Where P2P Payments are Heading

As more consumers start tapping person-to-person payments the users increasingly become the marketers, stoking growth past the pandemic period. Bringing small business purchases and disbursements into the mix will multiply usage.

P2P payments were already on a steep trajectory for 2020 and the pandemic gave the rocket an additional boost.

“I think if you had any financial institutions or consumers sitting on the fence about embracing the technology, that went by the wayside as many found it a necessary component to managing their finances during the pandemic,” says Matt Wilcox, President of Digital Payments and Data Aggregation at Fiserv. The company’s research indicates that nearly four out of five (79%) of consumers reported that they used P2P in some form through their financial institution or through a nonfinancial company in 2020.

The fuel for P2P’s explosive growth was already in place when Covid arrived, Wilcox says in an interview with The Financial Brand.

“Today, I can order something on Amazon and have it at my door faster than I could send you money,” says Wilcox, “and that’s just not a way that the payment system should work.”

RTP Overture:

P2P is the first entry point for many consumers into the real-time payments space.

“An instant gratification mindset has moved folks to really want — and demand — faster payments. It’s just the way the world is moving,” says Wilcox, a payments veteran and former banker. “The success of P2P will have consumers looking for the next innovations in payments.”

Fiserv works closely with Zelle — it has connected over 500 financial institution to the provider and expects that to rise past 1,000 in 2021 — and he says the channel has seen new types of usage, from tipping service providers to making fantasy football payouts, as consumers grow more used to P2P. In 2020 Fiserv saw Zelle transactions increase by 113% among institutions it processes for, with triple digit growth expected for some time ahead. Zelle on the whole saw a record $307 billion sent via 1.2 billion transactions in 2020.

Read More: Beyond P2P: The Future of Real-Time Payments

Word of Mouth Stokes P2P Use

This is not to say that every other payment method has been left behind — far from it.

“There are lots of things that still hang around the banking system,” says Wilcox. “It seems the industry adds stuff even while other stuff just never seems to go away.”

Payments Continue on Multiple Tracks:

While P2P continues to grow, cash remains in use and so do checks.

“Check usage will decline,” he says, “but it’s not going to plummet to zero tomorrow. It’s probably got another decade of life.” Mobile capture will continue to serve many consumers who still haven’t made the transition away from checks.

“The P2P user becomes the marketer and they create engagement for you with other users.”
— Matt Wilcox, Fiserv

But P2P will keep climbing. The combination of pre-Covid momentum and the extra push of the pandemic “means that the long-term ramifications are going to be very positive, because I don’t anticipate people looking back,” says Wilcox. “The great thing about P2P is that you get a network effect. Once someone becomes a user, they are essentially inviting somebody else to become a user as well when they send money their way. The user becomes the marketer and they create engagement for you with other users.”

While the usage figure cited earlier is stunning, Fiserv research suggests that further growth will be assisted by increased marketing by P2P providers and by financial institutions. Fiserv found that while use is high, nearly half of consumers surveyed still don’t know if their financial institution provides P2P via email address or phone number and 20% are certain their bank or credit unions does not offer the capability. Younger consumers are more clear on who provides P2P payment channels that they have used.

Seven out of ten consumers who have used P2P services expect one key attribute from it: That it be fast. They expect funds they send or that someone is sending them will arrive within an hour. This expectation is consistent across all demographic age groups except seniors.

Read More:

Many New Use Cases (But So Far Not Crypto)

As P2P services continue to evolve, Wilcox anticipates that they will have a multiplier effect on usage, expanding the audience and usage simultaneously. Small businesses can now use Zelle, for example, to invoice customers and they can opt to pay with Zelle via a button on the invoice.

“That money is received by the service provider in real-time,” says Wilcox. “That increases their cash flow and cash flow is king for small businesses.” Charities have also been making growing use of P2P, he notes.

Another growth area is digital disbursements by companies, organizations and government entities to pay consumers in transactions that traditionally would have been handled by check.

What about cryptocurrencies? PayPal introduced its “Checkout with Crypto” features in its digital wallet in late March 2021. Consumers holding any of four cryptocurrencies (Bitcoin, Bitcoin Cash, Litecoin and Ethereum) can use them to make online purchases. Within the app, the cryptocurrency is converted at current values to U.S. dollars first, and then the actual transaction takes place.

Crypto increasingly seems to have a future, though it has had fits and starts, and Wilcox thinks it will be part of a P2P solution going forward, as cryptocurrency becomes more mainstream. He suspects it will “intersect, and not replace, P2P offerings.

In a sense, Wilcox adds, crypto will follow P2P’s own lead. This will mean some years of predictions about momentum — followed by the actual momentum.

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