Banking's Big Dogs Take a Step in the Right Direction, But too Late?

Through a cooperative venture, three of the nation’s largest banks have successfully created a new mobile banking platform that allows customers to deposit checks via Smartphone applications. This new deposit system, named clearXchange, was developed by Wells Fargo & Co. (NYSE:WFC) and is co-owned by Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM).

In a blog post earlier this month, Wells Fargo described the basic features of the system and disclosed that its own executive VP of Innovation and Payment Strategy, Mike Kennedy, is serving as the clearXchange chairman.

Despite massive efforts by Wells Fargo to publicize the availability of clearXchange technology, which facilitates digital check processing services in its proprietary mobile software named “Send & Receive Money,” the bank’s target market hasn’t responded with the enthusiasm management had been hoping for.

Because younger adults have always had a higher tendency to remain closer to developing technology, mobile banking and the ability to deposit checks simply by photographing them with a Smartphone is not new or exciting.

clearXchange Is Nothing New

USAA, the military-focused, member-owned insurance giant, has allowed bank customers to deposit checks using an iPhone app since August 2009. PayPal, a leader in person-to-person electronic payment facilitation, owned by online auction giant eBay Inc (NASDAQ:EBAY), released its own Smartphone app in October 2010. Aside from the ordinary and expected mobile capabilities like account balance inquiry and transaction history review, the PayPal app also permits account holders to make deposits by snapping a picture of the front and back of a check.

While clearXchange is definitely a step in the right direction for Wells Fargo and Bank of America, the digital check capturing feature is unlikely to convince droves of consumers to move their money and open new accounts. The existence of the clearXchange system might help retain customers, but it will not attract new ones. 

More than two dozen other banks and financial institutions, including Citigroup Inc (NYSE:C), E*trade Financial Corp (NASDAQ:ETFC), Fidelity, ING Groep (NYSE:ING) and PNC Financial Services Group Inc (NYSE:PNC) have already offered similar mobile check deposit software to account owners with iPhones and Android devices. 

Tech-savvy Gen-Xers and their children, who might otherwise have been awestruck by the convenience and future potential of depositing checks with a cell phone, have already seen, Tweeted about, installed, used, and gotten bored with this type of mobile app. The banking powerhouses behind clearXchange missed the opportunity to jump on the technological bandwagon at a time when new mobile capabilities could have been better leveraged.

What does this mean for Wells Fargo, Bank of America, and JPMorgan Chase?

Now that these banks (apparently) have a mobile platform on par with the rest of the industry, they need to focus marketing efforts on illustrating the differences their system has compared to that of their peers. For example, one of the most potentially advantageous and attractive features offered by clearXchange is the ability for customers of all three banks to send and receive money to other people, regardless of which institution they actually bank with. 

Using only an email address or cell phone number, money can be transferred to another customer from the Smartphone app. Since 2003, Wells Fargo has allowed customers to send money to one other via the bank’s website, but until now it was only possible if the sender knew the receiver’s account number. The clearXchange system should make sending and receiving funds a faster, safer and more efficient experience. 

While PayPal has offered this service for years, it hasn't been available as a service directly from any major banks. This leaves open the possibility for Wells Fargo and the other clearXchange participants to market this feature to existing customers, many of whom might not also be PayPal account holders.

Additionally, Mike Kennedy stated that clearXchange intends to actively solicit similar arrangements with other banks, expanding the power and convenience available to customers of participating financial institutions. When more banks sign on and become part of the clearXchange network, consumers will have an even easier time transferring money, regardless of where they actually conduct their banking business. 

However, once again, this is already possible using PayPal as a conduit for P2P transfers. More than likely, Kennedy’s marketing plan will stress the ease of the new system and point out that customers won’t have to open a new account elsewhere (e.g. with PayPal).

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This article is a Twisted Nonsense Exclusive! (07/25/2012)