NEW YORK -- JPMorgan Chase, Wells Fargo and other big banks are upgrading their online payment services to allow customers to transfer money instantly to others who bank elsewhere, often at no cost.
The move comes as traditional banks face pressure from payment companies such as Venmo and Square Cash that offer ways to split bills.
Banks developed online services that allow their customers to send money to anyone with a phone number or email address several years ago. But the services were considered overly complicated. Until last year, bank customers could only send money to another customer at the same bank. The only option bank customers often had to send money instantly to another person was a wire transfer, which can cost upward of $30 at a branch, or to use a service such as Western Union, which also charges a fee.
When the option to send money to a person at a different bank became available, the service would take upward of three days to complete. Venmo and Square Cash, on the other hand, are open to anyone with a debit card and work in as little as one business day.
The banks don't want to lose more customers and are trying to top the Silicon Valley services.
"This is what our customers have been asking for," said Jason Alexander, head of digital platforms for Chase.
Chase, the nation's largest bank by assets and the largest bank operator of person-to-person payment services, is rolling out its upgrade to Chase QuickPay next month. Wells Fargo is starting its service in July. Bank of America customers have had the ability since March, but only between them and U.S. Bank -- they were the only two with the necessary software upgrades at the time.
The instant payments between these big banks come with a limitation: the instant payments will only occur between banks on the same network, called clearXchange. The network includes Chase, Wells Fargo, Bank of America, U.S. Bank, Capital One and Colorado-based FirstBank. That network represents 60 percent of all U.S. mobile banking customers, according to a Chase spokesman.
Acceptance of mobile payments has accelerated in recent years. About 46 percent of U.S. consumers have made a mobile payment, according to a study by The Pew Charitable Trusts released this week, with most of those users being millennials or members of Generation X.
Users of Venmo sent $1 billion in payments in January this year, up from $100 million in the same month in 2014. In comparison, Chase customers now send $20 billion a year using QuickPay. Wells Fargo customers send $10 billion over its service SurePay.
"Whether they use Venmo, or use a bank, this growth wraps around the same issue: the awkwardness of cash and how it's going away," said Anuj Nayar, PayPal's director of global initiatives.
The banks in the clearXchange network are not charging a fee for the instant transfer of funds, with the exception of U.S. Bank, which will charge a fee up to $6.95 for instant delivery. Venmo and Square Cash are for the most part free as well, although there is sometimes a fee of up to 3 percent on Venmo transfers where the customer uses a credit card.
Business on 05/28/2016
Print Headline: Banks' upgrades to ease client-to-client transfers