P2P Payments

The whole world lives in the era of modern technologies and the constant process of digitalization, and most people already cannot imagine their life without the Internet and social networks used for communication with friends and family. The tendency of making any payment online instead of using cash is growing. 22% of Americans claim that they do not carry cash at all and pay for everything by credit or debit card. It is convenient when you need to pay a bill in shops or supermarkets. But what should you do if you have a common restaurant bill with your friend or do not wish to write a check to pay your power bill? Undoubtedly, P2P payment is an indispensable thing in such cases. However, how does it work and how secure is this transaction?

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What Is P2P Payment?

p2p paymentsP2P payment, short for peer-to-peer or person-to-person payment, means a transaction that enables society to transfer their money to people in online mode with the help of personal bank and credit unions accounts or mobile apps. This way, it is easy to split a bill with your friends or family members. Besides, this digital technology can certainly deprive you of constant problems that appear when you have to carry cash with you. You should not worry that you forget your wallet at home or do not have small money to give somebody change.

If earlier, all online services were more popular among the young generation, now, it becomes a general tendency. People of all ages have mobile phones and use them whenever it is possible. Therefore, new P2P services and mobile apps that are connected with bank accounts are constantly being developed. The most popular P2P payment services include:

  • PayPal
  • Apple Pay
  • Venmo
  • Cash App
  • Google Pay
  • Square Cash
  • Zelle (it was previously known as clearXchange, and now, it cooperates with banks and credit unions).

It is also possible that some services are combined into so-called unions. For instance, PayPal bought Venmo. Both of them continue to exist and even have various conditions.

One of the most important issues is the problem of choosing the most appropriate P2P service for you. You will not be able to select one without reviewing the main characteristics as well as terms and conditions offered by each electronic wallet system. All of them have their peculiarities, advantages, and drawbacks.

Nevertheless, their popularity cannot be denied. The percentage of online transactions carried out with the help of P2P payment services and mobile apps is growing with every passing year, and it already accounts for more than $100 billion only in the USA. This tendency has no reason to slow down. However around 25% of people still cannot pay for everything online, and prefer withdrawing cash in ATMs. The reason for that is lack of awareness and information concerning the procedure of peer-to-peer money transfer, its safety and reliability.

How Does P2P Work?

p2p payments how it works

No matter which P2P payment service you will select to transfer a certain sum of money to your friend, family member, or close associate, the working principle does not differ considerably. It is as simple as creating an account on social media sites and sending a message to your friend. The simplicity of the required actions is one of the reasons for the popularity of P2P payment services. Besides, you do not need extra tools except for a mobile phone or laptop to make a payment.

In case you have never used online transaction systems or mobile apps, you should follow this simple plan of actions:

  • Select any P2P payment service and download its mobile app
  • Sign up for a personal account in the app
  • Link it with your bank or credit union account, debit or credit card
  • Do all the actions required by the P2P mobile app for providing a high level of safety (depending on the peer-to-peer payment service, it may be entering a password, providing some private information, for instance, email or phone number)
  • Enter the information about the person who will receive your money - name, phone number, email
  • Enter the sum of money you want to transfer. You might be prompted to enter the reason for transfer
  • Confirm your payment by actions required in the P2P app
  • When another person receives your money, he can either transfer the whole sum to their bank accounts, debit and credit cards or keep the received money in the P2P service for further payments and transactions.

You ought to be ready for particular modifications depending on the selected P2P payment system. Sometimes, people are afraid of using similar services working online since it is required to provide private information, particularly numbers of credit and debit cards or phone number. If you also have such worries, you should learn more about the safety of P2P payments.

Security of P2P Transactions

security of p2p payments

In general, there are no reasons to worry about the safety of P2P payments as all peer-to-peer services encrypt the personal information of their consumers. Furthermore, most P2P phone apps apply the procedures of fraud tracking that prevent information leak and hacking attacks.

