Banks unite for mobile payment system

Bank of America, Wells Fargo and JPMorgan Chase are creating a service that would allow online and mobile customers to send money via text and e-mail messages, reports Los Angeles Times.

With the ClearXchange system, the banks will be muscling into the consumer-to-consumer payments market dominated by PayPal, whose president recently predicted the company's annual revenue would double to as much as $7 billion by 2013.

In another example of a new payment system, Google is expected to unveil a mobile payment program that allows users to pay for retail purchases by holding their smartphones up to a special device.

According to Internet Retailer, ClearXchange users in the test do not pay fees for transferring funds.

But ClearXchange faces a field of competitors that includes PayPal, CashEdge and Fiserv as they all offer person-to-person fund transfer services.

ClearXchange also may benefit from the sheer size of the potential customer base. According to a Chase spokesman, Chase alone has 26 million cheque accounts held by individuals and small business owners.

Mobiledia says unlike with PayPal, bank customers won't have to set up a separate account for their fund transfers, increasing the convenience factor of the banks' offering.

“Customers want to move payments from paper to electronic methods,” says Mike Kennedy, chairman of the venture and payment strategist for Wells Fargo. “So if we can meet our customers' financial needs, they will be better customers with us.”