Payment Methods

How The Pandemic Has Helped Push P2P Payments Mainstream

How COVID-19 Is Making P2P Payments Mainstream

U.S. millennials were early adopters of person-to-person (P2P) payment apps, while Baby Boomers sought out financial institution-based P2P options and older consumers were slow to join in — until now. Fiserv's Vice President of Product Management Derek Swords told PYMNTS in a recent interview that P2P usage across demographics is on the upswing, especially since the COVID-19 outbreak.

“[The pandemic] is kind of throwing lighter fluid on a fire that was already burning,” he said. “We’ve seen consistent growth from a P2P perspective every single month for the past three years, [but] the last month or so has … been a more dramatic exclamation point on that growth, where we are seeing new user growth at about 19 percent and transaction growth increasing by roughly 9 percent per month. We’re certainly seeing more people jumping into the pool and starting to take advantage of P2P through their bank or credit union.”

Swords said consumers haven’t just been rethinking their payment methods during weeks of being stuck at home: They’ve radically rewritten their lives to adopt digital solutions for a host of interactions, from work to school to shopping.

And while the post-pandemic recovery is now underway, there’s reason to suspect consumers won’t immediately abandon their digitized lives, Swords said. Digital systems that work better than their pre-pandemic analogs will likely see continued gains — and Swords believes that includes P2P payments.

For example, he said, when consumers use a P2P service like Zelle, which financial institutions can offer to their customers via Fiserv, “more likely than not, they're going to keep using it because they find that it really meets a need in their lives. It’s both convenient and easy. It makes it incredibly simple to send and receive money in a fully contactless way, and we do think the affinity consumers are picking up for it is here to stay.”

Making P2P 'Sticky'

Swords said P2P usage has picked up during the pandemic because it offers an incredibly easy way to casually exchange funds without making physical contact. “It’s meeting a need that consumers have and making it super convenient,” he noted.

The expert said using a financial institution's mobile app to access Zelle adds a general stickiness because consumers are already managing the majority of their financial lives via smartphones. That makes the app feel familiar and accessible. But the app also feels trustworthy because it’s tied to the consumer’s FI, which they already trust.

Swords said such trust is a key ingredient when bringing new customers into the P2P payments fold, as consumers are often hesitant to send and receive funds via new methods.

“Job 1 is just educating consumers as to why it’s safe and what the appropriate use cases are,” he said. “With something like Zelle, we make it really clear that it’s intended to send money to people that you know — people that you trust. It is not a solution for buying concert tickets on the internet.”

After all, as the name implies, P2P is good for sending funds from one person to another — presumably two parties close enough to trust each other. Swords said the job of a P2P service is to make that clear from the word “go.”

Firms also need to clarify what consumers should expect in terms of threats, such as fraudsters who call to mine information and get access to a P2P account. Swords said providers also must ensure that a lot happens on the back end in real time when it comes to making decisions on transactions. For instance, the platform has to spot and stop fraud attempts before the bad guys manage to actually purloin any funds.

More Users Across Demographics

Swords said such capabilities will become increasingly important as the P2P user pool gets larger. Interestingly, the number of younger consumers using FI-based P2P services has increased during the COVID-19 pandemic. This could be an indication of a switch from P2P apps that lack a direct connection to bank accounts as people seek easier and faster access to funds.

While P2P had started to make inroads with seniors in the pre-pandemic world, consumers’ shift to digital commerce in COVID-19’s wake has pushed more older consumers into P2P than ever before.

“We’ve seen a lot more older Americans taking on Zelle and using it for things that are very specific to how we're living today,” Swords said. For example, he said, “we’ve seen a lot of use cases around older consumers offering reimbursements for groceries for their neighbors who are going out and purchasing groceries for them. P2P makes that easy.”

To make the transition to P2P even more accessible for older and potentially less savvy users, financial services players have started providing demo videos to help new users get started. Zelle’s parent company also recently partnered with the social-services group Older Adult Technology Services (OATS) to create an educational program that helps older Americans use P2P safely and efficiently.

A Bright Future For Contactless Payments

Swords believes efforts to push P2P even further into the mainstream will likely succeed, as COVID-19 makes contact-intensive payments unattractive. By contrast, P2P is an easy-to-use and nearly ubiquitous alternative.

“We think it is just going to continue to grow and grow,” Swords said. “The rate of change that we’re seeing now is really significant. This is not baby steps — it is more like big jumps. If you think about consumers using cash and checks today, there’s going to be a dramatic reduction in both, because P2P is just as easy, immediate and contactless.

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