Potential: Revealed

Strategic Thinking, Innovative Ideas, Growth Marketing, and Revealing of Potential

Recent Commentary: Person-to-Person Payments (P2P)

For a client recently I published some commentary on recent news in the financial services technology (Fintech) market.  Just sharing the publicly available portions here for your interest – and of course comments!

Here’s the second one (the first is here):

clearXchange P2P Next in Long Line of Mostly Unsuccessful Mega Bank Consortiums

On May 25, 2011  Bank of America, JPMorgan Chase and Wells Fargo announced the launch of a joint venture — clearXchange — which will enable their customers to move money using just a mobile number or e-mail address. A direct competitive move versus eBay’s Paypal unit. And threatening Person to Person (P2P) offerings from Fiserv (NASDAQ:FISV) (ZashPay), PopMoney (CashEdge), as well as money transfer players such as MoneyGram (NYSE:MGI), Western Union (NYSE:WU), Obopay and Fundamo.

The announcement garnered significant attention of course due to the banks involved.

Previous bank consortiums as mentioned in the article (e.g., Spectrum, Pariter, ISIS) have a lousy track record for a reason. Innovation and market success requires many characteristics such as capital – which the big banks have, of course – plus nimbleness and persistence in the face of inevitable challenges and failures along the way — which the big banks generally lack on an individual basis. I never see how the latter gets overcome if a group of mega banks simply band together as a “committee”.

P2P payments as the author notes have found success only where some friction in the marketplace could be reduced for a price the market would pay – providing for a sustainable, relatively defensible revenue model such as Paypal did with small/micro-sized merchant payments (e.g., eBay sellers and their auctioned merchandise).

I am unclear that this requirement is met with P2P where the P’s are really that, “persons” — indeed as the author points out this is a sort of last mile problem/opportunity in the payments market place. But is there enough friction with current methods (e.g, checks, cash) and processes (e.g., the infrequent incidence of paying another person such as a baby sitter or repaying a friend for picking up the drink tab last night) to offer sufficient latent demand that is ready to be met?

If successful in some way though, clearXchange would provide a positive force if they are a “network amongst networks” which interconnect to facilitate the critical mass reach that will eventually be required for P2P to become more mainstream.

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