Ever gone out to a fancy restaurant with friends, only to find that someone lacked the cash to pay their share? Is writing a paper cheque to a relative (say, a kid in college) a hassle?
PayPal's tagline says it's "the world's most loved way to pay and get paid," but it's not the only game in town. New services aim to do for money transfers between individuals what PayPal did for e-commerce: provide a way to make payments online without having to give recipients your credit card or bank account information. In addition, businesses seeking an alternative to selling goods and services via PayPal can find plenty of options.
Popmoney, which debuted late last year, and ZashPay, which arrived this summer, work much like PayPal: For payments, you need only the recipient's email address or mobile phone number. One important difference: PayPal lets you send and receive payments only via your account with PayPal. To make a payment, you must first fund your account (through a linked bank account or credit card). To receive a payment, you must transfer it to the bank or credit card in order to use it for anything other than a PayPal purchase.
Popmoney and ZashPay simply transfer money directly from your bank account to the account of the person you're paying (neither service supports credit cards). This process resembles the one used in electronic bill payments, and in fact, both services are offshoots of companies (Cash Edge in the case of Popmoney, and Fiserv in the case of ZashPay) that manage bill payment services for banks.
Both sender and recipient must have accounts on these services, but the services don't tie up any money, they just associate your existing bank account with your email address or your cell phone number.
If your bank offers either service, it will set up your account automatically, no need to provide additional info. Cash Edge says that some 175 banks already offer Popmoney, Fiserv says that ZashPay had about 70 banks on board as of early October.
Otherwise, you can still use these services to receive cash by signing up for a personal account on a service's website, but you must provide sensitive information, including your date of birth, Social Security number and the accounting and routing numbers for the linked bank account. You must then go through a verification process, which involves waiting for the service to deposit two small sums to your account and then reporting the exact amounts received.
Popmoney doesn't let you send money through its site at all, you can use it to send money only if your bank supports the service. For payments from someone who wants to use that service through their bank, you set up a Popmoney account.
Pros: Account setup on PopMoney site is free, as is receiving money. Some 175 banks offer free accounts to customers.
Cons: Accounts created on PopMoney's website cannot send payments, only accounts with a bank that supports PopMoney can do so. To create an account, you must go through a verification process that involves providing a lot of personal information.
Since our bank doesn't offer ZashPay, we set up an account for the service online, which took a few days, including waiting for the small verification deposits to appear in the bank account. All we had to do to make a payment was provide the recipient's email address and the amount we wished to send. When we received a payment, the service notified us via email (you'll get a text message if you set up your mobile phone). Turnaround time was one to two days.
Pros: ZashPay lets you send money via email or text message. There's no third party account to fund (as there is with PayPal, for example). Instead, money transfers directly between bank accounts. Account setup on the ZashPay site is free, as is receiving money. Payments of up to $500 cost only 75 cents per payment to send.
Cons: Creating an account involves a verification process that requires you to supply lots of personal information. ZashPay doesn't yet have as many banks on board as PopMoney, about 70 as of early October.
Other personal payment services are AlertPay and Obopay, which work on the same basic model as PayPal: You must set up and fund an account that makes and receives payments. Obopay offers strong support for mobile devices. AlertPay serves some people that PayPal does not, accepting additional funding sources such as money orders and letting you send money to more than 190 countries.
Will people quit writing cheques (or carrying lots of cash) and use these services instead? In order for that to happen, says Jim Bruene, who tracks online finance in his NetBanker blog, making payments has to become "as easy as pulling out a $20 bill."
Such convenience may not be possible until cell phones with built-in near-field communications (NFC) technology for contact-free payments (payments you make by tapping the phone on a payment terminal or another phone) become ubiquitous in North America, Breune adds.