ShopTalk | Will peer-to-peer payments be the tipping point toward a cashless society?
Credit cards, debit cards, and mobile payments are making cash transactions between businesses and consumers less common. And it appears that peer-to-peer payments (P2P) is doing the same for informal money exchanges between friends, family, and trusted acquaintances.
Eliminating awkward check splitting and IOUs are two of the many reasons consumers are warming up to P2P. But while consumers’ confidence for the payment option is growing, they have some caveats.
Vantiv teamed up with Socratic Technologies to learn more about what consumers think about P2P, and how they use the service. Here’s what we found.
P2P use is gaining ground
Nearly half (2 in 5) of consumers have sent or received money using P2P, and the service is expected to grow in the U.S. from 69 million users in 2015, to 126 million by 2020.
Convenience and ease are a big plus
People don’t want to be hassled by check writing or trips to banks or their ATM, and say ease and convenience are a big reason (57%) why they like P2P.
But security is a concern
P2P faces the same stigma as other emerging payment types, particularly among Retirees—of being less secure. A common concern is that hackers can easily steal information when using Wi-Fi.
Like other emerging payment types, younger generations are jumping on board more quickly
Younger consumers and Gen Xers have more favorable impressions of P2P, and usage is also highest among these groups—66 and 50 percent for Millennials and Gen Xers respectively. Only 36 percent of Boomers, and 17 percent of Retirees report using P2P.
Name recognition makes a difference
Riding on the coattails of eBay, PayPal has the greatest familiarity and usage among P2P users. Boomers and Retirees in particular are most likely to use PayPal over other P2P services.
Familiarity with person drives payment
People who use P2P tend to use it only with people they know—more than half (53%) use P2P to transfer money to/from family. This may be due to users being aware that P2P is not subject to the same protections as traditional financial transactions.
If there’s a fee, forget it
Since consumers don’t pay fees for debit and credit card purchases, there is an assumption that they don’t have to pay fees to use P2P. In fact, three-quarters of current users would stop sending money via P2P services if there were a fee.
Financial Institutions instill more trust
Many consumers still trust their financial institution for money transfer activities. Given the choice, half of the consumers would prefer a P2P service from their primary financial institution, compared to 22 percent who prefer a third party such as PayPal or Venmo
5 things to think about
- Pay on demand is a top consumer expectation
- P2P is paving the way for mobile payment adoption
- Financial institutions will play an important role in future P2P offerings
- Security issues must be paid attention to and addressed
- An omnicommerce strategy is essential
Today’s myriad payment options are taking customer-centricity to a whole new level. Whether using a debit card, credit card, mobile wallet, or P2P, consumers expect to be able to access their money when they want and spend it the way they want.
Many consumers that are not using mobile payments are using P2P. As familiarity with digital payment increases, so likely will mobile wallet adoption, so businesses must be prepared to accept these payment types.
Although many P2P services are not affiliated with banks, the recently rebranded Zelle was founded and supported by banks. The company’s success hints at further interest among financial institutions in future P2P offerings.
High profile data breaches continue to lead news headlines and consumers are increasingly cautious about securing their information. Businesses must go out of their way to let their customers know that sensitive financial and personal data is safe and protected throughout all interactions.
With sales channels spanning instore, online, and mobile, and consumers remitting many different payment types including P2P, businesses have no choice but to follow an omnicommerce strategy that addresses all possible means of commerce.
While P2P is just a slice in the bigger world of commerce, its nascent success speaks volumes as to what consumers are looking for in payments today: speed and simplicity. Businesses that embrace solutions that streamline transactions across all sales channels, whether instore, online, or on a mobile device, will be best positioned to win more customers in an increasingly competitive marketplace.
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