Dive Brief:

• Following its acquisition of the digital payments company Payrailz earlier this year, Jack Henry & Associates, a financial technology firm, has launched a standalone peer-to-peer (P2P) payments service, the company said last week in a press release.
• Customers can use the tool to make one-time or recurring payments using the recipient’s phone number or email address, or they can split up payments, the release said. The tool allows them to credit their funds to checking accounts, savings accounts, debit cards and digital Venmo accounts, with other options on the way.
• While Jack Henry will offer a password system for fraud mitigation, it is also developing a fraud monitor tool, which will assess the validity of peer-to-peer payments in real time, per the press release.

Dive Insight:

The P2P tool addition is part of Jack Henry’s bid to keep expanding its technological capabilities and tools for its community and regional bank clients. The company introduced this tool to enable banks and credit unions to provide a safe and convenient payment tool for customers, it said in its announcement.

Zelle is a similar P2P payments tool that was created by a group of big banks through their wholly-owned Early Warning Services and it has become popular with consumers. While Jack Henry will still offer Zelle to clients too, the new tool will provide options, a spokesperson for the company said.

“In the case of P2P, we can now offer an alternative or a complement to the Zelle” service, the spokesperson said in an email in response to a question about competition with Zelle. “Offering an alternative is about the flexibility to meet the needs of our clients.”

“The demand for P2P payments is strong and growing, and offering instant payments has evolved from a competitive distinction into a competitive necessity,” Tede Forman, president of payment solutions at Jack Henry, said in the release. “We believe the strategic addition of the open-loop Payrailz P2P solution provides our clients and prospects with additional and distinct functionality, optionality, and flexibility and enables us to more seamlessly support the near- and long-term digital and payment strategies of diverse banks and credit unions.”

The Payrailz acquisition was part of Jack Henry’s overall fintech ambitions. Earlier this year, the company said it aimed to revamp its services for regional and community banks by unbundling its services and putting them on a public cloud. In May, CEO David Foss said the company wanted to explore more mergers and acquisitions soon, particularly companies that have gone public and experienced a stock price drop as well as companies that want to go public. 

While Jack Henry seeks more acquisitions, the lack of bank mergers has cost the company recently in the form of lower profit margin expansion. The company attributed the higher costs and lower revenue to the decline in mergers and acquisitions of banks. 

Though bank mergers could benefit Jack Henry, the payments industry is under the close watch of the Consumer Financial Protection Bureau, which has been concerned about the concentration of power among core service payment providers. The agency’s director, Rohit Chopra, noted that Jack Henry, Finastra, FIS and Fiserv count more than three-fourths of U.S. banks in their clientele.

Jack Henry provides services to approximately 7,800 banks and credit unions, the spokesperson said.