Credit and debit cards have already gone a long way to getting people off of cash and checks.
But there is one type of payment that still requires a trip to the ATM or a desperate hunt for the checkbook. Called peer-to-peer (P2P) payments, these informal transactions are made between people — say to pay someone back for a concert ticket or to pay a babysitter for a few hours of work.
A new crop of apps, though, is changing the way these types of payments are made. In a new report from BI Intelligence we take a look at apps like Venmo, Square Cash, and M-Pesa, which are allowing people to transfer money back and forth using just a smartphone. Already, PayPal-owned Venmo, one of the leading mobile P2P apps, says it saw $314 million in transaction volume on its app last quarter.
In the report, we take a close look at what’s so compelling about these mobile P2P apps, and forecast mobile P2P payment volume through 2018. We explain what differentiates some of the most successful P2P apps and how we see adoption of smartphone-based P2P payments ultimately transitioning people onto mobile payments in general.
What’s really interesting about these apps is not just the services they provide for people, which solve a real pain point. It’s the fact that these services could ultimately get people to make mobile payments in general. There’s good reason to think that this is what these apps are really after. These companies often make little to no money off of facilitating peer-to-peer transactions, but if they can become the platform for in-store mobile payments, there could be real revenue at stake.
Here are some of the report’s key findings:
- Globally, the volume of P2P payments is over $US1 trillion and only a sliver of those transactions are currently conducted via mobile phones.
- In emerging markets, there is especially huge potential for P2P payments made on cell phones, due to a lack of financial infrastructure. A high proportion of the population in these markets lack access to checking and savings accounts.
- Kenyan telecom Safaricom provides an excellent case study for the success of mobile P2P payments in emerging technology markets. The telecom has a product called M-Pesa, which allows its users to transfer money to one another via text message. Largely as a result of M-Pesa’s success, an impressive 92% of Kenyans say they have used mobile P2P payments.
- In developed markets, adoption of mobile P2P payment services won’t be as fast. But we believe they still have real potential in the long-run because these services solve real pain points for consumers. Our high-end estimate is that mobile P2P transactions volume could reach $US86 billion in the U.S. by 2018.
- Mobile P2P payment services are usually free or next to free to use, which begs the question of how they will be monetized. Different services have experimented with fees and even advertising. But mainly, these services will serve as Trojan horses to gain user trust for mobile-based transactions.
In full, the report:
- Forecasts transaction volume for mobile P2P payments through 2018 and gives an estimate for the size of global P2P payments.
- Explains the value of mobile P2P payments to consumers and why there is such a compelling case for mass adoption.
- Profiles ten companies’ P2P services that we think are indicative of the breadth of services on offer.
- Analyses the major obstacles that mobile P2P payments face, including interoperability and security risks.
BI Intelligence is a subscription research service from Business Insider. We cover the payments, mobile, digital media, and e-commerce industries. For full access to all our charts and analysis, sign up for a free trial.
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