A Ten-Fold Boom in Mobile P2P Will Reward Providers But Also Build Pressure for Fees

Now that financial institutions have launched a digital peer-to-peer payment service called Zelle to battle popular nonbank services like Venmo, the rival platforms are likely to divide up a rapidly growing market but will also face pressure to find ways to charge for the service.

While overall U.S. P2P dollar volume will remain relatively stagnant, the mobile share of that spending will grow ten-fold through 2021, according to estimates this week from BusinessInsider.com, a news and analysis site. Business Insider analysts estimate the mobile share was $37 billion at the end of 2016, a number they see increasing 62% to $60 billion by the end of this year. By the end of 2021, they say, mobile P2P will total $336 billion.

Meanwhile, total P2P volume over that six-year span will grow just 4%, from $710 billion to $738 billion.

A report from Bank of America Corp., cited by Business Insider, underscores some of the reasons for the rapid rise of mobile P2P. The bank’s spring 2017 “Trends in Consumer Mobility” report cites survey results indicating consumers are increasingly willing to use mobile P2P for higher dollar amounts. While P2P payments are traditionally seen as low-dollar transfers among friends and relatives, some 26% reported “no dollar amount is too high.” Another 18% were willing to pay between $1,000 and $3,000 using a mobile P2P service.

Both senders and recipients also want the service to work rapidly. Some 22% want to be paid back within an hour. Thirty-five percent want to be able to send funds within that time.

But as volume builds, service providers will be under increasing pressure to finds ways to extract fee revenue, Business Insider warns. “Historically, most … players have taken on mobile P2P at a loss because it’s a low-friction way to onboard users and won’t catch on unless it’s free, or largely free, to consumers,” says the report. “But as it becomes more popular and starts to eat into these firms’ traditional streams of revenue, finding ways to monetize is increasingly important.”