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. Number 174/175 Dec. 10, 2009 STRATEGIES FOR Person-to-Person Payments 2.0 FINANCIAL Does mobility provide the tipping point for bank-branded P2P? INSTITUTIONS ______erson-to-person payments received much attention at November’s BAI Retail Delivery conference with four Internet banking Pcompanies making big announcements: First Data, FIS, S1, and PayPal (see pp. 38-39). Marketing When we first wrote about this area 10 years ago (OBR 54, Nov. Security 1999), three major U.S. banks had P2P systems in the works: Wells Fargo, Bank of America and Bank One. By 2002, all Mobile were shuttered; knocked out cold by the biggest financial- services success story of the dot-com era, PayPal. Payments PayPal now dominates eBay commerce and has become a force at Innovations other online merchants as well. But still, PayPal’s volume of pure P2P, casual payments between non-commercial parties, hasn’t taken Personal finance any material share away from paper-based solutions. For the most part, people still pay each other in old-fashioned ways: cash, checks, and IOUs. Because electronic transactions are often more expensive, INSIDE they won’t catch on until their convenience solidly trumps paper.
P2P Payments Mobile banking may be that path to ultra-convenience. Gartner seems Overview ...... 4 to think so. The research company put money transfer as the number- Market size...... 6 one most important application for smartphones in 2012 (see p. 8). 15-year forecast ...... 10 So what exactly is driving the rekindled interest in P2P? ...... 12 Product design • People are carrying less cash; especially younger FI opportunities ...... 16 consumers who do most of their shopping via debit so Pros & cons ...... 17 Revenue streams ...... 18 don’t have a need for cash (or checks). Recommendations...... 19 • PayPal has educated the market to expect this feature. FI examples...... 20 ING Direct...... 20 • More importantly, the ubiquitous mobile phone is the Mercantile Bank of MI...... 22 right technology and form factor to make electronic Patelco Credit Union...... 23 Univest National Bank & Trust...... 24 transactions more convenient than paper ones. Wells Fargo mobile...... 25 The question isn’t whether electronic P2P payments will eventually P2P players ...... 26 Overview of 13 providers...... 26 replace paper; they will. It’s who will control the service, financial AmEx/Revolution Money ...... 27 institutions or third parties? PayPal already has a substantial head start CashEdge POPmoney ...... 28 iPay Technologies ...... 30 with a 72% penetration rate among U.S. online shoppers. Nice, but Obopay (MasterCard & Nokia) ...... 35 banks have relationships with 100% of checking-account customers. PayPal ...... 38
Finovate Videos Jim Bruene, Editor & Founder now available...... 40 [email protected]
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Key research questions 1. How many end users are currently using various person-to-person payment options and what does the future look like?
2. What is the business case for launching an electronic P2P service in 2010?
3. How important is mobile access to the service?
4. How important are international remittances to the success?
5. How do major consumer-direct services work today?
6. Which vendors offer solutions for P2P payments?
About this report This report is an independent effort from ONLINE BANKING REPORT. It is available at no extra charge to subscribers of ONLINE BANKING REPORT and can be purchased by others through our website. We have no affiliations with any of the companies mentioned, other than as subscribers to our publications and/or participants in our Finovate Conferences.
About Online Banking Report Founded in 1995 by former banker Jim Bruene, Online Financial Innovations is a Seattle- based research company. OFI is best known for publishing the Online Banking Report, a regular newsletter featuring in-depth analysis, relevant data, and informed recommendations to financial services executives in 50 countries.
Copyright 2009: ONLINE BANKING REPORT (ISSN 1095-2829) is published monthly by Financial Insite Inc., 4739 University Way NE, Suite 1002, Seattle, WA 98105, USA. Phone: +1(206) 517-5021, Fax: +1(206) 524-0351, [email protected]. Subscriptions: US$1,795 per year worldwide, includes paper and electronic editions with online archive access. Editor & Founder: Jim Bruene, [email protected]; Analysts: Andrea Wood, [email protected], Chris Young, [email protected]; Business Manager: Kate Schultz; [email protected]; Marketing Director: Eric Mattson, [email protected]; Circulation: Anita Schultz, [email protected]; Webmaster: Gerry Soroczak, [email protected]; Copy Editor: Jennifer Russell Warning! Federal copyright law prohibits copying this report. Contact [email protected] for reprints or electronic rights. page 2 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Definitions Primary term: P2P Payment/Transfer (aka person-to-person, peer-to-peer, or consumer-to-consumer): A payment made to another individual without knowing their bank account info; typically all that’s needed is the person’s email address or mobile phone number. For the purposes of this report, we are excluding services such as Bank of America’s online transfer function that allows customers to send money to other Bank of America customers and ING Direct ACH service which allows users to send money to any other person at any bank as long as routing and bank account numbers are known.
Other terms used in this report: Account-to-Account Transfer (A2A): The movement of money from Bank A to Bank B usually with the customer having ownership of both sending and receiving accounts. Most major financial institutions and many smaller ones support this service. CashEdge is a major provider of this service; powering 650 programs which accounted for nearly $50 billion in transfers in 2008 (see pp. 28-30). Some banks also allow A2A transfers to other individuals as long as account and routing numbers are known, a service offered by ING Direct for Electric Orange customers (see pp 20-21).
Bank-Account P2P: Similar to customer-to-customer, but payment can go to anyone at any bank as long as the sender knows the recipient’s bank account and routing numbers.
Customer-to-Customer or Member-to-Member Transfer: A subset of person-to-person transfers where both parties have accounts at the same financial institution. Usually the sender must know the recipient’s account number to set up the transfer. Bank of America (p. 16) and Patelco Credit Union (p. 23) both support this type of transfer within their online banking suites.
Mobile P2P Payment: Same as above, but initiated from a mobile device. Typically, recipient’s mobile phone number is used to notify recipient of the payment.
Online P2P Payment: A P2P payment initiated from an online banking session, typically using the The front page of our first report on P2P payments recipient’s email address to send the payment pondered a question being asked at the time” Are P2P advice to the recipient. payments the killer app for online banking? Today, the same question is being asked of mobile banking. Text P2P Payment: A subset of mobile P2P, where the payment is initiated through text message using the recipient’s mobile phone number for notification. page 3 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Overview
he goal of this report is to help you decide when and if you should offer person-to-person payments. And if you decide to move forward, how to best position P2P payments within your T overall product set. To spark your decision-process, we’ll look at:
• Overall trends
• Market size and forecast
• The business case
• What others are doing
• What solutions are available
Overall trends Let’s dive into these three overall trends.
