PayPal Gets Competitors

We all know that PayPal is an easy way to make purchases and to send money from person to person. When you use your debit, credit card or PayPal credit account to make a personal transfer (if you send money to your child, for example), PayPal receives a fee of 2.9% + $0.30. Now, banks want to get in on that market.

Last week, a press release from clearXchange announced Bank of America, Chase and Wells Fargo are forming a partnership so that consumers can make person-to-person payments electronically amongst the three banks. In the press release, Mike Kennedy, EVP and Head of Payments Strategy at Wells Fargo, indicates they launched the venture because they “want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank.” The banks are endeavoring to make transferring money between their banks even easier than using PayPal as well: the only thing someone has to know is the email address or mobile phone number of the person they want to send money to, and the banks will take care of the rest.

The LA Times reports that Bank of America and Wells Fargo are already testing the payment option in Arizona, and Chase will soon join them. The new service will be free to customers while it’s being tested, and the banks will later separate fee structures. After the network goes national, other banks will be invited to join.

This isn’t the first time PayPal has gotten competitors; in 2007, Amazon launched Amazon Payments. PayPal soon responded by launching PayPal X, so that its platform is opened up to developers to build person-to-person payments on multiple platforms, not only PayPal. It will be interesting to see how PayPal will respond this time, after the new bank partnership goes national.