In case of any suspicious operations in your account such as transactions that you did not make or missing money, you should immediately get in touch with the support group of your P2P service. Make sure you read all the terms of the chosen peer-to-peer system if you want to know what you should do in case of any illegal actions in your account. Try not to select those mobile apps that have no support group at all.

Among the most popular problems that may occur when you deal with P2P payment, the following ones can be identified:

  • It is rather difficult to cancel your payment. For instance, if you want to send money to your friend or family member but mistakenly transfer it to another person, it is almost impossible to receive your money back. In most cases, it depends on the receiver’s conscience whether you will return the wrong payment.
  • Any P2P facility can be hacked, no matter what rate of protection it has. Such cases are just rare exceptions that should not affect your decision of whether to use P2P mobile apps or not. It is also possible to become a victim of a robbery when you carry cash with you.

However, you are always able to do your best to protect your P2P account from such problems:

  • Send money only to those personalities whom you actually know. In case you apply a P2P system to pay a stranger for any product or service, it may be rather difficult to receive money back in case you do not obtain what you have initially expected.
  • Always link your P2P mobile application to a bank account or debit and credit cards. In such cases, you have legal grounds to require your money back in case of wrong payment. Otherwise, you depend only on providers’ terms and conditions, which do not usually want to help users with such problems.
  • Create a reliable password for your P2P account. In most cases, peer-to-peer services offer their consumers an opportunity to create a password that then should be entered every time when you pay any sum of money with the help of the system.
  • Set up notifications in your P2P account. Almost all person-to-person platforms send their consumers information concerning all actions conducted in the account. If you do not receive such messages on your mobile phone, just change your settings. A P2P platform should send them every time you make a payment, receive money, link a new debit or credit card, and so on.

Speed of Conducting Operations

P2P services users give preference to such platforms because of the high speed of the transaction. You don't need to spend time going to the bank or ATM for cash withdrawal or money transfer. You can do it at any time without leaving a house, and a receiver will get your money almost immediately

However, the speed of any payment or transaction always depends on the P2P service itself. Each of them has its terms and conditions. Therefore, the period of transfers can be considerably different. It varies from several seconds to 3-4 workdays. Before linking your bank account or debit and credit cards to the P2P mobile application, make sure that its conditions concerning the speed of transactions are appropriate for you.

For instance, all payments conducted with the help of PayPal or Square Cash are almost immediate, and they take no more than five minutes. However, the only condition is that a receiver has an account on the same platform. Venmo takes up to thirty minutes to transfer money to another user. A P2P service clearXchange or Zelle offers its users a high speed of all actions in case they send money to other consumers of this platform. Otherwise, money transfer can take up to three days.

Some P2P payment platforms can ask you to pay extra money for conducting an immediate transaction. You may apply this function if you cannot wait for several days. The fee for instant payment found in terms of a P2P mobile application.

Advantages and Drawbacks of P2P Platforms

Every P2P mobile facility, no matter whether it is Venmo, PayPal, clearXchange or something else, has its features. The process of selecting the most appropriate peer-to-peer system should be based on the analysis of all these characteristics. However, as a phenomenon in general, P2P payment services have some noticeable benefits and drawbacks.

Among the important benefits of person-to-person platforms, the following ones can be identified:

  • There is no need in going to the bank or looking for the nearest ATM to make a certain payment. Besides, no need to carry cash or credit and debit cards with you all the time. It is enough to have a mobile phone only.
  • You don’t need to write down all your earnings and expenditures in the notebook to track your money. All P2P systems will automatically log every payment. You can always look through the history of your financial operations.
  • You don't need to go to the bank or shop to change money if you need to return a certain sum to your friend, family member, close associate, or any other person. The online platforms help send exact amounts of funds.
  • No need to convert currencies on your own because a peer-to-peer platform can do it for you.
  • There is a possibility to send funds to several recipients as well as receive them simultaneously.

The following drawbacks of using the P2P systems have been noticed:

  • Some services require users to pay fees for sending funds.
  • All P2P systems set certain restrictions concerning the sum of money that you can send or receive.
  • It is impossible to cancel your payment and get everything back in case of a mistake.