1. Carrying less cash: For anyone born before the Beatles broke up, there are already good and ubiquitous person-to-person payment mechanisms in place. One is free and easily portable, cash. The other costs about $0.50 if used remotely, a check. But I’ve come to realize that cash is kind of old-fashioned. We had a family gathering on the other side of the country this year, and upon arrival my two twenty-something nieces didn’t have $10 cab fare between them to get to their NYC hotel. One of them NEVER carries cash, even when traveling.
MasterCard’s year-end 2007 survey showed that worldwide: • The majority of respondents (56%) believe that one day the world will be a cashless society where credit and debit cards will replace cash and checks for payments • 75% of respondents believe that it is no longer necessary to have lots of cash on hand • Two-thirds of respondents (66%) use cash less often than five years ago to make purchases
PayPal is a major force in ecommerce accounting for 9% of global ecommerce and 15% of U.S. volume (includes eBay volume).
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2. Educating the market: The reason PayPal was able to create a new way to pay was due to the educational efforts of the eBay merchant community. As PayPal came onto the eBay scene in 2000, merchants began encouraging borrowers to use PayPal. And eventually borrowers began demanding that merchants accept PayPal. Now it’s used by 80% of sellers in North America.
For non-auction P2P payments, there’s no obvious cheerleader to educate the market and encourage electronic transactions vs. paper. The only one that really makes money on these transactions, due to its unique business model, is PayPal. So expect it to be an important driver in P2P, most likely leveraging their mobile PayPal and eBay applications.
3. Mobile phone ubiquity: While cellphones already outnumber landlines in nearly every country in the world, including the United States, it’s the smartphone that is likely to become the hub of payment activity. Not only will smartphones be used to authorize m-commerce transactions, eventually they will replace plastic at the point of sale as contactless technology is bundled with phones. In addition, we expect most routine balance/trans inquiries, along with alerts, to be handled via mobile phone instead of PC. In fact, we think that within 15 years, mobile banking will eclipse PC banking in the U.S. (see forecast, pp. 10-11).1 It already has in a number of developing countries. Obopay’s Send Money That means the phone will increasingly iPhone app released Dec. serve as the hub of all payment activities, 9 (see pp. 35-37) online and off. Once consumers are used to pulling out their phone to buy groceries, they are likely to do the same to pay a sibling their share of a family gift or to pay their neighbor for the rice cooker at their garage sale.
Table 1 Worldwide smartphone sales vs. total mobile phone sales, 2008 through 2014
2008 2009 2010 2011 2012 2013 2014 Mobile phone sales Smartphones 140 mil 190 mil 250 mil 320 mil 400 mil 480 mil 560 mil Any mobile phone 1.2 bil 1.2 bil 1.3 bil 1.3 bil 1.4 bil 1.5 bil 1.5 bil % of Total 12% 16% 19% 24% 29% 33% 37% Memo World population 6.7 bil 6.7 bil 6.8 bil 6.8 bil 6.9 bil 6.9 bil 7.0 bil Mobile subscribers 2.6 bil 2.8 bil 3.0 bil 3.2 bil 3.4 bil 3.5 bil 3.7 bil % Mobile 39% 42% 45% 47% 49% 51% 53% Source: Frost & Sullivan, Dec. 1, 2009
1 Some people are even more bullish than us. Mercatus recently predicted that mobile banking would eclipse online banking within five years.
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Market Size
he market for online and mobile P2P payments is currently too small to accurately measure with direct consumer research, but a number of recently published studies show various degrees T of interest. These study results, however, must be taken with a grain of salt. Since the vast majority of respondents cannot even envision how the service would work, or more importantly, how much it would cost, it’s easy to respond, “I think I’d use that.” Furthermore, respondents usually don’t want to disappoint survey takers or look foolish, so they are generally overly optimistic about projected usage and how much they would pay. That said, it’s still good to see that upwards of three-quarters of consumers can envision using P2P payments. That means you’ll have interested parties when you launch the service.
Of course, we don’t expect anywhere near 75% usage levels even 10 years from now. Our forecasts predict 15 to 20 million users in 2020, slightly less than 20% of online households (see p. 10).
Here’s what will hold back initial adoption: • Need to be aware of the service • Need to register for the service • Need to figure out how to use it to send money • Must remember to use it when the time comes • Must remember how to log in and/or where to find it on the bank’s menu • If there are multiple ways to use it (e.g., mobile vs. online), must decide which method to use for each transaction • Must understand how it works for the recipient • Need to explain it to the recipient • Must be able to overcome objections of recipient • Need to be assured it is safe • Need to understand the fees, if any • Must be willing to pay the fees (or pass them to the recipient)
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Survey of market research
CashEdge Company type: Payment provider (see pp. 28-29) Fielded: June 2009 (N = 850 consumers) • 81% would use P2P if offered by their financial institution (see Table 2 below) • 73% felt that P2P through their bank would be more secure than from an independent provider and 69% felt that it would be more convenient • 77% would prefer it from their financial institution rather than an “independent service”
Table 2 Consumer evaluation of their likely P2P usage (U.S.) Q. If your bank offered an online P2P payment service, how often would you use it? 40% Once per month 20% Twice per month 16% 3-5 times per month 5% More than 5 times per month 19% Would not use Source: CashEdge consumer survey fielded June 2009, N = 850
Table 3 Consumer usage of interbank funds transfer (U.S.) Q. How often do you transfer funds online between accounts housed at different financial institutions? 39% Less than once per month 19% Once per month 31% 2-3 times per month 7% 4-5 times per month 2% 6-10 times per month 1% More than 10 times per month Source: CashEdge consumer survey fielded June 2009, N = 850
Table 4 Expected recipients of P2P payments (U.S.) Q. If your bank offered a P2P payment service, who do you think you’d send money to online? 54% Online sellers 51% Family 31% Vendors to our household 22% Friends Source: CashEdge consumer survey fielded June 2009, N = 850, nationwide of 18+ using Zoomerang
