Anyone with a teenager or young adult in their family has probably at least heard of Venmo (a PayPal company), a person to person/peer to peer (P2P) payment network, where all you need is one simple piece of information such as a person’s email or cell phone number to initiate a payment. Venmo is the acknowledged leader in P2P transfers in the U.S. and has experienced rapid growth, particularly in the past few years. In Q4 2016, Venmo facilitated $2.6 billion in payments, 126% more than in Q4 2015.
Banks (and Apple) Enter the Fray
Recent estimates of the potential market for P2P payments exceed $1 Trillion causing competition to heat up for Venmo. Just this month, both Apple and a consortium of banks each announced the launch of their own P2P capabilities. The consortium includes the largest banks in the country, including Bank of America, Citi, Wells Fargo and JP Morgan Chase, as well as partnerships with MasterCard and Visa. Their offering, Zelle, has been six years in the making. Initially, Zelle will be integrated within the mobile banking apps of participating financial institutions, although that could conceivably change over time. It’s in the banks’ interests, though, to keep it as part of its overall consumer offering. This adds to the value and convenience banks can bring to its customers. In addition, for potential users outside of the millennials, there is comfort in association with established bank brands. To some extent, the same could be said of Apple, which stated that its P2P function (Pay Cash) would be integrated into iMessage in iOS 11, putting it head to head with Venmo, which already leverages iMessage for its functionality.
Cash May No Longer Be King
This may be the next evolution in banking. The introduction of ATMs in the 1970s revolutionized how people bank and how branches are used, although interestingly, the reports of the death of the bank branch have been continually “greatly exaggerated.” But with the rise of P2P and the digitization of financial transactions, it is possible that we could see a decline in ATMs and a move to a cashless world. So the next time you’re out with your friends and one of them forgets his or her wallet, show them you’re on top of financial trends and tell them to just Venmo/Zelle/Pay Cash you.
Ways to Reach Your Customers May Be Growing
P2P networks may also represent the next phase in selling financial services products to consumers, similar to the way ATMs are used. If consumers have to go through the sales message in order to get to the P2P function, just as ATMs display a sales message before you login, this represents a growing, captive audience.