds to one another’s
bank accounts using just a phone number or email address. Customers of the biggest banks
can now use their mobile phones, say, to send money instantly to a child in college who
needs cash.

2. “We pay attention to what customers are asking for, and we are doing all the things we
need to stay competitive,’’ said Brett Pitts, who leads digital initiatives at Wells Fargo.
The stakes are high: Banks are under broad pressure both from the Federal Reserve, which
has a “faster payments committee” aimed at requiring immediate improvements, and from
tech companies like PayPal and Apple, whose Apple Pay service was a bright spot in its
recent earnings report.
All these companies, and Visa and MasterCard, are competing to build and control the
payment network of the future.
Banks are promoting their new services as cool and convenient: One Chase advertisement
shows the basketball star Stephen Curry dribbling a basketball while making an instant
payment on his phone.
American bank executives fear that they could lose ground to plucky payment companies
like Venmo, a popular choice among millennials who want to pay each other — and send
emoji-filled messages to their friends.
The banks worry that if they do not respond with their own instant payment offerings, they
will be relegated to performing less-profitable back-office functions for hip new payment
companies, which make their money primarily by charging small fees to customers who pay
by credit card rather than directly from a bank account.
The person-to-person payment market is valuable because it allows financial companies to
gain the first point of contact with a consumer and then try to sell them other products like
loans.
Analysts predict that eventually the new payments network could be extended to connect
consumers with merchants, providing a potentially lucrative source of fees for banks.
“It’s like owning a toll road: You are going to get paid by everybody that uses it,” said Gareth
Lodge, a payments analyst at Celent, a financial consulting firm.
Mastercard and Visa, which have a tight grip on payments made with credit and debit cards,
are also trying to gain a foothold in these new networks.
Late last month, Mastercard acquired a majority stake in VocaLink, the company that
operates a mobile and internet payment network in the United Kingdom and is helping to
develop an even broader system in the United States. Also, Visa recently announced a broad
partnership with PayPal that will make both of their offerings more instantaneous.
Instant person-to-person payment is something that people in many other countries have
been able to do for years, and the absence of the service in the United States has been a
marker of the relative backwardness of American banks.
The banks began developing the system being introduced this year in 2011, when Bank of
America, JPMorgan and Wells Fargo created a network called clearXchange. That system has
already allowed bank customers to send each other money using just an email address or
cellphone number, but transactions were not instant until this year.
In addition to payments technology that the nation’s largest banks are rolling out this
summer, banks that belong to an industry group called the Clearing House are developing a

3. broader network that will allow businesses and even governments to make large instant
payments.
A fast and efficient payment network also has implications for the economy. Federal officials
and analysts say the current lag time between when a payment is sent and when the money
is cleared to spend can hinder businesses from balancing their books and managing their
supplies. The lag also puts the United States at a disadvantage compared with, say, Europe,
where banks are far ahead in making payments instantaneous.
The banks now face a challenge to make their real-time technology easy enough to lure
customers away from start-ups like Venmo.
With Venmo, a user can send money to anyone simply by tapping into the app and entering
a phone number or email address. By contrast, customers of JPMorgan Chase, for example,
must log into their Chase app using their password, then navigate through a series of
somewhat clunky tabs to initiate a transaction with QuickPay. The banks also lack the social
networking capabilities that have helped make Venmo a hit.
Talie Baker, a payments analyst at the Aite Group, a banking consultancy, said that even her
friends who have Chase’s service often do not think it is worth using. “I can’t get anybody to
accept a Chase QuickPay payment from me,” she said. “Banks are probably going to start
losing market share if they don’t make their applications as easy to use as Venmo is.”
Chase and the other banks say the additional steps they ask of customers provide more
security. The banks also say they are already handling significantly more personal payments
than Venmo and other competitors like Square Cash.
Chase said that last year it processed about $20 billion in so-called peer-to-peer payments,
while Venmo handled about $10 billion. PayPal as a whole made about $40 billion in such
payments, the company said.
The banks should have a significant advantage over technology companies, given the sheer
number of customers they already have, payment industry analysts say.
PayPal and the banks say the most immediate opportunity is not taking business from one
another, but cannibalizing the enormous number of payments that are still made by cash
and check, which represent more than three-quarters of all peer-to-peer transactions.
Bill Ready, who oversees Venmo at PayPal, said he was happy that American banks were
finally catching up with the progress that has been made in most other developed countries.
“The rest of the world has already been here a long time,” he said. “To see an industry move
is a great thing.”
Link for original article:
http://www.nytimes.com/2016/08/02/business/dealbook/banks-mobile-payment-wells-
fargo.html?