[Dave Birch] A year ago, I remember reading and agreeing with Javelin that banks would have to start doing something about, amongst other things, person-to-person payments. At the time, I was thinking about UK banks and the need to accelerate the development of interpersonal solutions to reduce cash usage and respond to the 2018 target for the end of cheque clearing (now removed as we have decided that the future is paper after all).

Facing limited budgets, increased regulation, angry consumers, and higher fraud incidence, banks must prioritize scarce investments related to customer fee models, mobile channels, social media, P2P, data breaches and PCI compliance, and even new solutions for ATMs, PINs and real-time systems.

[From Javelin Strategy and Research » Bankers, Payments and Security Experts: Changes in Technology, Regulation, and Consumer Trust Require Overhaul of Strategies and Business Models in 2010]

This point is that bank P2P (or, more properly account-to-account payments) would be an obvious replacement for expensive checks and wire transfers. In the US, the banks have (speaking in very broad terms) gone for two responses: some of them have integrated PayPal as their P2P solution and some of them have decided to built a new P2P system. In fact I’ve just read that the Javelin guys have been playing with the Bank of America and Wells Fargo offering.

According to the terms and conditions of this service, this transfer can take up to three days. Three days? That seems a bit long in this day and age. The Wells Fargo recipient received an email which prompted them to enroll their account in the services. The money was quickly debited from the Bank of America account and within minutes the recipient got an email saying that an amount was being transferred to them. A couple hours after the debit, the credit still has not been posted – it will be interesting to see exactly how long this takes.

[From Bank Person to Person Payments – small steps – Javelin Strategy & Research Blog]

Seriously. Up to three days. It’s as if transistors and laser beams had never been invented. I’m moved to say WTF, but I don’t want to offend (or annoy any of our bank customers). The reason for this implausible transaction time is, of course, that the money is actually being moved through the existing inter-bank electronic funds transfer networks. PayPal, M-PESA and new-kid-on-the-block Serve from American Express don’t work that way. They put the money in a big pot and then reallocate it as necessary. This make transactions instantaneous and inexpensive (because they are just a few bytes in a big database).

The Javelin guys found that the mobile money service didn’t seem to work terribly well either.

the receiving phone number must be pre-registered online before any transfers could be made to it.

[From Bank Person to Person Payments – small steps – Javelin Strategy & Research Blog]

M-PESA doesn’t do this. You can send money instantly to any phone in Kenya. If they are an M-PESA customer, they get an M-PESA notification. If they are not an M-PESA customer, they get a message telling them to go to any one of 28,000 agents to either get their money or to create an M-PESA account. I’ve said, at the more than one event, that perhaps the “developed” world should examine and learn from “developing” world use of mobile and I stand by it. In some cases, we could be making a big mistake by succumbing to the temptation to add layer after layer on top of legacy networks instead of putting them to one side and building something new.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


Leave a Reply


Subscribe to our newsletter

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

By accepting the Terms, you consent to Consult Hyperion communicating with you regarding our events, reports and services through our regular newsletter. You can unsubscribe anytime through our newsletters or by emailing us.
%d bloggers like this: