Inside the Rapid Evolution of P2P Solutions

In a society where cash is becoming ever more elusive, making payments to friends for dinner or even settling up with your babysitter is as easy as clicking an app on your smartphone.

Person-to-person (P2P) electronic payments are going mainstream, adding convenience and accessibility in today's world. Users electronically send payments from their P2P or bank account directly to the recipient's P2P or bank account via text or email.

Millennial Turi Reeves of Boca Raton, Fla. says he can't remember the last time he paid someone with cash--no one whips out cash when it comes to paying for dinner or drinks anymore. "If one person ends up footing the bill, or if you owe someone money, you just tell them you will 'Venmo' them instead," Reeves says, noting the fact that hishis generation has acquired a new verb.

Electronic payments provider Venmo says P2P activity has exploded since day one, processing $2.5 billion of third party verification, up 174% over year-on-year. Adrianne Wright, communications lead at Venmo, says organic growth happened spontaneously.

"Simplicity has been a core focus at Venmo," she explains. "And since day one, we've seen this not only cause a rapid adoption among our users, but exceptional engagement between their transactions and their experiences. There's a number of opportunities in the social commerce space, and technology will only continue to grow, but there still has to be an ease of use for the consumer."

What Exactly Is P2P?

Independent peer-to-peer payment companies like PayPal and Venmo, as well as financial institutions, offer electronic methods of personal payment.

Boston-based Radius Bank recently launched P2P application "Radius Pay a Friend" through fintech partner Acculynk. Radius's app functions like any other peer- to-peer transfer, but it is delivered through the bank instead of an external entity like Venmo.

"The biggest advantage with a bank-powered service like ours is that a Radius client can quickly send money to anyone, not just someone at Radius  - all they need to know if the recipient's email address or mobile phone number," explains Chris Tremont, executive Radius vice president for virtual banking. "The recipient doesn't have to have a bank account with us to retrieve the money, although we'd love it if they did, nor do they have to setup a user profile like with PayPal to collect their funds." 

Tremont says another advantage is the consumer can send funds without a fee using the Radius application. "Services like Venmo may assess a fee when sending funds with a credit or debit card, for example." According to Venmo's pricing guide, users can receive money free of charge, otherwise a 3% fee is assessed on credit cards and some debit cards to send money.

"A third advantage of using your bank for P2P is that it provides better personal financial management," Tremont adds. "From a tracking and budgeting perspective, it helps to have all of your income and expenses aggregated in one place versus having to visit various apps or websites to locate the information."

P2P Enters the Mainstream

As a virtual banking expert, Tremont has studied and tracked a number of consumer behaviors and says P2P apps will only continue to grow and become more of a mainstay and method of payment.

"Consumer preferences for digital banking features will only continue to rise, and anything a bank or fintech can do to improve the experience when it comes to money movement will help them be more successful in the future," he asserts. "So I think you'll see a rise in banks offering a P2P-type service in the future as that's what their clients will want. But the speed at which this functionality becomes widely available remains to be seen, as there are many strategic, technology, risk and customer experience issues a bank has to think through and plan for when launching P2P."

A growing number of banks and credit unions are launching P2P services, either through internal design or a financial solution provider, like Fiserv. Popmoney is Fiserv's answer to P2P and, according to Tom Allanson, Fiserv's president of electronic payments, Popmoney has found its way onto the electronic menus of more than 2,400 banks and credit unions, including 15 of the top 30 banks in the U.S.

The Popmoney P2P app is offered directly by a particular financial institution and has a standard method of electronic transmission and also a real-time method. Allanson says 185 financial institutions offer the real-time payment option. Popmoney is also offered at Popmoney.com and via mobile apps for iPhone and Android. Approximately 11,000 banks and credit unions have received payments via Popmoney.

"As far as pricing, we leave any charges the bank or credit union wants to issue up to the individual financial institution," Allanson says. "In many cases, financial institutions are offering Popmoney free of charge, but perhaps charging a fee for those who opt to use the real time fund transfer option."

Allanson says although usage continues to grow, P2P's biggest hurdle is awareness. "We aren't at the point where we are with applications like electronic bill pay or online banking," he says. "We are currently suggesting to our financial institution to position Popmoney in the electronic bill pay area to not only increase awareness but to demonstrate how easy it is to conduct a peer-to-peer transfer."

P2P experts agree that once consumers use a P2P payment application, they understand how easy and convenient it is to pay just about anyone. And what about security? Wright notes a number of steps taken to maintain security for both user and recipient.

She says multifactor authentication (MFA) is available for all Venmo users on the web or the latest iOS and Android apps. This feature is designed to maximize security while continuing to provide a quick and easy sign-in experience on devices our users regularly use.

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