Watch out, PayPal. Three of the nation’s largest banks announced Wednesday they’ve joined together to offer instant, person-to-person payment. The new venture, called clearXchange, is already offered in Arizona by Wells Fargo, JP Morgan Chase and Bank of America. It will be available nationwide within a year.
“We’re adding one more piece to the menu of bank customers, which already includes branches, ATMs, Internet banking, mobile banking, and now person to person payment,” says Tom Kelly, a spokesman for Chase.
The new system is intended to be simpler to use than PayPal, which does not offer checking accounts, and thus requires people to fund their PayPal account by withdrawing money from accounts at other financial institutions. With clearXchange, the transaction is intended to be smoother, as long as both parties to a transaction have a bank account with one of the three participating banks.
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To pay someone money using clearXchange, a customer signs into her bank’s website from a computer or smartphone. She enters the other person’s name, email address or cell phone number, and the amount she wants to pay them, according to a press release from the three banks. The recipient receives an email or text that says they have received money, and allows them to choose which account to deposit the money into.
“We want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank,” Mike Kennedy, head of payments strategy at Wells Fargo, is quoted. “All our customers need to know is the email address or mobile number of a friend or family member and we will take care of the rest utilizing clearXchange.”
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Naturally, in an era where email hacks aren’t that uncommon, the new system raises questions of security. According to The New York Times, an identity thief who has compromised somebody’s email account in hopes of intercepting cash would also need to know the person’s online banking credentials. Were someone to successfully access a person’s online banking account, they could potentially send money to their own account, the Times reports. In cases where fraud did occur, bank executives contacted by the Times said the person sending the money would be reimbursed “as soon as possible.”
The banks aren’t ready to talk about the steps they’re taking to secure peoples’ accounts against fraud, but they assure Credit.com that the new system will have protections.
“I can’t speak in detail yet, but obviously security is an important part of what’s going into this,” says Kelly.