Table 5 Desired features of mobile banking (U.S.) Q. What capabilities would you like to see offered through a mobile banking application? 95% Account balances 79% Funds transfer (at same bank) 72% Bill pay 41% Account-to-account transfer (between different banks) 35% Send money to third parties (e.g., friends and family) Source: CashEdge consumer survey fielded June 2009, n = 272 the 32% of the total sample interested in using mobile banking page 7 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Forrester Gartner Company type: Research company Company type: Research company From Aug. 2009 report (cited by CashEdge) Published: November 2009 Top 10 Consumer Mobile Applications for 2012: Per Forrester’s August 2009 Report, Help Your Customers Cut Through the 1. Mobile money transfers Alternative Payments Clutter 2. Location-based services 3. Search • 72% of online buyers have PayPal accounts 4. Browsing • 92% of online buyers have seen or heard of 5. Health monitoring PayPal (46% BillMeLater, number 2 most recognized alt-payment) 6. Advertising 7. Payments • 77% of PayPal users are satisfied or extremely satisfied (74% of BillMeLater) 8. NFC chip 9. Instant messaging 10. Music Fiserv
Company type: Payments provider
Fielded: June 2009 Javelin Strategy A survey of 1022 U.S. consumers conducted by Company type: Research company Fiserv in June 2009: Fielded: Sept. 2008 • 70% of those surveyed expressed interest in P2P payments Table 6 Likelihood to use MOBILE P2P transactions (U.S.) • 75% prefer it to be offered by their financial Q. Using a 1 to 5 scale, how likely would you be to use institution Mobile P2P transfers? Let 1 represent “very unlikely” and 5 represent “very likely.” • 83% said it’s important for money to be deposited directly into a recipient’s bank 6% Very likely account 7% Likely 13% Positive Of those that said they would use it: 17% Unsure 12% Unlikely • 88% would send money to someone 59% Very unlikely • 53% would donate to charity 71% Negative • 43% would request money from someone Javelin Strategy, Sept. 2008, n = 1946 (Base: mobile phone AND online users) • 40% would collect or contribute to a group gift • three times per month would be the average usage
Top benefits cited: • 80% eliminating the hassle of cash or checks • 77% greater convenience
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Juniper Research White Paper Tower Group Company type: Research company Company type: Research company Published Sep. 2009 Published: March 2009 Research highlights: Global • Total population: 6.6 billion • Over 3 billion P2P transactions occurred in • Mobile subscribers: 3.6 billion 2008 • Unbanked: 2 billion • In 2008, checks represented approximately • Underbanked: 3 billion $1.0 trillion of the noncash P2P payments in • ATM machines: 1.5 million the United States and cost financial • Bank branches: 500,000 institutions an estimated $260 million to process Number of mobile money services in operation or • Account-to-account (A2A) transfer volume formation in mid 2009: 140 will reach a projected $130 billion in 2012 Number in mid 2008: 32
Microsoft/M-Com (Fiserv) Whitepaper Company type: Solutions providers Published: Sept. 15, 2009
• In the United States, mobile device penetration has passed 75% with 240 million mobile phone users, compared to 180 million people who actively use credit or debit cards. • An estimated 150 million people worldwide send over US$450 billion internationally each year. The Federal Reserve has estimated that remittances from the US to Mexico alone total over US$23 billion
PayPal’s original user interface, circa Nov. 1999 (from OBR 54)
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OBR 15-Year Forecast While we don’t expect a dramatic spike in usage during the next few years, the service should gradually catch on provided fees are kept modest. In the United States, we estimate 7 to 10 million households sending P2P payments domestically by 2015 (year end). It will likely be higher in case it’s offered free of charge by major banks, especially Bank of America. We believe there’s a 30% probability of that happening. Conversely, if the service has average fees of more than $1 per transaction, usage will likely be less. There’s a 50% probability of average fees being higher than $1 per transfer (see Table 8 below for usage sensitivity of potential transaction fees).
Table 7 U.S. mobile banking vs. online banking usage: 2025 vs. today (U.S.)
Type 2010 2015 2020 2025
Online banking households1 60 mil 65 to 70 mil 70 to 75 mil 75 to 85 mil
Mobile banking households2 12 mil 40 to 45 mil 50 to 60 mil 80 to 95 mil
Either online or mobile 61 mil 70 to 80 mil 80 to 85 mil 90 to 100 mil
P2P payment users3 1.5 to 2 mil 8 to 11 mil 15 to 20 mil 20 to 25 mil (online or mobile)
Penetration 2% to 3% 11% to 16% 19% to 23% 22% to 25% (of either online or mobile)
Source: Online Banking Report estimates, Dec. 2009, +/- 10% for online banking, +/- 20% for mobile, +/- 33% for P2P Notes: 1. Accessed bank account data or paid bills online during the past 90 days 2. Accessed account data or paid bills via mobile phone during past 90 days 3. Payment made to another individual without using their bank account info; with a minimum of one payment during the year initiated online or via mobile device; domestic transfers only, does not include international remittances
Table 8 U.S. P2P Payments Forecast by Fees Charged
Predominant Pricing (for $50 P2P payment funded from checking account)
1% or $0.50 2% or $1 3% or $1.50 4% or $2 Type Expected Free each each each each
Pricing probability -- 35% 30% 20% 10% 5%
Forecast
2015 users 8 to 11 mil 12 to 15 mil 7 to 9 mil 5 to 7 mil 4 to 5 mil 3 to 4 mil
2020 users 15 to 20 mil 20 to 25 mil 14 to 18 mil 8 to 10 mil 6 to 8 mil 4 to 6 mil
2025 users 20 to 25 mil 35 to 40 mil 20 to 24 mil 12 to 15 mil 8 to 10 mil 6 to 8 mil
Source: Online Banking Report estimates, Dec. 2009, +/- 10% for online banking, +/- 20% for mobile, +/- 33% for P2P
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Table 9 Domestic online and mobile P2P payments* forecast (U.S.) U.S. households using online banking, mobile banking, and mobile or online P2P payments**
Online Bankers Mobile Bankers Domestic P2P Payments
Year P2P % of Online End Number Number Online Mobile Either Bankers 1995 600,000 ------1996 2.5 mil ------1997 4.5 mil ------1998 7.0 mil ------1999 10.5 mil 20,000 5,000 -- 5,000 0.0% 2000 15.5 mil 50,000 50,000 -- 50,000 0.3% 2001 22 mil 50,000 100,000 -- 100,000 0.5% 2002 28 mil 50,000 200,000 -- 200,000 0.7% 2003 33 mil 50,000 300,000 -- 300,000 0.9% 2004 36 mil 50,000 400,000 -- 400,000 1.1% 2005 40 mil 100,000 500,000 -- 500,000 1.3% 2006 44 mil 200,000 700,000 -- 700,000 1.6% 2007 48 mil 600,000 1.0 mil 50,000 1.0 mil 2.1% 2008 52 mil 3.5 mil 1.2 mil 100,000 1.2 mil 2.3%
2009 56 mil 7.5 mil 1.3 mil 400,000 1.4 mil 2.5%
