BECU went live on March 20 with person-to-person payments andsince then has moved approximately $700,000 for about 5,000 newlyenrolled users.

That pales in comparison to PayPal's $21 billion from more than84 million registered accounts in the first quarter of 2010 alone,but it's a start.

BECU and dozens of other credit unions are jumping into the P2Pfray not because it's profitable necessarily (many aren't evencharging for the service, although they pay for using the ACHpayment rails) but because they very well may need to.

“Members have been asking for this for a while, and it'simportant for us to offer these kinds of features andfunctionality, especially in the mobile channel, if we're going tokeep them engaged in our organization as their PFI [primaryfinancial institution],” said Howie Wu, the Seattle credit union'svice president of virtual banking.

BECU is using the Popmoney service from CashEdge, which he saiddiffers from PayPal from the member perspective in a number ofways.

“They're kind of a warehouse for money. They take the funds outand credit the receiving party before the funds are moved, and youhave to establish an account with them. With us, you don't have tohave anything but a phone and routing number, and if the recipientis a BECU member, you don't even need that. It's automaticallydeposited,” Wu said.

Other major payment processors offering P2P include FIS, whichhas partnered with PayPal for its offering, and Fiserv Inc., whichis preparing to launch its own ZashPay service.

Fiserv said its service, the latest iteration of its CheckFreemodel, differs from the others in that while, it, too, has anoptional public site and typically requires nothing more than therecipients' e-mail address or mobile number, it allows recipientsto send money back as well as receive.

One thing all these services have in common is meeting creditunions' determination to retain their status as their PFI and, in abroader sense, to restore the traditional role of banks and creditunions in the payments world.

That's the view of Paul Schaus, president of CCG Catalyst,Phoenix-based consultants to credit unions and banks.

“Financial institutions have always had the monopoly on paymentsand only recently have third parties gotten into the paymentspace,” he said. “It's a perceived value…. P2P payments are thesmallest segment of the market compared with business-to-consumerand business-to-business…but it's what consumers expect.”

“If you go to the grocery store, the perception is you'll findfresh food there. When you go to your financial institution(regardless of the channel) you expect to be able to do payments,”Schaus said.

The perception also is one of safety-people are assumed to bemore comfortable executing payments through their bank or creditunion-as well as the convenience of keeping financial relationshipsunder one roof, industry participants said.

And there remains the competition.

“There are so many people getting into payment models now-PayPaland Apple and contactless payments and so on-but members reallytrust us for their financial needs and they don't want to have togo out to third-party vendors,” said Mike Salerno, manager ofe-services at $5.1 billion America First CU in Utah.

His credit union plans to launch Fiserv's ZashPay service thissummer. “It's fast and easy and you don't have to do a lot to setsomeone up as the recipient. I think it's going to be as big asbill pay.”

Erich Litch, the man in charge of the Fiserv offering, agreesthat market is relatively small but full of potential.

“The actual number of P2P payments you actually see goingthrough PayPal are very small,” said Litch, senior vice presidentand general manager of consumer services at Fiserv in Brookfield,Wis. “In this country there still is a very significant amount ofpersonal payments made to schools, babysitters, colleagues andcommunity members of all kinds in cash.”

“We don't really believe it's going to stay paper-based and thatthe market is really demanding a more seamless, easy way to getmoney from person to person, and that's why we're offering thissolution,” he said.

The timing also seems right, he said, because while P2Pelectronic volume is relatively small compared tobusiness-to-business and person-to-business, for instance,“interest is extremely high.” He pointed out that 60 credit unionsalready have signed up and that others are actively evaluating thelegal and regulatory issues involved before committing.

Thomas Mercer operates a medical clinic in Seattle and uses BECUas his primary financial institution. He's also a first adopter ofthat $8.9 billion institution's new P2P service and uses it to,among other things, pay his nanny.

He said he appreciates the service and expects it from his PFIbut said he's concerned about the lag time between sending andreceiving.

“I pay on Monday and she doesn't get it into her account tillFriday while it's sitting in my account most of that time. Thatmystifies me,” he said, citing his experience with instant P2P inEurope.

“I guess where I'm coming from is that this is the age of theInternet, and it should be possible for me to take money out of myaccount and put it in someone else's account with some safeguards,instantaneously. Businesses do that. I should be able to as anindividual,” he said.

Wu, the virtual banking vice president at BECU, said the bigcredit union expects to offer next-day capability by the end ofthis year.

Litch at Fiserv said both his operation and CashEdge use ACHchannels but said ZashPay payments should be generally next day andif not, then within three days.

“It depends on how you manage the risk,” he said. “We'reinitiating the debit and credit instantaneously while they use moreof a credit and hold.”?The new systems' ultimate ability to helppreserve the stickiness of PFI relationships may be the flexibilitythey add, said Andy Schmidt, global payments research director atTowerGroup in Needham, Mass.

He said unlike PayPal, offerings such as ZashPay can offer theflexibility to recall a payment if the other party can't accept itthrough that channel.

“Plus, the bank or credit union has the flexibility to dictatethe price of the transaction, whether to make it free or at aminimal cost,” Schmidt said. He said he expected to see P2P oftenoffered as part of an overall relationship, much like bill pay isnow.

Schmidt also said that credit unions in particular may findtheir end users not only expecting the service, but expecting itfor free, “because they tend to have a higher level of customerservice expectation than any of the other banking markets.”

“But will it cause any erosion of PayPal's market? That'll beinteresting to see,” Schmidt said. “If it's already part of theonline banking portal and especially if it's mobile-to-mobile, too,instead of just PC-to-mobile, logic would dictate that you wouldsee some sort of pickup from PayPay's normal traffic,” theTowerGroup analyst said.

He added, “The United States writes more checks than any countryin the world, about 75 per person per year if you includebusinesses and consumers. The challenge is going to be one ofadoption.”

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