subject: P2p Odyssey, Hang On...this Ride Could Get Bumpy! [print this page] My personal P2P journey temporarily ended when I couldn't convince my payees to accept a P2P transaction. This was caused by their fear of identity theft/compromised account.
There are early adopters out there who are using P2P and usage is predicted to increase from 38 million in 2009 to 58 million in 2014. (Javelin 2009). It made me wonder: why are these numbers predicted to rise? And why has it been slow to catch on.
According to Person to Person Electronic Funds Transfers: Recent Developments and Policy Issues by Oz Shy, an Abstract released by The Federal Reserve Bank of Boston, there are a few theories.
* Banks in the US have been slow to introduce P2P funds transfer services, but that may be changing. Ironically, while banks pay the Fed much less for ACH than check clearing services, many consumers have figured out that they can utilize their banks' online banking platform to pay another consumer by entering that consumer's account information (as if they were a biller). The bank then has to pay the person via check, thereby increasing their own costs. Not to mention that this flies in the face of one of the reasons online banking was created (utilize the efficiencies of electronic payments and eliminate the paper).
* The scenario above describes an environment in which the payee must disclose their personal banking account information. Individuals who do not want to disclose this information, despite the fact that they hand a debit card to a waiter, and/or write a check with all their account info on it, may opt for using a P2P service, such as PayPal. Here are some of the companies who offer these services: CashEdge, Fiserv, OboPay, iPay and PayPal. However, even with these services, the payee must enter their account number (where the funds go). (And as evidenced by my previous Blogpost, this makes people nervous).
* However, CashEdge conducted a survey of 850 consumers. 81% responded they would use P2P if it were offered by their bank. 77% prefer that this service be provided by financial institutions rather than non-bank services. Is this the "safety" factor people are looking for?
* Financial Institutions may be more apt to offer P2P services to parties within the same bank (on-us) transactions because they save money when it's handled all internally.
To read the full Federal Reserve Bank of Boston Abstract, click here. Stay tuned for more developments in the P2P space. With social media getting into payments as well, hang on, this ride could get bumpy!
As always, please join the conversation. How do you feel about P2P payments? Are you a 'peer' (like me) impatiently waiting for the opportunity to pay your babysitter electronically? Or a financial institution in the research stages, trying to figure out how to introduce P2P to your consumer account holders? What are your hurdles? Where's your heartburn? Let's talk.
