Venmo who? Fiserv expands P2P payments to more Americans

A recent deal between two industry players means more financial institutions will be offering peer-to-peer payments to their banking customers.

Earlier this month, the financial services technology provider, Fiserv, and large banking network, Early Warning, announced a partnership to bring faster payments to Fiserv’s network of banks and credit unions.

One of the most talked about trends in payments has been speed, with calls for real-time payments and faster banks transfers. Consumer expectations for faster financial services have outpaced the speed at which financial institutions have been able to make their aging systems faster.

“The biggest thing going on for U.S. payments is real-time capabilities,” said Tom Allanson, president of electronic payments for Fiserv. “Our payment systems are old, and customers expect to move money as fast as they move everything else, and unfortunately this industry is a bit behind.”

Fiserv’s NOW network, introduced at the 2014 Money 20/20 conference, connects financial institutions with billers, small businesses, and consumers with real-time payment capabilities. Its partnership with Early Warning gives Fiserv capabilities for expanding the number of account holders it can reach. With EWS, the company can facilitate bill payment and deposits, totaling a combined 6,000 banks and credit unions, representing 75% of all deposit accounts in the US.

“The idea is that EWS has the connectivity and we have the technology. From fraud to customer service to moving money, the connection of those two things is how a partnership comes together,” said Allanson.

The agreement with Early Warning’gives Fiserv the ability to connect financial institutions to EWS’s clearXchange network in addition to the the firm’s own Popmoney. Similar to Venmo, Fiserv’s Popmoney app gives consumers the ability to transfer funds to friends and family directly from their bank accounts using only phone numbers and email addresses.

Fiserv’s technology has been developed for financial institutions, so customers who might hesitate to send money through a third party app now have the comfort and stability of an institutional P2P payment option.

“Our focus is on financial institutions, while Venmo focuses more on millennials,” commented Allanson. “Our dollars and cents have to be clearer since we’re working with financial institutions. It’s unclear to us how Venmo makes money, but that’s PayPal’s problem.”

The firm’s technology stack attempts to simplify the lives of the customers of its banking clients. That’s why it created an agnostic network that facilitates multiple payment rails. Philosophically, Fiserv believes that removing complexity lowers the hurdle to getting more people using digital payments.

Fiserv’s Popmoney doesn’t intend to overload end users with decisions about different payment methods. Users tell Fiserv where, when, and to whom they want money transferred, and the technology takes care of the rest.

“Our goal is not necessarily to try and dominate, but provide services to the consumer that allows them to do the things they want to do. We want them to live their lives and pay their bills when they have to pay them,” he said.

Behavioral biometrics is the next generation of bank security

When it comes to fintech services, bank customers want it all. They want streamlined, user-friendly applications on the one hand, but they also expect their financial service providers to protect them from the growing scourge of online threats.

The problem is that these two customer demands typically clash: in order to contend with the multiplying hordes of cyber attacks, social engineering schemes, trojans, and malware, banks have traditionally piled more security tasks on the user in order to minimize risk. However, the more banks make customers jump through security hoops to access and use their accounts, the less a user-friendly, sleek online experience banks provide.

“This friction between customer safety and customer experience is not something that is actually sustainable,” said Uri Rivner, head of cybersecurity at BioCatch. Founded in 2011, the company’s fraudster prevention technology for the finance industry also rests firmly on the user. Unlike traditional verification methodologies, BioCatch’s behavioral biometric solution needs customers to do just one thing: act normally.

If a user attempts to access her back account as she normally does with a device or app, BioCatch’s technology collects information about her and creates a user profile. “The idea of behavioral biometrics is to essentially monitor user activity over time, establish their regular behavior – behind the scenes,” explains Rivner. The technology then looks for deviations in normal behavior, “so if someone else then goes into that device or into that application using the username of the account, the system is able to detect it and alert the owner of the account in real-time that there’s some type of foul play that has been detected.”

Though the Israeli company isn’t releasing client names just yet, Rivner reports that four of the five biggest banks in the UK have started to implement BioCatch’s solution into their online and mobile retail banking services, with an average deployment of 5 to 10 million users at each bank.

BioCatch’s technology, which utilizes big data and machine learning, monitors approximately 500 parameters to determine whether an account holder is behaving as they usually do. The firm collects information from customers’ mobile devices, including how they hold the phone, the way they interact with it and touch it, and the way they scroll and swipe. It also analyzes customers’ cognitive choices, such as how they fill in their passwords, dollar amounts, or dates.

“One of the things we’re monitoring is the way that customers use the mouse because this exposes their hand-eye coordination,” Rivner explained. BioCatch will sometimes present invisible challenges to customers to verify that they’re behaving like themselves, like making the mouse disappear momentarily, or dragging the mouse off slightly to the side of the screen. These are barely perceptible changes, but it helps BioCatch ascertain that customers are humans, not malware. Moreover, different people respond differently to these very minor challenges.

