Although many of us get our paychecks direct-deposited into our bank accounts and pay for many daily expenses with the swipe of a debit or credit card, there's one aspect where commercial activity is several decades behind: person-to-person transactions.
So if you ask a colleague to grab you lunch when he goes to the deli or you hire a babysitter for a night out without the kids, you either have to have cash on hand -- and exact change, at that -- or go through the hassle of writing them a check. Sure, there's PayPal, but that involves setting up an account and agreeing to letting them take a cut off the top.
In other words, there's never been a good, hassle-free solution for peer-to-peer transactions. According to the news, that might be changing.Earlier this week, Visa announced it was partnering with a pair of mobile transaction companies to let people send money from a Visa card or a bank account to another person's credit or debit card (Visa cards only, naturally).
The two companies, Fiserv and CashEdge, already operate technology that make interpersonal non-cash exchanges possible. Visa provides its enormous customer base -- there are approximately 1.85 billion Visa cards in circulation around the globe -- which paves the way for an almost limitless number of peer-to-peer transactions.
"This is very exciting," Dennis Moroney, research director of bank cards at TowerGroup, tells WalletPop. "With Visa, you really get a heavyweight player into the game. That's what is significant."
The technology is described as being much more user-friendly than ordinary bank transfers, as this article points out. Traditionally, if you wanted to send someone money digitally, you'd have to transfer money from your bank account to theirs. You'd probably have to know a host of esoteric and private information like their account number and the bank routing number, and you'd probably be charged a hefty fee.
Visa's new system would let you transfer money to anyone with a Visa, so long as you knew their email address or mobile phone number. In effect, your cell phone could become a payment tool, TowerGroup's Moroney says. He adds, though, that Visa will probably need to make sure that this ability to pay comes with security features that will protect users from the risk of identity theft. On a similar note, the blog Consumerist points out that this system could be exploited by scammers; in other words, if someone claiming to be a Nigerian prince wants you to transfer funds to them, take a pass.
While this sounds like a great service for consumers (no more having your coworker hit you up for coffee every day and "forgetting" to pay you back!), Moroney says there's a good chance banks may welcome this, too, since they'll probably charge a fee for the service, and that money will help them make up for lost revenue due to regulatory reforms that reined in fees and surcharges.
Americans have been getting hit over the head with new and increased fees lately from many of the big banks, often for products or services they used to get for free. In this case, people might be more receptive to pay a fee if they see a value in the service being offered.
No one knows how much Visa's new service will cost yet, but PayPal's existing footprint in the marketplace means that consumers have a sense of how much a service like this should cost, which hopefully will force banks to be competitive.
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