Page 86 - Pay Magazine s2014

digital money
P2P Poised for Growth?
promoting P2P through social media and word of mouth, Berry adds. “Millennials don’t mind telling each other to just download the app when they want to pay each other, and through those pockets of influence, P2P is growing grad- ually,” she believes.
Size estimates of the emerging U.S. P2P payments market vary based on how transactions are defined. First Annapolis in 2012 predicted the niche would grow to $50 billion by 2017. Last year 451 Research forecast that P2P trans- action volume would grow more than 300 percent over four years, from 172.9 million transactions in 2014 to 722.3 million in 2018. Similar development is occurring with P2P outside the U.S.; in the U.K., P2P payments also are see- ing significant growth with last year’s launch of Paym, a mobile P2P service backed by the U.K.’s Payments Council; Barclays’ Pingit and NatWest’s Pay Your Contacts are two other U.K. P2P services that show promise. Faster Pay- ments, which launched in 2008, has the lead in enabling P2P payments for banked U.K. con- sumers (see page 50).
So far, most domestic P2P payment services (excluding wire transfers) are either very low-cost or free, but analysts say immediate profitability may not be the end game in P2P technology. “The payments industry is going through major changes, and though P2P right now is a relatively narrow area, it may eventually become a key way
Cash’s TenaCious Grip
P2P payments technology faces many challenges before consumers broadly accept it, and the biggest one is ubiquitous: Cash. Despite the sharp rise of cards and electronic payments in recent decades, cash is still king in routine payments among consumers, and check-writing is down but not out.
About three-quarters of all checks written are for $500 or less, ac- cording to the Federal Reserve,
and though check-writing has de- clined dramatically over the last decade, Fed data show the smallest decrease was among checks written from one consumer to another. Whether it’s for splitting the tab, sharing housing expenses or paying for the babysitter, Fed data suggest the vast majority of consumers still are wedded to using cash or checks.
u.s. share of payment Type by number of Transactions
Debit 25%
Credit Cash 17%
40%
4%
source: Federal Reserve Payments Study, 2013
7% Check
Electronic Other
7%
84
individuals routinely move funds to one another,” Berry notes. “Payments providers investing in P2P now may be laying the groundwork for ‘sticky’ services that are part of larger products
Millennials are leading growth
of mobile payments, according to our consumer research, and it makes sense that they’ll look to their phones as
the way to pay
their peers.
—Marianne Berry, Auriemma Consulting
and services in years to come,” she speculates.
Though it’s still early in the evo- lution of P2P payment services, it seems a fair bet that a critical mass of consumers eventually will grow comfortable with using digital P2P services. If and when that happens, the P2P brands with scale will be at least poised to win deeper consumer engage- ment if not new revenue streams, analysts suggest.