After monitoring an account for a certain number of sessions, BioCatch builds a unique user profile, based on parameters collected from the general public and from the individual user. And while this may sound like a creepy big brother set-up, Rivner is careful to differentiate behavioral biometrics from physiological biometrics.

While physiological biometrics such as facial recognition or fingerprint collection is focused on accurate identification of a person, behavioral biometrics just wants to make sure that the account is behaving normally. Even if you were to aggregate all of the data from the account, you still wouldn’t to be able to identify who the account user is.

BioCatch’s biometric solution got a real boost in the U.S. in 2015, after the startup signed a strategic partnership with Early Warning, a bank-owned consortium that provides technology and fraud prevention services to the financial services industry. Nevertheless, even if behavioral biometrics has graduated from novelty to accepted technology, the space is still basically a two-player game.

The startup’s main competition is Swedish BehavioSec, which like BioCatch offers continuous authentication with behavioral biometrics. And while BioCatch may have snagged the Early Warning partnership, the Swedish company recently nabbed two awards at the 2016 European Fintech Awards. BioCatch’s solution is tailored to the finance industry, while BehavioSec also caters to ecommerce and social media platforms.

BioCatch and BehavioSec’s respective collaborations within the finance industry are a great example of how a partnership economy can benefit both financial institutions and their customers. By moving online security checks unobtrusively into the background, behavioral biometrics is helping banks facilitate a healthier balance between seamlessness and security across all remote channels. Your move, cyber criminals.

Photo: flickr

Big banks prepare to crush p2p startups with clearXchange

the bank's counter to p2p payments

Quietly over the past few months, some of the largest US banks have rolled out real-time P2P payment functionality in their banking apps. Now, 5 of the largest US banking institutions, including Chase and Bank America, enable their customers to send and receive money in real-time to one another and eventually, to friends and family who hold accounts at other banks.

Instead of building their own solutions, participating banks have signed up to the clearXchange network, a white label P2P payment platform that has facilitated non-real time P2P payments for banks since it was founded in 2011. After inking deals with leading banks, P2P payments on the clearXchange network are now available to more than 100 million online banking and 70 million mobile banking users in the U.S.

In the first quarter of 2016, customers at banks in the clearXchange network completed more than 46 million P2P transfers, accounting for over $16 billion in combined transaction volume. That number is expected to grow as banks already on the network ramp their marketing of p2p capabilities, and more banks sign up for the service.

P2P startups facing down a speeding train

Before clearXchange, it wasn’t easy to send payments across banks. A whole industry of P2P payment players has sprung up to help bridge this gap by putting a transaction layer on top of existing banking infrastructure. As a workaround to directly moving money between bank accounts, technologies like PayPal and its faster growing service, Venmo move money between stored value accounts. So, while payments may be instantaneous, it can take days for the receiving party to be able to access that cash directly from her bank account, as money moves from the P2P platforms into the banking system.

clearXchange changes all that. Banks on the network are active participants this time, enabling payments to move freely between banks at the account level. clearXchange’s parent, Early Warning, is owned in part by seven of the largest banks in the U.S. Early Warning has been around for 25 years, providing thousands of banks and credit unions across the country with risk, fraud prevention, and authentication solutions.

“The involvement of our owner banks gives Early Warning’s clearXchange network a very large footprint in the U.S.,” Lou Anne Alexander, Group President, Payments, at Early Warning emailed Tradestreaming. “The expansive reach of our network is appealing to financial institutions interested in bringing person-to-person payments to their customers since they know their customers will instantly be able to reach a substantial population.”

Early Warning’s clearXchange lets banks compete head-on with newer entrants like Venmo. And because it’s a technology solution, clearXchange integrates into the existing banking apps its clients have already developed. Users don’t need to download a separate app to access the payment functionality.

It’s not easy getting everyone to play together

clearXchange is a network and joining the network becomes more valuable when they’re more banks on the network.

“As more financial institutions join the clearXchange network, it will become increasingly useful and valuable to consumers who will be able to send and receive real-time payments with each other,” said Alexander, who also held senior payment and innovation roles at Wells Fargo and Wachovia. “As it grows in scale, I expect a substantial amount of payments that are currently made with cash and check to migrate to clearXchange.”

Consortium efforts can pay off massively, but they’re hard to pull off. Just look at the Merchant Customer Exchange, or MCX, a retail industry consortium that wanted to do an end-around of the credit card networks. Tired of paying interchange fees, companies like Walmart and Target worked for years to roll out a mobile payments solution, dubbed CurrentC. Walmart ended up launching its own payments, Walmart Pay. MCX announced layoffs in May and its future is uncertain.

Ramping up the network

For now, clearXchange network banks are working on customizing marketing programs that encourage mobile adoption, including P2P payments. JPMorgan Chase’s CEO, Jamie Dimon famously said that he expects to win in payments. Chase is an Early Warning client.

“Financial institutions are eager to respond to the growing customer demand for the convenience that P2P payments offer,” said Early Warning’s Alexander.


Photo credit: tj013579 via Visual hunt / CC BY