Various banking apps are pictured on a smartphone. Big banks are beginning to catch up with third-party person-to-person transaction apps like Venmo, pictured bottom right, by announcing plans for customers to begin making immediate cash transfers across different banks. Photo by rvlsoft/Shutterstock.com
WASHINGTON, July 23 (UPI) -- Several of the nation's largest banks are reviving efforts to get into the person-to-person online payment industry after seeing the popularity of online apps such as PayPal and its subsidiary Venmo increase dramatically with younger consumers.
Venmo, an app that allows users to make financial transactions in real time, has become a popular tool for young people to replace what used to be cash transactions like splitting a dinner check.
Big banks like Chase and Wells Fargo have yet to develop online services that rival the immediacy of PayPal or Venmo, and have struggled to overcome their own competitiveness, by creating apps that allow users of different banks to make person-to-person online payments, The Wall Street Journal reported.
That, however, is about to change.
Several large banks recently unveiled a revived joint operation, clearXchange, a bank-owned platform that enables users to make immediate person-to-person transfers that do not have to wait the usual two or three days to settle like a normal bank transaction.
Research by the consulting firm Aite Group underscores the potentially lucrative payoff for whatever companies ultimately win the day on facilitating person-to-person transactions.
Research shows Americans made $1.2 trillion in person-to-person payments in 2014 -- everything from a 25 cent purchase at a garage sale to the $50 for the babysitter or $5,000 for a used car on Craig's List. The average household made 54 such payments each year and the largest number were made in cash, 22 percent. Personal checks accounted for 16 percent and PayPal clocked in with 8 percent.
The share of online person-to-person payments is growing and is most popular among Americans under 30. Millennials especially have turned to PayPal's Venmo app because it allows them to share what transactions they make -- another way to share with friends using the app when going to dinner at a popular restaurant, or seeing the newest movie.
At least five major financial institutions have signed on to clearXchange: J.P. Morgan, Wells Fargo, Bank of America, U.S. Bancorp and Capital One Financial Corp., The Wall Street Journal reported.
At least some of major banks already allow person-to-person immediate transactions between their own customers, including Chase's Quick Pay app.
But they are behind the curve with many Millennials who increasingly rely on bank cards for even the smallest transactions, and have turned to third-party apps to facilitate the same things with friends.
PayPal CEO Dan Schulman told PC Magazine this week the shift in person-to-person transactions is only one of the many changes happening in the banking world.
"We will see more change in financial services in the next five years than we've seen in the past 30," Schulman said.
He predicted the trend of "democratization of financial services" will continue because the ultimate desire of consumers is to have the most control over their money in the shortest amount of time.
The days of writing and cashing checks and waiting three days for the funds to become available seem increasingly archaic, he said.
"Managing and moving money should be a right for every citizen, not a privilege for the well-off," he said.