2010 60 mil 12.5 mil 1.6 mil 600,000 1.8 mil 3.0% 2011 64 mil 18 mil 2.2 mil 1.0 mil 2.6 mil 4.1% 2012 68 mil 24 mil 3.0 mil 1.6 mil 3.8 mil 5.6% 2013 71 mil 30 mil 4.0 mil 2.5 mil 5.5 mil 7.8% 2014 73 mil 35 mil 5.0 mil 4.0 mil 7.5 mil 10% 2015 75 mil 40 mil 6.0 mil 6.0 mil 9.5 mil 13% 2016 77 mil 45 mil 6.5 mil 8.0 mil 11.5 mil 15% 2017 79 mil 50 mil 7.0 mil 10 mil 13 mil 16% 2018 81 mil 55 mil 7.5 mil 12 mil 14.5 mil 18% 2019 82 mil 60 mil 8.0 mil 14 mil 16 mil 20%
Period Growth Growth ’09 v. ‘19 26 mil 53 mil 6.7 mil 14 mil 15 mil -- CAGR 3.9% 23% 20% 43% 28% -- Source: Online Banking Report projections based on industry data, Jan. 2009 Accuracy estimates: 1994 to 2005: +/- 12%; 2006 to 2008: +/- 15%; 2009 to 2016: +/- 20% *Electronic payment made to another individual without using their bank account info; with a minimum of one payment during the year initiated online or via mobile device; domestic transfers only, does not include international remittances **Assumes moderate pricing scenario, with fees approximately 1% of transaction value, with a $0.50 minimum; see Table 8, previous page for price sensitivity analysis.
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Product Design
While there is yet no industry standard for P2P payments product design, here are some guidelines based on experience with other online and mobile services: Product name: There is still no consensus on what these payments should be called: personal payments, P2P transfers, consumer-to-consumer, friends-and-family. It depends somewhat on your positioning. Is it a fee-based higher-end wire transfer replacement? Or is it just an offshoot of your free bill-pay program? In our original 1999 report on the subject we suggested the name, Electronic Money Order (EMO), which we still favor, especially for a fee-based, instant-delivery product. EMO implies guaranteed funds, and uses a known naming convention, both of which help elevate the product above the original person-to- person device, the paper check.
How it works: Users type/look up the recipient’s email address or phone number, then enter payment amount, recipient’s actual name, and possibly a phrase to communicate to the recipient for added security (iPay uses this approach, see pp. 30-34). First-time recipients receive an email, text message, or voice message informing them of the pending payment and providing retrieval instructions. Recipient authentication could vary depending on the size of the transaction. Subsequent payments can go directly into end-user accounts using standing instructions. However, you may want users to “claim” every transfer to verify that their account details have not changed since the last payment.
Personalized message: The payment message should also contain a personal message from the sender. This is a win-win, making the service more valuable and improving the credibility of the message.
Bank branding: The message should contain a Powered by Yourbank message, both to increase the credibility of the message and to reinforce your brand. Also, a low-key cross-sell could be used, e.g., “You’d have this money already if you banked at yourbank. Free, real-time money movement between yourbank customers.”
Placement/navigation/location on website: There is yet no consensus whether P2P should be on the online banking transfer menu or the billpay menu. The user views it more as a transfer when sending money to family members, especially to their kids. But P2P is more like a bill payment when you are repaying your friend for your share of the weekend place on the coast. page 12 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Let’s face it. Much consumer-confusion still remains about the decade-old pay-anyone service (Is it real-time? When are funds withdrawn? What if the payment isn’t made on time? Can I pay individuals?) So a new service that purports to pay individuals with yet more rules on timing, delivery, receipt, and so forth, needs to be clearly positioned and described. And try to err on the side of clarity, rather than funneling people into the highest fee option. We like ING Direct’s approach (see pp. 20-21) with a few modifications. Following is one approach to the navigation. Some services are shown in more than one area. In this example, 16 menu options lead to 10 different payment services (the alpha letters refer to the 10 payments services): Primary and secondary navigation:
Accounts: Checking/Debit | Savings/Investments | Credit/Loans | Budget | Mobile
Services: Alerts | Find ATMs/Branches | Security | FAQs | Help | Contact Us
Activities: Transfer Funds | Pay Bills | Send Money | Spend Money | Save Money | Protect Money
Sub-navigation:
Transfer funds Pay Bills Send Money A. Between your accounts at our A. Pay your loans and credit cards at our H. Electronically to others in our bank (real time) bank bank I. Via email with personalized message (must B. To/from your accounts at D. Pay your bills normally (2 to 5 days) know their email address) other banks E. Pay your bills rush/insured (next day) I. Via mobile phone (must know their mobile C. To friends and family (you phone number) must have their bank account F. See your ebills number or be a joint owner) I. Via Twitter direct message (must know Twitter G. Pay individuals name) D. Via paper check (must know their address) E. Via FedEx (must know their address) J. Send a gift card instead (see our seasonal offerings) D. Donate to your favorite charity in your name or someone else’s
Mobile design: If you have a single mobile app, you’ll probably design the interface to mimic your online banking navigation. However, you should consider creating a dedicated P2P Payments app for smartphone users. The app would simplify the process of sending money to users. Like PayPal’s mobile app, users could select contacts directly from their phone’s contact directory (phone number and/or email address) and send a payment with just a few keystrokes.
Text-message option: Given that mobile P2P is the greater opportunity, consider offering an SMS version for your non-smartphone base: Text to bank: pay Text from bank: list of 10 most-recent P2P payees (text more to get more names if needed)
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Reply to bank: number of person on that list, payment amount, and optionally for future- dated payments, the payment date Text from bank: Please confirm your payment of $27 to Pat Smythe on 5 Dec. 2009 by typing your 4-digit P2P PIN Reply to bank: 1248
International remittances: One of the biggest markets for P2P payments is cross-border payments, a market estimated to be as much as US$400 billion or more globally. PayPal, Western Union, MoneyGram and many large banks are already active in this area. A P2P service can potentially allow your customers to easily send money to family members outside the country right from within the convenience of your online or mobile banking interface. These transactions are potentially more lucrative, supporting higher fees and profits from favorable exchange rates.
