Will peer-to-peer payments be the tipping point to cashless society? | Worldpay

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.

Learn more about what consumers think about P2P, and how they use the service.

P2P payments are gaining ground

A 2022 LendingTree survey found that more than eight in 10 (84%) consumers say they’ve used a P2P service. Among this group, 44% use P2P services at least once a week.

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 why they like P2P payments.

Consumers have security concerns with P2P

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.

P2P payments acceptance

Like other emerging payment types, younger generations are jumping on board more quickly. The 2022 LendingTree survey reported that 37% of Gen Zers and 36% of Millennials use P2P services multiple times a week. The survey also found that Gen Xers (ages 42 to 56) were more accepting (28%) than Baby Boomers (ages 57 to 76), who reported using P2P services only 7% as frequently.

Name recognition makes a difference

Riding on the coattails of eBay, PayPal has the greatest familiarity and usage among P2P users. Boomers and Retirees are especially 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-fourths 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% who prefer a third party such as PayPal or Venmo.

5 things to think about for P2P payments

1. Pay on demand is a top consumer expectation

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.

2. P2P is paving the way for mobile payment adoption

Many consumers who 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.

3. Financial institutions will play an important role in future P2P offerings

Although many P2P services are not affiliated with banks, Zelle was founded and supported by banks. The company’s success hints at further interest among financial institutions in future P2P offerings.

4. Security issues must be paid attention to and addressed

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.

5. An omni-commerce strategy is essential

With sales channels spanning in-store, online and mobile and consumers remitting many different payment types including P2P, businesses have no choice but to follow an omni-commerce strategy that addresses all possible means of commerce.

While P2P is just a slice in the bigger world of commerce, its rising 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 in-store, online or on a mobile device, will be best positioned to win more customers in an increasingly competitive marketplace.