PayPal's New Rival: ZashPay

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Person-to-person payments have gotten a lot easier thanks to technology, but most require a third party to get the job done. But now, those days might be over. A new website called ZashPay promises to link people who want to pay other people directly, and without having to rely on third-party players like PayPal.

It’s not exactly a shocker that more players are entering the person-to-person payment market. ABI Research estimates that the market will grow to 170 million mobile subscribers by 2011. There is some bad news for banks in the ABI numbers, as well. The analytical firm says that three times as many consumers globally will use their mobile phones to make P2P payments than users who will access their phones to make traditional bank transactions.

ZashPay hopes to leverage that growth in person-to-person lending without having to rely on third-party intermediaries like PayPal. A division of Fiserv, ZashPay customers need only know the name, mobile phone number or e-mail account of the person to whom they want to send money. Both the sender and recipient of the funds will have to sign up on ZashPay.com, but only the sender will have to pay a fee, which ZashPay claims will be less than $1 per transaction. According to Fiserv (Stock Quote: FISV), senders' payments are deducted directly from their banking accounts and deposited directly into recipients' accounts, with the same security protection as an online banking transaction.

"Anyone with a bank account can use ZashPay to send money electronically across the room or across the country," says Erich Litch, senior vice president and general manager of consumer services at Fiserv.

Fiserv says that ZashPay really comes in handy for consumers looking to make low-level payments, like a cash transfer from a parent to a college student or to buy tickets to fundraising events. Not coincidentally, that’s a big slice of the PayPal market, without the added burden of having a third-party involved in the transaction.

PayPal executives can’t be too thrilled about the fact that more than 200 financial institutions have already signed up to offer ZashPay to their customers. Plus, the online payment system that ZashPay uses already hosts 16 million Fiserv consumers.

It’s a declaration of war on third-party P2P providers, and Fiserv is betting that ZashPay has already left a mark on PayPal. How PayPal will respond is anyone’s guess, but the landscape has shifted in the P2P market — and that’s a good thing for customers.

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