Other Benefits of P2P

All peer-to-peer mobile applications and P2P money transfer websites including Venmo, clearXchange, PayPal, and others, do not deal with physical agents if compared with such organizations as MoneyGram or Western Union. These person-to-person transaction services are sometimes helpful if you do not have enough time or desire to deal with a bank. However, you still need a bank account as well as any credit or debit cards to send or receive money with the help of various electronic wallets.

Any P2P payment platform will definitely bring its users some benefits:

  • It is the fastest and the most convenient method of sending small amounts of money to your friend, family member, or business partner.
  • It is a great way to send funds without going to the bank where everyone can see and hear how much and to whom you are transferring funds. So, it means that in Venmo, PayPal, or clearXchange, you can conduct all payments privately, without social interaction.
  • It can help replace your usual wallet with a mobile phone that you carry around all the time.

P2P Wallet

Paying money to your family and friends becomes more popular due to various services such as Venmo, PayPal, clearXchange, Google Pay, and others. All of them can make a wallet from your phone. Person-to-person payments can be carried out through banks or credit unions and even on various social networks such as Facebook.

Social feedback is always very important for any service. Therefore, all these organizations, no matter whether as popular as PayPal and Venmo or less known as clearXchange, have to support their reputation in the world. For this purpose, there are some companies, such as Wallet Factory, which create fiscal and technical solutions for banks, P2P payment providers, retailers, and so on.

Do not hesitate and start using a P2P electronic wallet on your mobile phone right now because it is the future of any banking operations.

How to Send Money with P2P Wallet?

The general algorithm of applying peer-to-peer payment platforms such as Venmo, Google Pay, clearXchange, Apple Pay, and others has been already described above. In most cases, it can help deal with all these difficult bank operations just by a few clicks on your mobile phone. As experience shows, it is much easier than sending money via Western Union or similar services. However, some people can still have certain difficulties when making a payment in the P2P account to a friend, partner, or family member. Here is a little help with a real example.

Charlie wants to send $50 to his friend John using only his phone. The reason is rather simple – Charlie and John had lunch in the café, and John decided to pay for a common bill to save more time. It means that Charlie has to return money to John for his part. However, Charlie does not have cash and enough time to go to the bank to withdraw it. Charlie decided to use a phone and P2P payment application. From a wide variety of peer-to-peer platforms, Charlie selected Venmo.

Charlie downloaded a Venmo app and registered his account by linking the number of his credit card. These steps took Charlie just a few minutes. Then, he started looking for his friend in Venmo. For this purpose, Charlie entered John’s phone number. When Charlie managed to find his friend, he clicked on his username and entered a sum, which was $50. After that, Charlie confirmed his P2P payment by a password, and the money was sent. Since both Charlie and John had Venmo accounts, this process was rather quick.

Charlie really liked the efficiency of the Venmo platform and recommended it for all family members. He started using his phone as a wallet. But for security, Charlie has never sent money to strangers but only to his family and friends.

International Money Transfer Services

Though Charlie preferred Venmo, there are other international P2P payment platforms that help send money to your family and friends wherever they are by using a phone.

Venmo has been functioning since 2009. Just like many other peer-to-peer services, Venmo links a bank account to the P2P payment profile with the help of a phone number. Venmo clients have to pay a 3% fee for credit card payments, while debit ones are for free. Venmo also has a social feed for payments.

PayPal is the oldest person-to-person service, and it has recently bought a Venmo platform. But they have some differences. If compared to Venmo, PayPal will require some bank information and email for linking a bank account. Users pay a 1% fee for immediate transactions or wait for 1 day for free. There is no difference between debit and credit payments as it was in Venmo.

Many people do not know much information about various P2P services and confuse some of them. But some person-to-person platforms work only within the USA. A Zelle or clearXchange is one of them. So, you cannot send money to family or friends via clearXchange when they are abroad. Instead, use Venmo, PayPal, Bank of America, XE, Western Union, and so on.

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