October 22, 2010

San Jose, Calif.-based Internet payments company PayPal is touting its person-to-person payments capabilities as a check-killing service that could help financial institutions break into the personal mobile payments space.

Showing off the company's instant mobile transaction abilities at BAI Retail Delivery in Las Vegas, PayPal senior director and head of financial innovations Dan Schatt said financial institutions can benefit from providing P2P payments to current customers by saving the inherent costs of printing, sending and processing checks, while potentially reaching new clients by including bank-branding and messaging into each payment.

"It turns out there's over a trillion dollars out there in checks and cash that takes place in casual payments," Schatt says.

While Schatt didn't indicate how many banks were currently using PayPal's P2P payments service, he did demonstrate how it works through MERC Mobile, Mercantile Bank of Michigan's iPhone app. And, Schatt adds, the service is scalable enough to fit most any bank.

"We've got everyone from top-10 financial institutions all the way down to $100 million credit unions," Schatt says.

While banks can brand and deploy the service however they choose, PayPal does require they add a "Powered by PayPal" logo. PayPal's service gives customers the ability to send money to anyone with an e-mail address, mobile phone number or international mobile phone number. While Apple iPhone, Google Android and RIM BlackBerry can support downloadable apps, Shatt says some banks are implementing the service through Wireless Application Protocol, something pretty much any mobile phone can access.

"A consumer can be empowered instantly to move money through a $20 handset," he adds.

When a payment is initiated, a notification is sent to the recipient either through e-mail or text message. While the payor doesn't need to have a PayPal account to send money, the recipient needs an account to receive payment. Shatt says there's already an installed user base of 221 million PayPal customers in more than 190 markets. Schatt believes there is a viral marketing aspect with the service as well; those who receive payments from a bank customer with the ability to send them might be inclined to open an account with a bank that offers the service.

In cases where banks have already implemented the service, Shatt says PayPal has seen customer behavior begin to change in terms of payments.

"What you're seeing is all these people are using their financial services in ways they never could," he says.