February 1st, 2010 by gwiegner

The next big thing in US banking will be mobile person-to-person (P2P) money transfers. You will be able to sign up for this service through a bank or similar provider. The bank’s person-to-person payment system will be integrated with your regular online banking, and funds can be emailed and then debited from your account. The recipient will get the cash deposited directly into an account or have it posted to an existing credit card or a prepaid card.

What if you borrowed $50 from a friend last week, or your child at college needs quick cash, or you need to pay the babysitter, or pay your dining partner your share of the bill? All you need is their email address or cell number and presto. All in real time too. No more hauling off to the ATM to get cash, or writing a check and mailing it snail mail. While the older generations still may walk to the supermarket to pay their utility bills, the younger set has already fully migrated to the next frontier of on-line shopping and e-banking. Having used on-line banking for over a decade now, consumers can enjoy the convenience of managing their money within the context of their existing and trusted banking relationships.

While the banks are just waking up to the potential of person-to-person payments, Paypal is already offering a service that allows users to make transfers over a cell phone, and may well gain the most critical mass in this new technology. But financial institutions easily can extend their banking services without having to build major infrastructure. In the end, whoever can make mobile payments the simplest, and also design a good marketing strategy, will capitalize on this opportunity, charging possibly twenty-five cents per transaction.

With regards to security, consumers can rely on the personal payment service through their participating financial institution, who has already established a secure payment processing system. This will eliminate the need to share account information with a third party and result in both improved security and greater convenience.

Another benefit will allow consumers to leave money in their bank accounts longer. While the current interest rates are at an all-time low, better to have your money in the bank than in your pocket, or paying up to 26% on your credit card balance.

Like cell phones eliminated the need to wear a watch, they will now eliminate the need to carry a wallet.