Peer-to-peer (P2P) payments are exploding.
P2P payment network Zelle’s Q3 results show its year-over-year payment values rose by 58 percent, while transaction volume increased by 73 percent. During the quarter, $49 billion was sent through the Zelle Network in 196 million transactions.
“Today, one in two adults with a U.S. bank account have access to Zelle in their mobile banking app,” Lou Anne Alexander, group president, payments solutions at Zelle operator Early Warning, said in a press release.
Last month, Bank of America revealed that it saw a 76 percent year-over-year increase in Zelle payments in Q3. During the quarter, consumers made 80.8 million payments worth $20.8 billion using Zelle — and that number is expected to grow as we head into the 2020s.
Demand for instant payments is growing in the U.S., where 42.2 percent of consumers received at least one instant disbursement within the past year. This marks a massive increase from the 11 percent who said the same just two years ago.
In the latest Disbursements Tracker, PYMNTS analyzes the impact of instant payments and disbursements in a variety of use cases and industries, as well as how payment innovation continues to grow and change in accordance with consumers’ disbursements needs.
Instant Payment Innovations
Zelle competitor Venmo is also on the rise. By Q3 measures, Venmo was up 64 percent year over year. Venmo has also been adding features to differentiate itself, such as rolling out a cash-back rewards program for its Venmo Mastercard debit card at certain retailers, as announced in a press release. Venmo Rewards is now offering 5 percent cash back at Target, Sephora, Chevron and Papa John’s, and 4 percent cash back at other retailers.
These new features are very similar to Square's Cash Boost offering. Meanwhile, Square has been branching out in different directions. Earlier this year, it started allowing users to deposit bitcoin, and recently added stock trading capability to the Cash app. Square also offers small business loans and has a Visa debit card linked to the app, which lets users treat it like a bank account.
Visa also recently bet big on P2P. In Q3, the payment card network said it has formed a strategic partnership with MoneyGram on a P2P money transfer option via which U.S. consumers can send money domestically through MoneyGram to a recipient’s eligible debit card. Fees for the new P2P debit card deposit service start at $1.99. Currently available in the U.S. only, the service is slated to soon expand to other global markets.
Older Consumers as Growth Drivers
P2P payments aren’t just for younger consumers. Generation X and baby boomers are increasingly smartphone-equipped and seeking fast, P2P mobile payments. A survey conducted earlier this year found 53 percent of U.S. adults age 65 and older own smartphones — a significant jump from the 42 percent who owned them in 2016 and the 18 percent who did so in 2013.
In a survey by Zelle, more than half of first-time P2P service users were at least 45 years old. Fifty-two percent of Generation X and 46 percent of baby boomers said they “trust” P2P payments and are interested in using them. More than three-fourths (76 percent) of Gen X and 74 percent of baby boomers agreed that the top reason to try P2P payments would be if it were offered through a financial institution they already use.
In an interview with PYMNTS, Kristy Brandon, senior vice president of eBanking at Comerica Bank, explained how utilizing common, shared payments platforms helps small FIs meet Gen X’s P2P needs.
Gen X and baby boomer consumers demonstrate some different P2P payment uses than millennials, with many using these services to quickly send money as graduation or birthday gifts and to children in college to pay for textbooks, Brandon said. These consumers are also likely to want their banks to provide P2P offerings and are less likely to turn to FinTechs for such tools.