are, you’ve at least heard of Venmo, but there’s
also a good chance you haven’t used the mobile app or
anything else like it to send money to family or
that’s likely to change over the next few years, as
banks, payment companies and even the likes of Google
and Facebook push so-called peer-to-peer, or p2p,
payment systems — a medium of exchange with
apps and online tools could someday overtake cash and
checks as the primary way individuals pay each other,
and they even could make inroads at the cash register
and with businesses that send refunds and other payments
to their customers.
systems will get a boost later this year when a
coalition of the nation’s biggest banks roll out Zelle,
a mobile and online money-transfer network that will let
any customer of nearly every U.S. bank send money to
customers of any other bank using only a phone number or
say the bank-led system — and the related marketing
push — should bring online and mobile peer-to-peer
payments to a larger audience. Even competitors, notably
the popular money transfer app Venmo, say the Zelle
rollout could boost their fortunes by making
digital-money transfers more mainstream.
don’t see it as a winner-take-all scenario," said
Josh Criscoe, a spokesman for Venmo owner PayPal.
"We welcome any effort to move folks to more
digital payments and move toward the smartphone as the
central point of financial life. The common enemy is
and mobile peer-to-peer payment systems have grown
rapidly over the last few years, and analysts expect
that to continue. In a report published in March,
finance industry research firm Aite Group estimated that
Americans made about $147 billion in digital p2p
transfers last year, up from $100 billion the year
are big numbers, to be sure, but last year’s sum still
only accounted for about 12 percent of the more than
$1.2 trillion that Americans paid each other that year,
mostly in cash.
means there’s still plenty of growth ahead, said Talie
Baker, an analyst at Aite Group. In her report, she
estimated that the volume of digital p2p payments will
more than double by 2020, topping $316 billion.
that many consumers are using mobile payments yet,"
Baker said, noting that though these payments are more
common among young consumers in big coastal cities, they’re
not so ubiquitous elsewhere. "I’m a Gen-X person
and I live in Denver — I hadn’t heard of Venmo until
are plenty of players in the p2p game.
Inc., the payments company behind the tiny white credit
card reader that plugs into a smartphone, has a p2p
service of its own, Square Cash, which launched in 2013.
the geometric theme, there’s also Circle, a Boston
firm that started the same year and specializes in
cross-border p2p transfers in dollars, euros and British
and Google, too, allow users to send money to friends.
Google has Google Wallet, which started as a mobile
wallet app but became a p2p payment tool in 2015, and
Facebook users have been able to send money through
Facebook Messenger since 2015.
Google and Facebook don’t report the volume of
payments made through their p2p systems, but Facebook in
regulatory filings has said that only "a relatively
small percentage" of its users have used the
is arguably the biggest name in peer-to-peer transfers.
It even has the coveted status, like Google, Uber and a
few others, of becoming a verb — as in "Venmo
in 2009, the company was acquired in 2012 by payment
services provider Braintree, which was acquired the
following year by online payments giant PayPal — which
offers p2p payments under its own name too.
the biggest players in the market are still the banks.
year, Venmo users transferred $17.6 billion. That’s
more than double the volume from 2015, but it’s also
much less than the $28 billion transferred in 2016
through QuickPay, JPMorgan Chase’s peer-to-peer
payment system. And that’s just one bank.
Bank of America, Wells Fargo and other major financial
institutions have had their own p2p transfer programs
for years, though it can sometimes be clunky for bank
customers to send money to people with accounts at other
Group estimates that of all the digital p2p transfers
Americans made last year, non-bank systems such as Venmo
accounted for only about 17 percent of that. Banks
accounted for the rest, though much of that likely was
made through banks’ websites, not mobile apps, and
much of it was money transferred between customers of
the same bank.
part, that’s a statement about who uses different
systems, and what they are used for. Venmo and other
non-bank systems are accessed about twice as often as
bank systems, but for much smaller transactions,
according to Aite Group. The average money transfer on a
non-bank system is $135; the average for bank systems is
$1,359, according to the report.
