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EcommerceBytes-NewsFlash, Number 2913 - October 15, 2012 - ISSN 1539-5065    5 of 5

Is P2P the Next Frontier in the Payments Market?

By Kenneth Corbin
EcommerceBytes.com
October 15, 2012




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WASHINGTON - PayPal has been at it for years. The big banks are getting on board, and outside players such as Twitter co-founder Jack Dorsey's latest venture, Square, are jumping into the market for person-to-person, or P2P, payments.

But P2P payments, like mobile payments, remain a very young and unsettled market.

However, the promise of resolving the all-too-familiar nuisance of dividing up a dinner check without having to fuss with divvying up change for people's paper money is appealing enough to have caught the attention of an array of credit-card firms, banks and other payment providers, with the presumption that the applications will catch on with customers.

"P-to-P is a cash-replacement strategy at its core," Patricia Hewitt, director of debit advisory services with Mercator Advisory Group, said during a panel discussion here at the BAI Retail Delivery conference. "P2P is all about money movement."

Sanjeev Dheer, president of Fiserv's CashEdge division, said that his group has been studying the emerging market for person-to-person payments intently, analyzing when the technology would offer greater convenience than traditional methods of payment. Their conclusion was that the most compelling use cases all involved social interactions. Restaurant checks, of course, but also paying a share of rent or a utility bill, repaying a loan, travel expenses or going in together on a gift, to name a few.

In that light, Dheer suggested that what is understood as P2P really amounts to a fundamentally different form of payments, and deserves a nomenclature that sounds less like industry jargon.

"We've done a lot of work in trying to understand what these transactions are. And we've had an epiphany. And that epiphany is that we don't like the term "P2P,"" he said. "We're looking at a whole new category of payments, and we're choosing to call them social payments."

Fiserv, which acquired CashEdge last year, provides technology to more than 1,000 banks to facilitate payments between individuals.

PayPal, a pioneer in the space, has been expanding its profile after making the "strategic decision" to partner with financial institutions (FIs) for P2P payments about three and a half years ago, according to Arkady Fridman, PayPal's manager of financial innovations business development.

"We don't look at ourselves as a technology provider to the FIs," Fridman said. "Instead what we see ourselves as is more of a strategic partner. We have the robust technology. We have the global network. We have brand awareness, and an existing customer base of recipients all around the world. So together with FIs we believe that we can offer complementary and differentiated services, ones that we could not do alone."

But the question of how to monetize P2P payments remains unsettled, as banks, technology providers and social-media applications are all vying for a slice of a the revenue.

Some see those dynamics setting the stage for a fevered competition among the various stakeholders. But Dheer suggested that social media outlets will provide a natural channel for P2P payments (after all, Fiserv is trying to coin the term "social payments"), and that payment applications will need to be easily accessible on social sites. A key to widespread adoption of P2P payment applications, Dheer and others said, is to remove the "friction" from the process of setting up and using the service.

"It enables money to flow from one individual to another using a social ID, regardless of what the banking relationship is. Those social IDs start with emails, mobile phones, Facebook and many more to come," Dheer said. "That should not be an obstacle to how money flows from your existing banking or financial relationship to another. So I'm one of these subscribers that social networks won't disintermediate the payment part of it, I think the payment applications have to be incorporated into social networks."

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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