3 Big Banks Making a Big Move Into Payments

When it was announced last spring that clearXchange, a money-transfer platform, would be teaming up with the likes of Wells Fargo (NYSE: WFC  ) , Bank of America (NYSE: BAC  ) , and JPMorgan Chase (NYSE: JPM  ) , it seemed too good to be true. The super-convenient system whereby bank customers transfer money quickly and securely by mobile phone has been tested in Arizona over the past year, and Wells Fargo has recently announced that the service is now available to all of its customers.

Could be a game-changer
The new system, dubbed Send and Receive Money, makes it simple for bank customers to send money to other customers in the system. The mobile-transfer product requires only an email address or cell-phone number to send money without mentioning critical information, like account numbers. That last part is a great enhancement over ING Group's (NYSE: ING  ) similar service, which has been around for several years and allows customers to transfer money to anyone with a domestic bank account. The difference here is that with ING, you must know the recipient's bank account number, something that customers are not always comfortable sharing with others.

eBay's (Nasdaq: EBAY  ) PayPal claims that it offers similar banking services as Send and Receive Money, allowing for direct transfers between bank accounts, as well as a service in which the company sends money to recipients immediately, and then is repaid by the bank. But one possible advantage of the bank's new service is that customers won't need to set up a PayPal account at all, as is often the case to use PayPal's features.

The participation of these three banking titans brings nearly 40% of the banking public to the table, where they can register for this new service with their host bank and then transfer funds to their hearts' content. Currently, only Wells Fargo and Bank of America are participating, and JPMorgan is scheduled to come on board at a later date. ClearXchange is eyeballing the other 60% of bank customers who will not be covered by this new system as well, and it's looking for ways to expand the services to other banks, thereby squeezing out other rivals.

Fool's take
The ease and security with which this new system works should definitely be a big hit with bank customers, and the three banks should have no trouble getting people to join up. Obviously, the idea is to make money from this venture, which I see happening in a few ways.

Now free, the service may eventually require a fee to use -- as so many previously complimentary bank services have done over the past few years. Alternatively, the banks may consider the idea of having consumers sign up at their banks to enroll in this new service, thereby opening up new accounts that may have their own fees attached, to be enough of a payoff.

Lastly, since the venture is supported by these three banks alone, they may be planning to charge other banks that join the service some sort of membership fee. They have some plan to make money, I'm sure of that. On the face of it, though, this new option seems convenient, consumer-friendly, and, so far, free -- and that's hard to beat.

Mobile payments are a growing concern, and Wells and B of A are showing some great innovation in this field. If you'd like to see how you, too, can profit from mobile technology in The Next Trillion-Dollar Revolution.