P2P Payments: Best of Both Worlds

It was only a matter of time before social networks and messaging systems became a place where, in addition to pictures, videos and text messages, money would be sent and received.

It is a technology that is not really new and is already in use by some of the major online players, such as PayPal or eBay.

According to the estimates of analysts, it is expected that by 2020, the exchange of money (sending money from one person to another, or P2P) will reach 20 percent of the total value of this financial segment of banking and financial markets. P2P players like Venmo and Square Cash are leading the charge in this area and they are proving themselves to be very popular.  Venmo, for example, reported that more than $1 billion in payments were made through their app in January 2016.

Re-defining Money Transfer

Peer-to-peer or person-to-person payment solutions imply online technology that emerged in the late 1990’s. It allows users to transfer funds from their bank account or credit card to the account of another individual via the Internet or mobile phone.

In such payment methods, the payer initiates the payment from a non-banking company. That company then acts as an intermediary between the payer and the recipient. Therefore, the needs of buyers and sellers who do not know each other and who live in different areas are better met.

This is how the collaboration of Western Union and Viber was born. Viber users can now send money to each other using an intermediary company, in this case Western Union. It is a question of time before other online platforms arrange a similar collaboration with someone like Western Union or any other bank, financial institution, telecom or retail chain.

Sources: Gartner, Forrester, Statista

All Eyes on Facebook

One of the biggest internet players also has a payments option for its users. Facebook recently unveiled a payments feature within its Messenger app, after much speculation about this move since last year, when Facebook hired a former PayPal executive to lead its Messenger business. Built in-house, this feature allows Facebook users to send money to their friends on Facebook after adding debit card information to their accounts.

Digital innovators will dominate P2P payments. This means that risk-adverse traditional banks are being displaced by innovative tech companies such as PayPal, AliPay, TransferWise and Venmo in the P2P space. The innovative newcomers are recognizing the benefits of being in the P2P space, such as: cross-selling opportunities; marketing insights; high margins within SMEs, and favorable currency exchange rates for cross-border payments.

Key Predictions for P2P Payments 

The Transaction Value in the P2P Money Transfers segment amounted to approximately $51 million in 2016. It is expected to show an annual growth rate (CAGR 2016-2021) of 27.2 % resulting in the total amount of $169 million in 2021.  The number of users is expected to amount to 184.5 million by 2021.

The global mobile payment transaction value is estimated to grow from $235.4 billion in 2013 to $721 billion in 2017, according to Gartner. According to Forrester, the share of P2P payments in overall mobile payments in the US could reach 12% by 2019.

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