Social Nature Of P2P Strong, But Banks Need To Raise Their Voice

By Jeffrey Green (@epaymentsguy)

A common theme with U.S. person-to-person (P2P) payments is the “social” nature of the transactions, as they often evolve out of a social situation or event, according to Tom Roberts, senior vice president of marketing, electronic payments, at Fiserv Inc.

In terms of who is providing the P2P service, alternative providers, led by PayPal, have a sizable lead over financial institutions, and lack of consumer awareness of banks’ P2P services may be a factor, contends Paul McAdam, senior vice president of strategic thought leadership at Fidelity National Information Services Inc. (FIS).

PYMNTS.com interviewed Roberts and McAdam earlier this week to glean their views on the burgeoning U.S. P2P market. Both Fiserv and FIS are playing pivotal roles in bringing P2P funds-transfer services to financial institutions. Some 2,000 banks and credit unions support Fiserv’s Popmoney product, for example. FIS’s real-time PayNet service is in pilot with 160 clients that use its core processing system and NYCE electronic funds transfer (EFT) network. The processor eventually plans to open the service up to bilateral agreements with other processors and EFT networks.

Situations involving individuals’ social networks are key P2P environments. Examples include rent payments to a landlord, friends paying each other back, parents sending funds to kids away at college, and roommates paying each other back for various split expenses, Roberts says.

“In all these situations, there is a personalized interaction, so there is a need to combine the ability to communicate digitally with the ability to pay another person digitally,” he says. “We’re seeing more social payments being made from mobile devices, and we’re also seeing a slight increase in typical payment value, with the average transaction currently over $400.”

Driving the trend is the increased role smartphones are playing in consumers’ overall lifestyle, and it shows folks are getting more comfortable using their phones to make payments. Though Popmoney transaction volume has doubled over the past 12 months, “there is still a long way to go in terms of marketing social payments – making people aware of these types of services and how to benefit from them,” Roberts says.

Marketing is especially lacking among financial institutions, as illustrated by research FIS conducted in November. Among the 4,380 online consumers it surveyed, 13 percent of respondents who owned a smartphone had used an alternative provider’s mobile app, such as PayPal’s or Amazon Payments’, to conduct a P2P transfer in the previous 30 days, while just 5 percent had made a similar payment through a financial institution’s mobile app, the research found.

“Consumers may not see mobile or online banking as a P2P service, and PayPal has been in the market for a while,” McAdam tells PYMNTS.com. “Once you get down to the regionals, a good number still don’t offer P2P, so that’s also a big part of it.”

An earlier survey FIS study conducted with Ipsos Vantis in March found that, among the 1,508 respondents who were active online or mobile bankers, 59 percent were unaware whether their financial institution offered P2P through its online banking site, while 48 percent were unaware whether it offered online or mobile P2P services.

Half, 50 percent, of the 300 respondents to the March survey who replied to the question noted that their bank required the recipient’s account information to facilitate the transfer. As such, banks must simplify their credentialing processes to compete with PayPal, which simply requires use of a mobile number or email address to facilitate a P2P funds transfer, a process favored by 55 percent of Generation Y and 43 percent of Generation X respondents.

McAdams notes that these data points are from this past spring and may not reflect changes banks may have made to their credentialing requirements. They do, however, reflect that early bank P2P efforts likely didn’t use tokenization of account information to simplify storage and use of payment credentials to simplify their processes.

PYMNTS.com on Dec. 18 published a report that provides an in-depth look at the U.S. P2P market. Among the chief conclusions is that consumer education on P2P services is lacking, and the broad variation in how transfer systems work is only complicating the consumer-education process, as is finding the right motivation to encourage consumers to change their traditional payment habits.

To purchase the report, please visit the PYMNTS.com Report Store. For more commentary by Jeff Green, click here.