The digital payments initiative clearXchange is run by three banks that make up more than 50% of the online banking market in the U.S., but it still has a lot of work cut out for it.

"It's a great start but we're not all the way there," says Mike Kennedy, a clearXchange co-founder who is now its CEO.  "We are in discussion with multiple banks about joining clearXchange. One thing about having me on board [full time] is to take the company beyond the three [current members]…We want to make sure we have a ubiquitous network where our customers can send and receive money easily."

Kennedy previously was executive vice president and head of payments strategy for Wells Fargo, which operates clearXchange along with JPMorgan Chase and Bank of America. As executive vice president and head of Wells Fargo's Innovation and Payments Strategy, Kennedy drove mobile and emerging payments, strategy across all payment products, and technology research and development.

ClearXchange enables payments between customers of the three banks by using a mobile number or email address to identify the recipient. Wells Fargo has also launched a person-to-person payments service based on clearXchange.

Past bank-led attempts to build an automated P2P payments system have stalled. Citigroup's C2it, a low-cost international operation that allowed users to transfer money via the Web, closed up shop during the last decade, as did an earlier Wells Fargo/Bank of America venture called Pariter. The Pariter venture, which was designed to make transfers more efficient via joint ACH processing, was discontinued in 2011, shortly before clearXchange's launch.

Wells Fargo was also part of eBay's Billpoint, a payments system the online marketplace designed to compete with PayPal. Eventually the companies admitted defeat — Wells Fargo left the project and eBay purchased PayPal and shut down Billpoint in 2002.

This time around, Wells Fargo and the other clearXchange banks are taking aim at a different target.

"It's not about taking share from PayPal, it's about taking share from paper," Kennedy says. The person-to-person payments market totals about $900 billion, with most of that still coming via cash and checks, Kennedy says.

Since people are using smartphones more often, executing transfers via mobile devices should be a strong selling point, Kennedy says.

"Nobody remembers their bank account or their account number. However, I know your email address, or it's a more natural question to ask someone—what's your email address or mobile phone number," Kennedy says.

While Kennedy did not comment in detail about clearXchange's competition with PayPal—which controls a majority of the automated P2P payment market, he did say clearXchange's use of existing bank accounts helps enrollment.

"We don't require people to open up a new account at a non-bank third party," Kennedy says.

Financial technology experts such as Steve DePerrieu, the director of product management for Computer Services, argue that while electronic person to person payments offers a vast new market opportunity, providing convenience for the receiver will drive mass adoption of person to person payments. And financial institutions are in a unique position to be the channel of choice if they select programs and applications that help consumers easily exchange money, DePerrieu wrote in a recent column.

PayPal did not return a request for comment by deadline. In an earlier interview, PayPal said it was developing technology to allow a standardized messaging format to execute payments directly between bank accounts

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