Charitable donations: The P2P payments engine could be used for customers to direct payments to local charities and/or one-time fund raising efforts (e.g., for a victim’s family). The donation could be made in someone else’s name if desired, with that person receiving an email acknowledgement of the donation. Senders could elect to have an email or paper receipt for their tax records. For extra credit: develop an indicator that displays the transaction in online statements as potentially tax deductible.
Other payment enhancements: • Gift wrap: Just like online retail shoppers can pay extra to have purchases gift wrapped, P2P senders could have the option of “gift wrapping” their money transfer. Users could choose to send the payment in the form of a gift card (see next section), or could simply choose various snail mail or e-greeting card options. For extra credit: team with local or online merchants to deliver actual physical gifts to the recipient such as flowers, balloons, bouquets, and so on, or digital gifts that can be delivered online such as music downloads, movie tickets, virtual game currency, and so on. • Gift cards: One of the more interesting enhancements is integrating P2P payments with the massive gift-card market. Users could select various gift card options as the payment vehicle. The gift cards could be actual plastic prepaid cards or virtual ones for online shopping only. The cards could be sold as a fee- based option or if merchants were willing to provide cards at a discount for the exposure, they could be provided free of charge, or even at discount, e.g., for the same $50, you cold send Johnny a gift card from Olive Garden worth $65. • Savings account integration: Senders could encourage recipients to save the money by depositing it into a special goal-based savings account at your bank. For example, “You can receive the $50 now, or deposit it in a special “Internet savers” account at yourbank.com and you’ll receive an extra $10 if you keep it in the savings account for one year.” Using the SmartyPig approach, subsequent payments could go directly into that new savings account.
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• Payment forwarding: Just like a regular email message, you could offer a “payment forwarding” option to the recipient. One of the choices on the message that accompanied the payment could be “forward all or part of this payment to someone else.” • Disable option: Some customers will not want to use P2P nor will they want their account to have this capability, considering it a security vulnerability. If the service is automatically made available users, offer users the option of shutting it off permanently. • Recurring payments: Like bill pay, users should be able to schedule periodic P2P payments; makes paying an allowance a snap. • Categorization: Allow users to categorize P2P payments like they would a bill payment (see iPay, pp. 30-34). • Security phrase: Provide users with the option of selecting an offline security phrase to reassure them that only the intended recipient can access the funds (see iPay, pp. 30-34). • Facebook app: While Facebook is viewed as a social network and communications channel, some users may enjoy the convenience of settling personal debts within the site; PayPal just added a Send Money capability to its Facebook app on Dec. 9
Table 10 User Benefits of P2P Payments Sender (of funds) • Easier/faster than writing and mailing a paper check • Can be done immediately, less chance of forgetting • No need to carry a checkbook as long as you have access to mobile phone or computer • In some cases, cheaper than the $0.50 cost to write and mail a paper check • Better communications: recipient receives an immediate personalized email notification • Transaction automatically displays in your online banking records, no need to make manual entries in a checkbook and/or PFM program • Can potentially add extra “memo” info or tag the transaction to improve record keeping • Record of the payment can also be maintained in personal email files, easily retrieved and forwarded to remind recipient of payment • Money can potentially be sent worldwide • For ecommerce, recipients know you have sent good funds and can ship the goods faster
Recipient (of funds) • Instant confirmation that sender has paid, even if it takes a few days to move the funds into their account • Can easily thank the sender by replying back to the payment-notification message • Receive money faster than mailed paper checks • No paper checks to deposit, no trips to the bank • No need to track the deposit to see if it clears, and no fees to pay if it doesn’t • Assurance of good funds • Electronic records can easily be maintained by filing email notifications in a computer folder • No need to reveal bank account numbers to senders Source: Online Banking Report, Dec. 2009 page 15 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Financial Institution Opportunities
he big question for financial institutions is whether full P2P payment needs to be embraced for 2010/2011 or whether to wait until it’s more popular four or five years out. The answer to that T question for U.S. financial institutions has a lot to do with what Bank of America does. If Bank of America expands aggressively into full P2P payments (see next section), it will create an instant 30-million potential user base. And most likely, the other major banks will follow within a year or two. Under this scenario, P2P payments will catch on relatively rapidly, reaching as many as 15 million households within six years, or about 20% of online/mobile banking customers (see Table 8, p. 10).
BofA scenarios For years, Bank of America has supported free online transfers between customers. However, senders must know the recipient’s bank account number. Because people don’t like giving those up, despite the fact that they are printed on the bottom of every paper check written, we do not include that type of service in our definition of P2P (see p. 2).
But it’s highly likely that BofA will support masked electronic P2P payments (both online and mobile) by the end of next year (2011). We believe there’s a 70% probability that BofA offers it in 2010, 80% by 2011, and 90% by 2012. Wells Fargo launched a mobile P2P service (also only between Wells Fargo customers) in September (see p. 25). It’s not likely that BofA will allow Wells Fargo to leapfrog it in terms of mobile features.
The bigger question is how will BofA price P2P payments? Remember, this is the company that single handedly drove electronic billpay from a $5/mo service to free in 2002 when it launched a national TV campaign showcasing free bill payment.
Before the Great Recession and legislation designed to reign in checking and card fees, I’d have expected BofA to offer the service free of charge. OD fees levied on P2P payments would have more than offset the costs and risks.
But now, the bank may want to make the service pay its own way. So we think there is a 70% probability the bank will charge P2P fees for most of its customers and 30% chance its free for everyone.
Bank of America’s customer-to-customer payment service is positioned within its “Transfer Funds” menu.
