Bank of America Is Taking clearXchange Beyond P2P

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Bank of America Corp. plans to allow new transaction types, such as corporate disbursements, to be made through the bank-led clearXchange person-to-person payments network.

The bank is testing a digital disbursement product that handles transactions such as insurance payouts to consumers via the clearXchange rails.

"We're able to use the clearXchange network to enable corporations to make a number of different kinds of payments," says Ather Williams, the managing director of global payments and global transaction services strategy at Bank of America Merrill Lynch.

ClearXchange, which allows users to make payments to the email addresses of participating bank customers, was founded by B of A, Wells Fargo and JPMorgan Chase and also includes Capital One and Colorado-based FirstBank. These financial institutions make up more than 50% of the country's online banking market, and the exchange has made extending service and membership a top priority.

B of A will also use its participation in P2P networks in Canada, the U.K. and other markets to expand its disbursement products, Williams says. A Fed survey found that about 85% of consumers and 81% of merchants wanted a seamless evolution toward digital transactions by not providing account information to execute payments, Williams says.

The disbursement pilot is also part of a strategy at Bank of America to scale payments technology from the consumer side of payments to build services on the merchant side, and vice versa.

"Payments is considered a dual-sided market. You have to have the merchant side and the consumer side," Williams says. "We're banking with [83%] of the global Fortune 500, and in the U.S. a quarter of payment settlements go through our bank."

ClearXchange did not respond to a query by deadline about any other non-P2P services that its banks are offering. B of A would not discuss the other clearXchange participants and said there are no fees for the disbursement service.

P2P payments are considered a relatively small market, though the technology can serve as a springboard to broader payments services.

"The essence of P2P payments is that they are 'push' payments, the sender is pushing the money out based on the recipient's details, as opposed to the sender having to share their payment credentials with the recipient so that the recipients could 'pull' money out of their accounts, as in cards and check payments," says Zil Bareisis, a senior analyst at Celent's banking group.

"Insurance disbursements, incentive payouts and many other payments are by their nature well suited to 'push' payments, and therefore are natural use cases for P2P payments platforms such as clearXchange," Bareisis says.

The clearXchange network also gives its member banks the opportunity to compete with alternative payment providers such as PayPal, Dwolla or Stripe.

While nonbanks often appear to be faster to adopt new payments technology, banks have the breadth and scale to offer broader services, Williams says.

"We have the relationships with clients and have the scale to provide these types of products," Williams says. Banks may appear to be embracing new technology more slowly because of compliance and risk standards, he says.

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Technology P-to-P payments