If you work for a smaller bank or CU, you may be thinking, is this appropriate for us? Absolutely. As good a product as we think this will be for DotBank, Confinity, and Checkfree, it will be even more successful when offered by a bank as part of its online banking program. We’ll explain why after we outline how a bank could incorporate personal payments into their online banking program:

The Ideal Bank-Based P2P Product

1. Personal payments should be tightly integrated with other online banking and bill payment functions.*

2. Users type the recipient’s email address, payment amount, and actual name (for authentication) into a Web-based form (see mock-up on next page). The email payment consists of a personal message from sender A to recipient B along with your bank name and potentially a guarantee of good funds (see mock-up next page); giving the transaction the credibility that will take Confinity years to earn.

3. The recipient receives a message informing them that sender A has authorized recipient B to draw x dollars out of A’s bank account. Unlike Confinity’s PayPal, where funds are moved immediately into Confinity’s account, the ideal bank program keeps the money in the sender’s bank account until recipient B initiates a retrieval transaction. The bank and its customers maintain their historical hold on the float.

4. To claim the funds, recipients click on an imbedded link that takes them into a secure area on your bank’s Web:
– New users must register and be authenticated
using a combination of email, snail mail, and
credit card authorizations depending on the size
of the transaction, nature of the payment, etc.
– Previous users simply point and click to move
the funds into any U.S. bank account or have a
check mailed to them.

5. Pitch your bank and/or online banking services to recipients.

Source: Online Banking Report, 11/99

*For most financial institutions, the degree of integration will depend a great deal on how your Net-banking platform vendor decides to support the feature.

Following is a mock-up of how the service might be delivered on your Web, followed by an example of the email payment advice generated by the program. It’s much like PayPal’s system except we’ve added the ability to personalize the heading and message.

Mock-Up of Web-Based Entry Form

*We recommend an extra layer of password protection for functions that allow funds to be moved out of the user’s account (see OBR 4/99). Better yet, allow users to set the maximum dollar amount allowed before the extra password is required.

Mock-Up of Email Sent to User

To: Linda Culp

From: Kate Schultz kate@netbanker.com

Subject: Here’s the $20 I Owe You

This message contains an electronic money order for $xxx. The funds are waiting for you in a secure and private area at yourbank.com. To retrieve the money, click on the link below and follow the simple two-step process (after registration). It’s free and only takes a minute or two, far faster than depositing a paper check. For more information on yourbank.com epayments, click the Help button after following this link:

http://pay.yourbank.com/cigi-bin/abcd

Linda, if you have questions, please reply to this email, or call me (206) 517-5021.

Thanks.

Kate Schultz

P.S. Once registered, you too will be able to zap money via email from yourbank.com.

Source: Online Banking Report, 11/99

Such a system has a number of benefits for users:

P2P User Benefits

Recipient (of funds)

•  Receive money faster than mailed paper checks
•  No paper checks to deposit
•  No need to track the deposit to see if it clears; and no fees to pay if it doesn’t
•  Assurance of good funds
•  Electronic records can easily be maintained by filing email notifications in a computer folder
•  No need to reveal bank account numbers to senders

Sender (of funds)

•  Easier/faster than writing a paper check
•  Cheaper (most likely) compared to the $0.33 to $0.50 cost to write and mail a paper check
•  Better communications: recipient receives an immediate email notification of payment and can easily respond with questions
•  Electronic records can easily be maintained by filing email notifications in a computer folder
•  Money can be sent worldwide
•  For ecommerce, recipients know you have sent good funds and can ship the goods faster
•  No worry about accidentally sending a NSF check

Source: Online Banking Report, 11/99

In partnership with Confinity, or built in-house, you could be the first on the block with email personal payments. Not only will it put you on the PR map, it could be both a profit center and lucrative source of new accounts.

Why? New accounts come from the viral nature of the program. For someone to send or receive funds, they must be registered with <pay.yourbank.com>. They don’t actually have to open a traditional bank account (that would severely hamper usage). But must tell you who they are and what account they are using. Armed with that information, you could pitch special offers for years to come.

Bank Benefits from P2P Products

•  lower transaction costs than paying Checkfree to mail a paper check
•  viral way of getting your name in front of new prospects
•  a good way to help small merchants, especially those that don’t accept credit cards, receive payments faster and more conveniently
•  a potential source of fee, loan, and other income
•  good copy point for the online banking brochure
•  an easy-to-use and easy-to-explain feature that could boost activation and usage of online banking and bill payment across the board
•  excellent PR and promotion possibilities