Payment processes have become the hottest working areas for banks in financial technology. Banks have started to realize the importance of real-time payments and Wells Fargo & Co (NYSE:WFC) now joins other banks to enable customers to make immediate payments through ClearXchange.
ClearXchange is a network owned by several other major banks such as Bank of America and JPMorgan. It was launched in 2011 but at that time, the customers had to wait two to three days in order for payment to be processed completely. The network’s immediate processing capability got live this year. Wells Fargo has turned down several fintech start-ups, which signifies that the firm does not believe in alternative ventures for payments systems.
Three banks are now live with realtime peer-to-peer payments on the ClearXchange network: U.S. Bank, Bank of America, and as of yesterday, JPMorgan Chase. U.S. Bank and Bank of America joined the realtime network in March.
P2P payments were realtime within Chase since 2012, but now they are realtime among all banks on the ClearXChange network.
Venmo and Square Cash may get all the attention, but bank peer-to-peer payments see more volume and larger payments. Chase QuickPay, the bank’s P2P solution, became part of the ClearXChange network in 2012. Usage is projected to grow 40% year over year, and Chase customers transferred $20 billion peer-to-peer in 2015, while the average transaction size is now more than $300, according to Chase.
Compare those numbers to Venmo, which processed $3.2 billion last quarter. Venmo grew 150% over 1Q 2015, according to CEO Dan Schulman on PayPal’s April earnings call. Ron Shevlin, research director at Cornerstone Advisors, puts the average Venmo transaction size at around $2, which seems low compared to the Chase number. Two possibilities: 1) People use Venmo much differently than they use bank-based P2P; or 2) People are not self-reporting accurately about Venmo usage, and they transact less frequently than they think they do.