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The case for doing P2P now: 1. Natural extension of your bill payment program 2. New benefit for your mobile banking app 3. Potential direct fee income (transaction fees) 4. Potential indirect fee income (P2P payments as part of a fee-based premium online and/or mobile banking service) 5. Keeps you top-of-mind for all payment needs 6. Another electronic hook into customers, especially younger ones that may not already be doing direct deposit or bill pay through you 7. Viral marketing to recipients 8. Provides an opportunity to fund payments via credit lines or credit cards 9. Trendy feature that differentiates your online services
The case for waiting: 1. No overwhelming consumer demand, yet: Current paper options work just fine (see Forecasts, pp. 10-11). 2. Initial program costs: Even if your vendor does not charge an explicit start-up fee for P2P payments, there are internal costs to educate staff and train customer service reps. 3. Ongoing transaction costs: Most solutions on the table today will have ongoing transaction costs for P2P transactions. 4. Ongoing support costs: You will either have to support customers via online and phone yourself, or pay someone to do it. But with a relatively new program, there will be support issues. 5. Fraud losses: Every payment vehicle has fraud. And if P2P becomes the easiest way to move funds out of an account online, it may be the favorite for fraudsters. 6. Priorities: Even if you can cover all the costs listed above with fees, do you really want to devote time and attention to a relatively minor service. 7. Uncertain network model: It’s not known which of the announced systems will reach a critical mass. You might push customers into a system that ultimately goes away requiring a tedious conversion process. 8. Mobile financial services in their infancy: As much hype as there is about mobile banking, still less than 10% of U.S. households use it even the basics such as balance inquiry. A much smaller number use their phones for payments. Why not wait until there are more end users for P2P?
9. Phishing: The industry still hasn’t resolved phishing issues. Sending email or text- message funds-transfer messages inviting recipients to share their bank account info to a new website is exactly what phishers have successfully done for the past seven or eight years. (That’s why iPay’s security phrase delivered offline could help. Of course, phishers could fake that as well with a separate email with a generic password, e.g., “yourmoney”). page 17 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Potential P2P revenue streams: 1. Transaction fees 2. Foreign exchange fees 3. Float income (if holding funds in separate account) 4. Breakage (recoverable via dormant account fees, severely limited in new legislation) 5. Interest income (if funds are drawn against credit line or credit card) 6. Funds-guarantee fees 7. Insurance 8. Expedited delivery fees 9. Premium delivery options (ecards, gift cards, mailers) 10. New accounts cross-sold to payment recipients 11. Retention 12. Interchange/ATM fees from redemption (if redeemed via gift card) 13. Interest income from line of credit or credit card draws 14. Core component of VIP package with monthly or annual fees 15. Prepaid card revenues (fees and float) if funds redeemed on prepaid card 16. Commissions on redemptions made on prepaid store cards 17. Advertising on P2P notification messages 18. NSF/overdraft/transfer fees from P2P transactions made with insufficient funds
Table 11 Potential Fee Schedule for P2P Payments Based on volume and speed
Size of P2P Payment
Less than $1000 to Type $100 $100 to $250 $250 to $1000 $5000 $5000+ From checking Paid in 2 to 3 days Free* $1 $3 $10 $25 Instant payment $3 $4 $5 $15 $35 From credit/debit card Paid in 2 to 3 days $3 2.5% 2.25% 2% 1.75% Instant payment $7 $7 + 2.5% $7 + 2.5% $7 + 2.5% $7 + 2.5% Add-on fees International remittance $3 $4 2% 2% 2% Delivered as prepaid MasterCard/Visa card $5 (first class) $5 (first class) $10 (registered $25 (registered $35 (FedEx or priority mail) priority mail) other courier) Delivered as gift card(s) $2 each $2 each $2 each $2 each $2 each Delivered as reloadable savings account at $5 $3 $2 Free Free your bank (e.g., SmartyPig) Delivered as check with greeting card $3 $3 $3 $3 $3 Insurance with delivery confirmation $1 $2 $3 $5 $10 Gift wrap $5 $5 $5 $5 $5 Source: Online Banking Report, Dec. 2009 *Subject to maximum amount and/or number of payments each day, week, and/or month
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Recommendations Realizing there is no right answer, we offer the following advice depending on your financial institution type as it relates to new delivery systems: Early adopter, mega brand, or iPay client2: • Do it now: You need this in 2011 or early 2012. Don’t let BofA, Wells Fargo, et al, get ahead of you on this front. Get a quote from your preferred vendor or send an RFP out in early 2010. • Be reasonable with pricing: Use a fee-free intro period followed by small, ATM-like fees of under $1 for the sender. Let the recipient transfer the funds into their checking account free of charge and cross-sell to them through the process. • Make customer-to-customer transfers free: To encourage parents to open accounts at your financial institution for their college students, maintain a policy of free transfers within your own bank. The combination of no fees and real-time money movement provide a great incentive to stay loyal to your financial institution. • Focus on mobile: Long-term, the bigger opportunity is in mobile (see Forecast, pp. 10-11). Make sure it’s featured prominently in your mobile app. Even consider making it its own app so that it’s drop-dead simple to use. • Launch an SMS version: Mobile P2P needs to be as simple as sending a text message. PayPal is already pretty much there. • Make it free for premium-package OLB customers: If you have a high-end package account (see OBR 109), consider adding free P2P payments as a benefit. Alternatively, use free paperless P2P payments as an incentive to get people to adopt estatements.
Fast-follower: • Keep a close eye on the market: We’ll be covering the launches during the next few years in OBR and in our Netbanker blog. • Consider starting with intra-customer P2P (or bank-account-P2P3): The low hanging fruit in P2P is intra-family transfers. It is super convenient to be able to send your college student money via online/mobile banking, and it’s a great way to increase retention rates of your customers’ children and other close relatives. • Get the preliminaries done now: If BofA launches as a free service to its entire base, instantly creating a pool of 30 million users, you will probably want to follow no later than 12 months after them. Get some of the initial project work done in 2010. Talk to several of the major vendors and start feeling out your organization for its willingness to offer a Powered-by-PayPal version.
Everyone else: • Become familiar with the services by using them yourself (especially PayPal). Be conversant with the pros and cons and watch how the market develops. You probably won’t be offering it for three to five years.
2 iPay bill pay clients can add the service with little expense, so they can consider offering P2P payments earlier than others 3 Where the sender uses the recipient’s bank account numbers to make the transfer (see Univest, p. 24). page 19 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Financial Institution Examples
ING Direct ING Direct has an interesting approach for its Electric Orange account with four choices under the Electric Orange (e.g., checking) tab within online banking:* • Bill Pay (free) • Person2Person Payment (free)** • Mail a Check (free)*** • Overnight a Check ($20) *The intro to this overview page is a user-friendly, “How would you like to pay?” **ING Direct’s P2P offering requires knowing the recipient’s bank account. ***ING Direct’s checking account does not come with paper checks, so that’s why they have a prominent (and redundant) Mail a Check option. Fundamentally, it’s the same as billpay, but Mail a Check is easier to understand for the novice user.
