Mega Banks Enter Alternative Payments Market
The banks are losing the fight against the Durbin Amendment but don’t count them out yet. The threat of billions dollars losses from interchange fees revenue has inspired them to innovate. So much so that alternative payment processors such as PayPal will soon face the wrath of a sleeping giant.
Bank of America, JP Morgan and Wells Fargo have teamed up to form clearXchange, a payment system for simple bank to bank transfers. In what they have dubbed a ‘coopetition’ (cooperative competition), there’s no new bank or merchant account needed. “PayPal and other systems require you to create an account separate from your bank account to transfer money, this new service will let customers simply log in to their existing bank account and enter the recipient’s name and e-mail address or phone number. The person they’re paying will then instantaneously receive an alert that money is being sent their way.”
And this doesn’t just compete against PayPal, it threatens cash and check payments as well. No longer will you be able to tell your friend that you don’t have any cash on you when they ask for the $20 you owe. D’oh!
Major retailers like Walmart stand to win big as a result of the Durbin Amendment, a triumph that will ultimately come to haunt them. With no interchange fees to earn, banks will get bored of debit cards and eventually phase them out. clearXchange is the new dawn of electronic payments and revenue for the big banks. And guess what? Durbin’s laws aren’t applicable to it. What have we done?
– deBankedLast modified: February 21, 2013
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.