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The low cost and convenience of peer-to-peer payments may be ready to cannibalize a portion of the traditional wire-transfer market, according to a new report from Javelin Strategy & Research. The report also finds that mobile P2P is important to all consumers, not just Millennials, often considered the most likely age group to adopt the service.
The report, “P2P Payments in 2015: Market Sizing and Evaluation of P2P,” canvassed more than 3,000 consumers in three different surveys to gauge their assessment of P2P transfers, which Javelin estimates will hit $379 billion this year.
Many consumers will opt for free or low-cost secure P2P transfers over wire transfers, which tend to be expensive and for large amounts of funds, Javelin says. “P2P will be an attractive alternative to expensive wire transfers that often force consumers into the [bank] branch,” says the report, which was co-written by Michael Moeser, director of retail payments and small-business banking at Javelin. Megan Cain, research specialist, also co-wrote the report.
“Banks have an opportunity to convert part of the wire-transfer market that needs expedited P2P payments for bill payment, e.g., sharing common bills,” Moeser notes in the report.
But to do that effectively, they’ll need to be cognizant of the importance of mobile services to all age groups and not overlook shared bill-pay services.
Though consumers between 25 and 34 are the power users of mobile P2P—averaging 11 transactions in the past 12 months—such transactions are made by all age groups, Javelin says. By comparison, consumers aged 45 to 54 made four transfers in the same period. Those 65 and older noted just three mobile P2P transfers.
“The fact that mobile and laptop are very strong usage indicates consumers are getting more comfortable sending money through digital channels,” Moeser tells Digital Transactions News. The most popular P2P-payment uses are for gifts, 39%, bill payment, 38%, and entertainment expenses, such as splitting a dinner check, 29%.
Whether the transfer is made using a financial institution or a non-bank provider, like Venmo or Square Cash, the overall number of mobile P2P transactions is 10 across all age groups.
As for the value of these mobile P2P transfers, consumers using financial-institution services send an average of $154 per transaction, compared with $130 for those using non-bank providers.
Moeser also notes that the need for consumers to split bills points to a large and potentially growing market that might be willing to pay for the service, which has not been the case with other P2P applications. “Although all P2P services cannot be monetized, there may be an advantage to streamlining the process of paying shared bills, which could be monetized in a more traditional banking manner,” the report says.
No lack of P2P providers indicates fervent interest in the market. Apple Inc. is rumored to be considering offering a P2P service. “If Apple really wants to get into this space it has to be for a reason other than the ability to send money,” Moeser says.
Providing P2P services is really about engaging the consumer, he says. “It's not necessarily the traditional way to make money. “If [Apple] can provide additional engagement with their wallet, that's a greater prorioty,” Moeser says. “That would be a primary reason for them to get into P2P services.”
