The news that CO-OP Financial Services and FIS are going tointegrate and expand their Sprig and PayNet systems into a real time person-to-person paymentnetwork will mean different things to different network users, apayment expert said.

The move will elevate as many as 48 million U.S. consumers to alevel of banking that has been enjoyed in the rest of the world fordecades, said Gareth Lodge, a U.K based senior analyst for paymentsfor Celent, an international banking consultant firm. And, headded, the deal will challenge all participants in the U.S. paymentsystem with a new way of operating.

“People in the U.S. don't realize it, but people in the U.K andother parts of the European Union have been able to send money backand forth for little or no cost for about 30 years,” he said.

“So in one sense it will mean U.S. consumers start joining otherconsumers in the rest of the world, but in the other sense it'sgoing to mean the U.S. payment system starts to change foreverybody – whether they are ready or not.”

Read more: CO-OP Expands P2P Service with FIS PayNet Deal

Lodge observed that the deal as announced does not include theability for consumers to use the new service to make payments tomerchant accounts, in part because neither firm wanted to undercutthe participants' card interchange.

But he predicted this restriction would not last long.

“FIS and CO-OP are fortunate because they are each closedsystems, so to speak,” Lodge said. “The transactions run over theirown rails, so they get to establish the rules and terms. But ifthey want to expand further, that will not be possible, and theyare going to have to deal with the merchant question at somepoint.”

Lodge contended that instead of focusing on protecting what theyalready have in card interchange, each network would be betterserved by focusing on what they will gain from a sharply differentpayment system.

For example, he said, other nations that launched person toperson payment systems found that the number of transactionsoverall increased, and the only channels that saw declines inactivity were cash and checks.

“Where did people use the person-to-person systems most?” Lodgeasked. “It was to send their kids money at college, or pay familymembers for some part of a joint gift, or to pay a neighbor orfriend for something. It wasn't to make a payment they wouldotherwise use a card to make. Card payments generally did notdecrease,” he added.

But all markets are different and Lodge observed that othernations didn't see as much of a decline in their wired moneyservices like Western Union as the U.S. will probably see. “But that's just one more place where money spent on one part ofthe payment system could move back to the financial institution,”he said.

He also noted that while person-to-person payments, includingthose to merchants, didn't make as much on a per-transaction basisas card transactions, they didn't lose money. And, given theirincreased volume, the revenue could be significant.

The challenge, Lodge said, is not only to recognize that a newtechnology is disrupting old ways of doing business, but to startthinking about the opportunities such disruption represents.

“There is a real delicate balancing act at play for every bankand credit union,” Lodge said, “between not wanting to cut existingincome too much, but also not wanting to stifle any of the benefitsand opportunities the new technology will bring.”

For example, consider what person-to-person payments do forconsumer loyalty, he said.

“If accounts with direct deposit are already sticky, how muchmore sticky will they become if they are the places where yourfriends and family know to send you money when they owe it to you?And what will that mean for additional cross sellingopportunities?” he added.