Three major banks team up for online payment system

LOS ANGELES — Online and mobile customers of three major banks will be able to instantly zap funds from their accounts to other depositors at the banks under a program to be rolled out across the country over the coming year.

Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. are setting up an Internet exchange that would allow their customers to send money via text and email messages to customers at participating banks.

The program, called clearXchange, accelerates a trend away from checks and cash, the conventional ways to tap bank accounts, to debit cards and digital payments.

The new methods cut processing costs for financial institutions and, in banker jargon, are “sticky” — meaning customers who adopt them are less likely to switch banks.

“This is yet another sign that the traditional payment industry’s model is looking more and more like PayPal’s,” said Dan Schatt, head of financial innovations at PayPal, an online payments arm of eBay Inc. that has been operating for a dozen years.

With the new system, the banks will be muscling into the consumer-to-consumer payments market dominated by PayPal, whose president recently predicted the company’s annual revenue would double to as much as $7 billion by 2013.

Customers who haven’t set up linked online or mobile accounts to accept funds will get an email explaining how to do so, Mike Kennedy, Wells Fargo’s head of payments strategy and chairman of the new venture, said Wednesday.

It’s unclear what new security issues may be created, but the payments, like debit transactions, appear to have fewer legal protections for consumers than credit card charges, said Paul Stephens, director of policy for the San Diego nonprofit Privacy Rights Clearinghouse.

With new financial regulations aiming to rein in the fees banks charge merchants for debit card transactions, the new system “presumably … is a bank moneymaker,” Stephens said.