might suggest that parents sending money to a student
for college tuition, for instance, might be more likely
to transfer money through a bank, while students are
much more likely to split a restaurant bill or bar tab
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payment app is also a social network in its own right,
with users sending messages to friends when they
transfer money — a feature Venmo pioneered. Those
messages shed light on what’s behind each transaction
and indicate that Venmo is most often used among friends
over food and drink, said Criscoe, the Venmo spokesman.
is the No. 1 emoji on Venmo; beer is a close
follow," he said, adding that other messages
suggest users are splitting bigger-ticket items too,
such as rent.
Venmo and other non-bank payment systems are still a
small part of the p2p market, banks want to make sure
they keep their place in the financial order and keep
summer, Early Warning, a company owned by some of the
nation’s largest banks, will release Zelle, a payment
system built to compete with Venmo and others — and,
banks hope, to make digital p2p payments more
with the release, Early Warning will kick off a
marketing campaign showing not only how Zelle works but
how it might be used. Lou Anne Alexander, president of
Early Warning’s payments group, said the focus will be
on appealing to older consumers who might not have tried
trying to take (p2p) from millennials to the mainstream—customers
might use a product like this," Alexander said.
"That might be managing contributions to the high
school marching band or it might be renting a home on
the beach with friends or family."
STORY CAN END HERE)
traces it roots back to 2011, when Bank of America,
Wells Fargo and JPMorgan Chase set out to build a system
— initially called ClearXchange — that would allow
their customers to send money to each other using only
phone numbers and email addresses. Before, customers
could only transfer money to friends and family by
entering account and routing numbers — information
customers often didn’t know and might be concerned
is essentially a souped-up, rebranded version of
ClearXchange. It will be available to anyone with a U.S.
bank account, and it aims to overcome some of the
limitations and confusion around the ClearXchange
Grotta of research and consulting firm Mercator Advisory
Group said banks didn’t do a great job of explaining
that ClearXchange would allow customers to send money to
customers of other banks.
of the problem, she said, was that every bank has its
own name for its ClearXchange-powered p2p system,
including Chase QuickPay, Wells Fargo SurePay and
Capital One P2P Payments.
wasn’t well-marketed that someone at Chase could pay
someone at Bank of America because they had different
marketing and different branding," Grotta said.
"You could pay someone at any financial
institution, but people never realized that."
address that problem, banks over the next few months
will begin rebranding their p2p transfer systems to
include Zelle in the name. Chase, for instance, will
start calling its system "QuickPay with Zelle."
Customers of more than a dozen big banks —
representing most U.S. account holders — will be able
to transfer money through the banks’ mobile apps. For
other banks and credit unions, customers will be able to
do so through the Zelle mobile app, set to be released
the system is running and the marketing campaign kicks
off, Grotta expects Zelle to be a hit.
is going to be a much better user experience than the
banks had before," she said. "I think it will
start to catch on once people see that they can in fact
send money to another person at another financial
banks, the stakes are high. Though Venmo and other money
transfer apps are tiny by comparison, Baker said banks
are rightfully worried about what might happen if their
customers interact more often with outside payment
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a customer opens an outside p2p payment app once a day
and their mobile banking app just once a week, the
payment company has more opportunities to sell that
customer on products and services the bank would
otherwise provide, she said.
Venmo builds up a strong enough customer base, then it
can say, ‘Hey, come get a credit card from us,’ or
‘Come get a home loan from us,’" Baker said.
"That’s the approach some providers are hoping to
see other advantages too. Mary Harman, an executive in
Bank of America’s consumer payments division, said it’s
expensive for banks to process checks and move cash
around, so an increase in digital p2p payments could cut
said banks also want to give customers the services and
options they want. Some customers, she said, might
prefer using Venmo; others might prefer the implied
security of managing financial transactions exclusively
through their bank.
serve 65-million households in the U.S., and not
everyone will act the same way," Harman said. We
have to recognize that and have different products
available in different places."