So long IOUs, P2P payments are mainstream now

12 May 2017

Paying friends back for a round has never been easier. Image: View Apart/Shutterstock

Innovation in the financial services industry has been lopsided, with payments receiving the vast majority of attention. Perhaps that’s why it’s now going mainstream.

In some parts of the world, the simple, humble, never-to-be-honoured ‘IOU’ note is fading into antiquated obscurity.

Instead of leaving someone short of a small amount of readily available cash, people are instead utilising the plethora of person-to-person (P2P) payments services on the market.

You buy me coffee at lunch? I’ll send €2 your way with the swipe of a thumb. I pay for a group dinner? My friends pay me back over the internet, in an instant, without a sight or sound.

A new survey from Bank of America shows that 36pc of US adults currently use a P2P service or app, with millennials leading the charge at nearly double that rate (62pc).

The future is on devices and it’s nearer than you might think, with the report showing that almost half of those who don’t use these P2P apps intend to give it a try in the coming year.

One of the more interesting aspects of this is the variety, as sums of money ranging from little to plenty are embraced.

For example, 51pc of people in the report consider it OK to request a friend to pay them back less than $5, with more than one-third claiming “no amount is too low”.

When it comes to what people are paying each other back for, just about anything goes. Shared bills (45pc), including utilities and rent, is the most popular reason to use this technology, closely followed by shared expenses for gifts (42pc), travel (37pc) and dining (35pc).

Across Europe, the trend is similar. In January, the European Central Bank announced that citizens of the EU will be able to make P2P mobile payments across Europe using only the payee’s mobile phone number – which will act as a proxy for their international bank account number – by the end of 2017.

In recent months, Facebook has joined the likes of Visa and Mastercard in the growing number of operators releasing, or planning to release, their own version of this attractive software.

The funding keeps on coming, too, with one notable instance late last year seeing $8.3m Series A finance landing in Verse’s bank account.

Despite the confusion and disruption emerging from companies such as Verse, or Venmo, or even Facebook in this regard, traditional banks could end up thriving.

“As fintech continues to shake up the banking sector, instant messaging provides banks with new and exciting ways to attract digitally savvy customers,” said Oliver Lynch, a business development director at Comtrade Digital Services, writing in

Messaging platforms, Lynch argues, create a new stream of business for banks, allowing constant (and instant) monitoring of accounts by users. This is beyond what most banking apps can control.

“Banking chatbots have become people’s financial assistance and saving advisers,” he said.

However, with WeChat –the company best-placed to bring conversational commerce, and therefore P2P payments, to the masses – now dipping its toe in the US and EU markets, traditional banks will be up against it.

Either way, both sides of the Atlantic, the P2P payments scene is booming.

Gordon Hunt was a journalist with Silicon Republic