The rise of mobile p2p

Mobile person-to-person payment options are changing the way money moves. Here’s how community banks stand to benefit.

By Colleen Morrison

Remember the days when you went out to dinner with a few friends and one person picked up the tab, leaving the rest of the group hunting in their pockets for cash or pulling out the checkbook to pay their share? Those days are gone.

According to Bank of America’s 2017 Trends in Consumer Mobility Report, “the exchange of funds through p2p [person-to-person] is the new social ‘norm,’ ultimately replacing the IOU.” With millennials leading the charge and Generation Z following in their footsteps, the mobile portion of the p2p payments market could reach $97 billion this year, according to BI Intelligence. Venmo, PayPal’s social payments platform, processed about $9 billion in payments in Q3 2017, up 93 percent on the same period of the previous year.

“p2p is critically important, but the problem is that it’s not a good revenue model from a direct economic standpoint,” says Chris Nichols, chief strategy officer at CenterState Bank, a $10 billion-asset community bank in Winter Haven, Fla. “But we look at it from the future standpoint. In the long run, p2p will be the flagship application in any platform.”

Despite its potential, many community banks haven’t jumped on the p2p bandwagon. A recent study from ICBA Bancard found that a third of community banks plan to offer a p2p solution in the future but have not yet introduced one.

“When I ask community bankers why they haven’t adopted it, the most common response is, ‘My customers aren’t asking for it,’” notes Tina Giorgio, president and CEO of ICBA Bancard. “My response is, ‘That’s because they are getting it from someone else.’ It’s not because they don’t want it; they just aren’t asking you for it.”

Bank-centric solution
Experts believe a bank-centric solution may drive adoption by expanding connection points. With the potential to reach every account in the nation, community banks can ease the mobile p2p payment process and improve customer satisfaction at the same time.

“Today, the user experience is that there are a lot of solutions out there,” Giorgio says. “I use one, my friend uses another, and I end up with multiple apps on my phone to move money. Any time a bank can step in and help with that, the longer it’s going to have that customer.”

Banks have seen the beauty of this approach, and more bank-centric solutions are emerging. In October 2016, ICBA and North American Banking Company launched a proposal for an all-payments app called Excheq, a bank-connected faster-payments solution with a mobile p2p component. This offering provides a white-label option and leverages same-day ACH to process payments.

Most recently, the largest banks in the nation banded together to launch Zelle, a p2p network that quickly delivers payments to more than 86 million U.S. mobile banking customers. The Zelle team plans to expand its network by engaging in strategic partnerships across the financial services and technology spectrums, and has already partnered with some of the leading payment processors:

CO-OP Financial Services, FIS, Fiserv and Jack Henry & Associates.
“We want Zelle to be made available ubiquitously,” says Peter Tapling, the former chief revenue officer of Early Warning Services. “We want all banks to be able to participate on equal footing.

The whole distribution strategy was created in a way to make it as easy as possible to participate.”

Financial institutions can join the Zelle network in one of two ways: They can contact Early Warning Services to sign up and build the direct integration, or they can reach out to their service provider and find out when Zelle will be available on the core banking product.

“Zelle is the new standard for the bulk of banks’ customers,” Nichols says. “There’s no doubt that Zelle will get a large percentage of the market, but will it get enough to completely displace Venmo? That remains to be seen.”

Security matters
When looking at gaining market share, banks may have the upper hand when it comes to their customers’ security requirements. A recent American Bankers Association/Morning Consult poll reported that a majority of consumers across all age groups trust banks to keep their payments safe—more so than alternative payment providers, retailers and telecommunications companies. In fact, consumers reported trusting banks nearly five times more than providers like Apple, PayPal or Venmo (59 percent versus 12 percent).

“As p2p banking solutions increase in use and popularity, we believe customers’ money should be secure within the safe, trusted network of banks,” says Michael Brandt, senior vice president and corporate marketing director at Homestreet Bank, a $6.8 billion-asset bank headquartered in Seattle, and one of the first community banks to sign on to Zelle. “When deciding what p2p solution to offer, it came down to security, quick transaction times and ease of implementation. Zelle checked those boxes for us.”

No matter what p2p solution a bank chooses, the time to engage has arrived. Offering a bank-provided product bonds customers more deeply to your bank.

Just imagine it: The next time your customer goes to dinner with friends, your bank’s app could take care of the check.

Skin in the game: bank-centric p2p solutions

  • Excheq all-payments app (North American Banking Company & ICBA), a white-label p2p app that leverages same-day ACH for clearing and settlement.
  • Popmoney (Fiserv*), a service that allows consumers to conveniently send, receive and request money with an email address, mobile phone number or account number, leveraging Fiserv’s network.
  • People Pay (FIS*),
    a network that enables customers to make real-time, p2p payments through FIS’ infrastructure.
  • Zelle (Early Warning Services), a new p2p payments network from bank-owned Early Warning Services, connecting more than 86 million U.S. mobile banking customers.

Colleen Morrison is a writer in Virginia.