How it works: Sending a bank-account P2P payment to a new recipient is a simple three-step process: Step 1 1. Enter name, email address, personal message, and date for payment 2. Enter bank account number and if headed outside of ING Direct, the routing number 3. Review and send
Note: Each time, the recipient must verify their account number and routing number before the money is transferred into their account. page 20 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Step 2
Step 3
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Mercantile Bank of Michigan The first financial institution to announce its participation in the S1’s mobile P2P Powered by PayPal program is Mercantile Bank of Michigan
How it will work: The service will be free of charge and made available to all of Mercantile’s 300+ mobile banking customers. Customers do NOT have to set up a separate account at PayPal to make payments. 1. Choose email address or mobile phone number 2. Choose account to pay from; enter payment amount; press submit 3. See results (after payment claimed by recipient) One Two Three
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Patelco Credit Union San Francisco-based Patelco CU is one of two big credit unions that endorsed CashEdge’s POPmoney service in its July launch (see pp. 28-29). Both were said to be planning to implement in 2009, but neither have launched the service yet. Patelco already offers member-to-member transfers. Online banking customers need only know the recipient’s 6-digit account number to send an instant transfer to any other member. There is a one- day delay on the first transfer to confirm the recipient’s account number. To reduce fraud, the CU adds an extra security layer when signing up new transfer recipients: Members must answer two security questions to enable the new payee (see screenshot below).
Patelco M2M transfers are located within the Transfer tab.
Members must answer two security questions before setting up a new M2M recipient.
Patelco’s transfer interface.
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Univest National Bank & Trust Souderton, PA-based Univest National Bank & Trust
The bank is currently featuring it on its homepage (see inset).
Univest’s P2P landing page
Wells Fargo Wells Fargo launched a mobile P2P service in late September. It’s listed as a choice under Transfers on the iPhone app (see inset). It works only for transfers between Wells Fargo customers.
In the press release, VP Arah Erickson cited one of the best-use cases for such a service: “The added ability to transfer funds while on the go will be especially helpful for parents who have kids in college this fall as well as for students who need quick access to money at the last-minute to cover living costs, textbooks, or to split an expense with a roommate.” • The service is free. • Maximum $1000 per day • Must be to another Wells Fargo customer • Must be setup initially online
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P2P Payments Players
he list of money-movement providers has grown substantially in the past year. Juniper Research, which specializes in the mobile sector, said in a recent report that the list of mobile T payment companies it was aware of grew from 36 to 140 during the past year (mid 2008 to mid 2009). That’s amazing considering what the global economy was doing during that same period.
Table 12 below lists the major players in the U.S. market, for both mobile and online money movement. Six are profiled in more detail on pp. 27 to 35.
Table 12 U.S. P2P Payments Providers
Company/ Location/ Service URL Partners Comments/News Ref Amazon Seattle Amazon allows individuals to send and receive money free of charge Payments payments.amazon.co using its website or text message from a mobile phone. m American NYC/Florida American Express announced its pending acquisition of Revolution p. 27 Express revolutionmoney.com Money, a 3-yr old alt-payments company that has a P2P service. It is Revolution not known if AmEx will expand or kill the P2P service when it takes Money over the operation in early 2010. CashEdge NYC First Hawaiian Leader in A2A services, currently processing more than $50 billion pp. POPmoney cashedge.com Bank, BECU, annually, entered the P2P space in July. BECU and Patelco CU have 28-29 Patelco CU committed to offering. Presented P2P service at Finovate 2009, see video
American Express (Revolution Money) It remains to be seen if American Express enters the P2P space, and if they do, whether it’s something they distribute through banking partners. But its Nov. 19 announcement that it will spend $300 million to acquire Steve Case’s three-year old alt-payments play, Revolution Money, gives the card giant a ready-made platform. The deal is scheduled to close in early 2010. Revolution Money has two products: 1. Revolution MoneyExchange:
4 This is a registered user count, not necessarily a user of the service. Many of the new customers came for the $25 signup bonus or just to kick the tires. There was no cost or obligation to register. 5 On the call, Revolution Money said that 80% of ATMs accept its card.
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CashEdge NYC-based CashEdge, a 300-person company founded in 1999, announced its POPmoney services this summer and demoed it live at FINOVATE2009 on Sep. 29 (video at
It looks like First Hawaiian Bank
The First Hawaiian service is priced at $1 per transaction. Users can send money via email address, mobile phone number, or directly into the recipient’s bank account (if known). It is located in the Transfers section under a tab entitled Send Money. P2P payments are limited to $5,000 per month subject to a daily maximum of $1,000 via email/mobile or $2,000 transferred directly to another bank account. Payments can be scheduled up to 1 year in advance.
POPmoney is an extension of CashEdge’s dominant account-to-account transfer services used by Citibank and a number of large financial institutions. CashEdge says it processed nearly $50 billion in account-to- account transfers in 2008. The company says it has 650 bank clients including 7 of the top 10.
New recipients can claim their funds via the POPmoney website.
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Demo screenshot of the POPmoney “Send Money” screen.
In this example, Standard 3-day payments are priced at $3 and next-day Express payments are $10.
The personal message is limited to 200 characters.
A recurring payment option is available.
Demo screenshot of the payment management area.
page 29 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS iPay Technologies Founded in 2001, Elizabethtown, KY-based iPay Technologies is now the biggest billpay provider as measured by number of clients, 3,600, 2,000 of which have been added in the past 2 years alone. But its clients are much smaller, so the company only services a small fraction of the end-users of industry leader Fiserv.
iPay’s total end-user base is more than 1.5 million, under 500 per client. The company also has 400 clients offering its business billpay solution. We profiled the company in OBR back in 2002 (OBR 86). The innovative company has also demoed new payments capabilities at Finovate 2007 and Finovate 2009 (videos at Finovate.com).
Other than PayPal, iPay has been offering P2P payments for longer than anyone, nearly seven years. We spoke with iPay President, Bill Ready, who joined the firm last year after a stint at McKinsey, on Nov. 16 to get the latest numbers on iPay’s P2P solution: • 920 financial institutions use its P2P service, which has zero added cost for its clients IF they are using the premium version of iPay’s service. P2P payments carry the same transaction fee as other billpay transactions. Burton, OH-based Geauga Credit Union is one of 900 iPay clients offering P2P payments
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Enter name and email address.
