P2P Payments: The Latest Way for Members to Pay

The world of payments is changing more rapidly than ever as a result of consumer demand and the evolution of technology and communication methods. Today’s consumers are using cash and checks less often and are using payment methods that are quick and provide little resistance. These same consumers are also shifting away from utilizing traditional service providers when it comes to the transfer of money. Previously, payments would have been processed through a service linked to the user’s primary financial institution. Now, FinTech companies are quick to offer and market emerging payment technologies, causing financial institutions to also move into these non-traditional payment arenas to retain their customer base.

P2P 101: The Basics

P2P payments are transactions that allow consumers to transfer funds from one account to another individual’s account via the internet or a mobile device. Zelle, Venmo, Square Cash, and Apple Pay Cash are a few popular providers of P2P services.

Generally, there are two different ways to initiate a P2P transaction. The first approach utilizes a third-party processor to designate a transaction account or payment card to transfer and/or accept funds. These transactions are processed via the vendor’s website or mobile application, where users are typically identified by their email addresses and can send funds to other users of the same service. The other common method of P2P processing is via a financial institution’s online or mobile application, where the sender has an established banking relationship. The sender designates the recipient by means of either an email address or mobile phone number, where the recipient will then receive notification of the transfer. This notification directs the recipient to enter his or her account information to accept the funds. In this case, the recipient does not need to have an account at the same financial institution as the sender to receive the funds.

P2P by the Numbers

As one of today’s fastest growing payment methods, P2P payments allow consumers to transfer funds from one account to another via the internet or mobile device. In 2016, financial institutions held 83% of the P2P market share.  In 2017, the transaction value of P2P payments in the United States was expected to grow by another 55% to $120.38 billion.

  • 63.5 million U.S. adults use P2P apps at least once per month.
  • 32.6% of all smartphone users are using P2P apps.
  • 100 million+ users are expected to be using P2P by 2020.

P2P and Credit Unions

Members will be asking about P2P services, and typically are interested in:

  • Availability: Can this product integrate with products from other providers? How reliable is the app?
  • Transfer Option: What types of transactions can be performed with the app? What are the fees associated with each transaction type?
  • Payment Method: What tools can be used to perform these transactions and how quickly will the funds be available for use?
  • In-App Features: Is there a social media feature associated with this product? What options are available for questions or challenges with the app?
  • Security: What fraud protections are available via the app? How are we notified of suspicious activity?

Having a strong strategy will be vital for financial institutions to gain traction in this market. Credit unions will need to make sure that members are aware that the option is available to them and raise P2P to the top of their mobile product strategic plan to drive transactions.

This blog was sourced from a white paper written by product expert Rebekah Higgins, Synergent’s Vice President of Payments. Access to the complete white paper is a benefit that our valued partner credit unions receive as users of Synergent products and services.