Banks pushing person-to-person e-payments, credit unions yet to offer the service

WEST PALM BEACH, Fla. - It's not exactly a bill payment and not exactly a wire transfer-it's called e-payments, an emerging trend in the financial services industry credit unions have yet to break into. One of the issues online bill pay companies have had to deal with is setting up an individual as a payee on a person's bill payment program. How does a person use online bill pay to pay the babysitter or gardener? With large companies, bill pay companies can do most payments electronically by getting either a direct data pipeline into a large company, such as a mega utility company, to get their customers' bills paid, or via an EFT network or by using ACH. But setting up a bill pay when an individual is the recipient takes more time, and is almost always going to result in a paper check being cut and mailed to the payee. Though bill payment companies have "pay anyone" capabilities, meaning if they need to cut a check to get the payment through to anyone (including individuals), they will. This of course takes the electronic aspect of bill pay out of the mix on the payment side, though from the user's perspective it is still electronic because the payment is initiated using a PC and bill pay program. Of late, some major banks have announced their entrance into the person-to-person e-payments arena. BankOne was the first bank to introduce e-payments through its eMoneyMail service. Any BankOne customer who has an e-mail address and a bank account or a Visa credit/debit card can send money to anyone else using e-mail. Here's how it works. An eMoneyMail user logs into eMoneyMail from the BankOne Web site; inputs the recipient's name and e-mail address; then inputs the dollar amount to be sent; and lastly poses a unique security question (place of birth, mother's maiden name, etc.). The security question is supposed to be a question only the sender and recipient will know the answer to. The sender then selects their checking account or Visa card to pay the recipient. On the recipient side, the person receives an e-mail indicating that someone has sent them money. The e-mail will contain a hyperlink to the eMoneyMail log-in screen. If the person is not an eMoneyMail user they will have to create a user profile and then sign in. The recipient then responds to the sender's security question, and lastly decides where the money will go-in their checking account, as a credit to their debit or credit card account, or as a paper check. Users of eMoneyMail can send payments between $10 and $500. The cost for sender and recipient is always $1 regardless of payment amount. There is an additional $1 fee if a check is mailed to the recipient. BankOne claims the money is credited to the recipient's Visa account in one day, and in one to two days in a recipient's bank account. At press time, Credit Union Times knew of no credit unions offering the service, but Matt Lawlor, CEO of bill pay firm Online Resources, McLean, Va., said it's not a service that would be difficult for CUs to develop on their own. And though the service could have some implications for bill pay firms, Lawlor said it's a low-tech solution that goes after the wire transfer market, not the bill pay market. "It's a nice repackaging of ACH technology. It's a cute idea to use ACH and e-commerce to attack the wire transfer market. Rather than pay $15 for a Western Union, someone can pay a dollar with this. They're going after wire transfers," said Lawlor. "It's good if you have a grandson desperate for some cash, and grandma wants to send a gift quickly." And that's exactly how BankOne is marketing the product-as a solution for fast, personal payments such as a parent wanting to get money to their son or daughter in college quickly. Lawlor said wire transfers are a very small portion of business for a credit union or bank as compared to bill pay services. He said ORCC clients have had the ability for the last five years for members or customers within the same financial institution to transfer money to each other, but not between different institutions. While the service is new to the big banks, it has been around for a few years through companies like PayPal.com, x.com (the two merged recently) and Tradesafe.com. FleetBoston Financial Corp announced a person-to-person e-payment service through a partnership with Tradesafe.com. "There are a lot of payments done informally. What's driving this business right now is the online auctions. It's an easy way for those folks to settle the transactions," said Paul Jamieson, senior banking analyst for Gomez Advisors, Lincoln, Mass. "It actually complements bill payment, targeting person-to-person payments, as opposed to person to biller pay scheme, which banks offer ubiquitously. The addition of Fleet and BankOne makes this yet another new online financial product. It's attractive as a way for a parent to send little Johnny his birthday money," said Jamieson. Jamieson said there's roughly one million people using e-payments, compared to the 3.4 million consumers using bill pay at least once a month. He said consumers are likely going to go to the big name financials that they trust, or their trusted credit union. "Banks or credit unions can establish themselves in this market relatively quickly because of the trust factor," said Jamieson. Jamieson said it's hard to tell what e-payments will do to the bill pay market. Recent stats show that electronic bill payment is just not attracting consumers as rapidly as online brokerage accounts and online banking. According to Forrester Research, Cambridge, Mass., only about 50% of the some 5 million households using online banking, also use bill pay. -pgentile@cutimes.com