Enter security keyword to be communicated offline to recipient.
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Select category and pay from account and submit.
Choose out-of-band method to activate new payees: via voice call, text message or email. The recipient will also be required to respond to an activation request sent to their email address. page 32 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Enter activation code in the box.
Schedule a payment. page 33 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Review and submit
Payment is now awaiting pickup by recipient.
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Obopay: Powering MasterCard MoneySend & Nokia Money
Silicon Valley-based Obopay was founded in 2005 and has received at least $126 million in venture funding including strategic investors Qualcomm (owners of Firethorn), Citigroup, and most recently Nokia. Citigroup worked with Obobay from early 2006 until just recently, testing an Obopay-powered mobile offering. The co-branded service will end on Dec. 22 (see screenshot, p. 35). Citi charged $0.25 to send less than $50 and 1.5% for larger amounts. There was also a 2.5% load fee from a credit or debit card. But now, Nokia appears to control a large portion of Obopay as lead investor in a $70 million series-D round in March 2009. It is not know if Nokia is a majority holder. Three months after its investment, Nokia announced Nokia Money, built on the Obopay platform. According to the company, there are 2.5-times more mobile phone accounts than bank accounts, 4 billion to 1.6.6 The service will be launched in at least one market in first quarter 2010. The total opportunity was estimated at $7 trillion in worldwide payment http://europe.nokia.com/explore-services/nokia-money volume.7 Obopay’s other large partner is MasterCard which launched MasterCard MoneySend in June (see screenshot, p. 37). MasterCard’s MoneySend service is primarily a private-labeled version of Obopay. Users will be able to enroll directly in the program from their bank or card issuer.
6 Nokia press release, 26 Aug. 2009 http://www.nokia.com/press/press-releases/showpressrelease?newsid=1337248 7 Watch Obopay CEO Carol Realini’s keynote address (Nokia World, Sept. 2009) about Nokia Money: http://webcast.nokia.com/CCUIv3/frameset.aspx?ticket=678-750-7796&target=en-default-&status=ondemand&browser=ns-0- 0-0-10-0&stream=flash-video-500 page 35 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 P2P PAYMENTS
Obopay is also partnering with FIS to enable mobile payments and just released an iPhone app on Dec. 9, 2009 (see screenshot, p. 5).
Citi Obopay (discontinued Dec. 22, 2009)
MasterCard MoneySend Table 13 MasterCard MoneySend is a MasterCard MoneySend fees
prepaid P2P service. The prepaid Type Virtual Plastic account can be virtual or held on a Receive money Free prepaid MasterCard debit card. Send money $0.29 up to $50 The service is positioned as a $0.99 for $50 to $200 mobile offering, but can be sent via the MoneySend website or via $2.95 for greater than $200 text message. A downloadable app Add value via ACH or credit card 1% promotional (1.5% standard) is said to be coming soon. Monthly $0 $1.95 ATM fee NA $1.95 US; $2.95 The virtual account is free but International there’s a $1.95 monthly Currency conversion 2.95% 2.95% maintenance fee for the card. Paper statement fee $2.95 $2.95 MoneySend has is priced on the Card replacement na $10 higher end of what we’ve seen Account liquidation by paper check $15.95 $15.95 tried so far. The cost to load and Source: MasterCard, Dec. 2009 send $100 within the United States is $1.99 and internationally it would be $4.94 after the currency conversion fee (see Table 13, below). MasterCard is currently the only advertiser on Google for P2P searches (see screenshot, p. 37).
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Google search for “p2p payments” + bank on Dec. 1, 2009 from Seattle IP address
Landing page
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PayPal PayPal launched its P2P email address-based service on 15 Nov. 1999 (see OBR 54). The company was acquired by eBay in 2002 and is now considered by some to be more valuable than its parent. It’s possible the unit could be spun off in an IPO within the next few years. The company now has 73 million active users and more than 150 million total accounts. Worldwide the company did nearly $60 billion in volume last year (2008).
The company recently opened its platform to the development community and began courting financial services deals.8 At BAI Retail Delivery in Nov. 2008, PayPal CEO Scott Thompson showed a screenshot of a Chase Student Banking service that featured a bundled PayPal account. While that service has not made it out of testing, PayPal was back at Retail Delivery this year aggressively courting banks. The company announced three deals with large bank-tech companies: • S1: PayPal-powered payments will be integrated into next year’s mobile banking platform. The first bank client, Mercantile Bank Source: PayPal, Sep. 2009; global totals of Michigan is scheduled to go live in early 2010 and is already touting the Powered by PayPal service on its homepage (see p. 22). • Star System unit of First Data, has integrated into an ATM/debit solution. • FIS will integrate PayPal-powered payments into its online banking suite
The idea of banks working closely with PayPal, perhaps tapping its P2P engine to offer various “powered by PayPal” online and mobile services, which was hard to imagine before 2008, is almost a reality. According to the companies, there is considerable interest from financial institution large and small. We suspect it will be difficult converting product-level interest into strategic decisions to endorse PayPal. However, at least one bank has made the leap. Here’s what Mercantile Bank’s CIO John Schulte told Digital Transactions on Nov. 10: (PayPal) is a network; it doesn't scare me at all. They're never going to steal significant deposits out of our bank and keep [them] in PayPal accounts. Visa and MasterCard probably look at PayPal as the enemy, and they probably should, but that’s their problem, not mine.
88 See transcripts from PayPal Innovate Developer’s Conference held Nov. 3-4, 2009
page 38 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 FINOVATE
Like most multi-billion dollar payment companies, PayPal’s pricing has evolved over the years. Ten years ago they made their mark with free payments and $10 bonuses to open an account (OBR 54). Today, they make a solid profit by keeping prices competitive (see its latest price chart inset) and costs substantially below their competition.
The company’s primary method of containing costs is to convince users to fund as many transactions as possible from either a PayPal balance or an ACH electronic transfer from the customer’s bank account.
Source: PayPal, Nov. 29, 2009
The latest from PayPal is an app to send money directly from within Facebook
page 39 ONLINE BANKING REPORT Number 174 & 175 © December 10, 2009 FINOVATE
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