BAI Retail Delivery’s P2P (person-to-person) payments panel — consisting of PayPal’s Arkady Fridman, Fiserv’s Sanjeev Dheer, and ClearXchange’s John Feldman — produced some interesting perspectives on the state of the P2P payments union. The critical question: Do consumers want a bank-centric P2P solution?
According to CU Times:
“Dheer and Feldman unsurprisingly thought so. Fridman unsurprisingly thought not – “they want a customer-centric solution,” he said. Dheer added, “They see this as a core banking function.” Fridman countered …“What does a bank centric solution mean? Feldman noted that “the banks have a strong view that this has to be bank centric.”
My take: Consumers don’t want an “anything”-centric solution.
“Centric” isn’t even a real word, let alone one that enters into the minds of consumers. What consumers want is very simple: Stuff that works, when and where they want it, at a reasonable price, and from a provider they can trust.
As it applies to P2P payments, consumers do not have a preference for one type (bank or non-bank) of provider over another.
Relative to non-banks, banks have some potential advantages: An existing relationship, and a platform (i.e., mobile banking) for providing P2P services to consumers.
But, for the most part, banks overestimate the advantage they have in being the P2P payment provider of choice. Why? Because bank interactions predominantly occur in a branch, a call center, an ATM, or the online banking platform. P2P transactions — transactions between two or more non-business entities — occur predominantly everywhere but those four touchpoints.
Mobile banking (and, ultimately, payments) will help banks create an “anywhere” touchpoint to provide P2P convenience, but, as we speak, mobile banking adoption is still relatively low.
And that opens the door for non-bank providers like PayPal, as well as plenty of other potential providers of P2P payment services.
Arguing whether or not consumers want a bank-centric solution or a something-else-centric solution misses another important aspect to this potential market: If the marketing of the service isn’t effective, it doesn’t matter if consumers want a bank-centric solution or not.
Mr. Dheer said he was “taken aback by the breadth of what people are using this for.” Perhaps. But, in practice, there are some uses that account for a lot higher percentage of electronic P2P transactions than others. Splitting restaurant bills, other bills (e..g., rent) and providing financial support, for example.
But banks, to date, have marketed electronic P2P services as….well, electronic P2P services. Their marketing hasn’t been use case specific. And that has opened the door for non-bank providers who focus on a narrow range of use cases.
Another problem: Contrary to what the digerati might believe, electronic P2P transactions aren’t clearing the convenience and reasonable price bars. Among consumers that don’t make electronic P2P transactions, about half say that cash is more convenient, and half also mention that they don’t want to pay a fee. Even among consumers who have made electronic P2P transactions, in the instances when they make a non-electronic P2P payment, many cite the convenience of cash, or the avoidance of a fee.
What catches my attention in the chart above is the high awareness that consumers of alternatives to making P2P transactions using something other than cash or checks. So the challenge for the industry is not awareness, but driving utilization, and demonstrating value.
Bottom line: So what do consumers really want regarding P2P payments? The best solution. Not a bank-centric, not a non-bank-centric, not an anything-centric solution. So far, cash is winning.