Peer to peer payments, or P2P payments, are transactions that allow the funds to be transferred between two parties using their individual banking accounts or credit cards through an online or mobile app. They can be used for anything from splitting dinner bills between friends to paying your rent. Person to Person payment is becoming more and more popular among people of all ages as we carry less cash and do more of our banking and payments online. There are a few things you should know about P2P payments before deciding whether they’re right for you.
What is P2P?
Peer-to-peer transactions are the electronic transfer of money directly from one person to another often aided by payment application. P2P Payments can be sent and received via smart devices as an alternative to traditional payment methods. More and more unique P2P platforms continue to emerge as people continue doing most of their payments and money transfers online. It can be used for anything from splitting the bills between two or more people or transferring funds to your friends or family members, faster and easier than going to the bank or physically getting cash from the ATM.
How Does it Work?
Peer-to-peer payment accounts are completely user-friendly as they are relatively simple to set up. Whichever platform you choose, you’ll first have to sign up for an account and then link your bank account or credit card to it. Some apps require further verification of information and passwords to maximize security. After your account is set up you can find other people who use the same app by their username, email, or phone contacts. When this is done, choose who you are sending money to, the amount of the transaction, and optionally add a reason for payment, then submit the payment. This payment system comes with a lot of benefits over traditional transaction methods.
The simplicity of this payment method is the obvious reason since the money can be sent at the click of a button. It requires minimal effort from the user as Person to Person payments are sent using only your debit card PIN. In case you are receiving money this way, the funds are deposited right into your bank account, so you can use the money right away without waiting. The best example of how it works in real life is best presented by the professionals from Venmo – a mobile payment service owned by widely known and accepted PayPal. No credit card, no ATM, no wallet, and no fees included. It doesn’t get easier than that.
Third-party payment solutions often charge a fee that could be a flat rate or a percentage of what you are sending, some even charging both flat fee and percentage. This is why low transfer fees are a highly attractive proposition for users. Traditional online payments usually involve expensive processing and service costs due to the number of intermediary banks and middlemen involved. Sending a secure payment over the debit network using your online banking or mobile banking app avoids all of this as the payments are made directly between two users. Therefore, the fees are either minimal or the money transfer this way is free of charge.
Transferring funds internationally, through traditional methods can also take several days for completion. P2P services and cryptocurrencies can achieve the same thing much faster with many transfers being completed in just a few minutes. This plays a great role in situations when you are out of cash in a bar or restaurant, and you have to pay your part for the drinks or food. Simply log in to the app, and transfer your part, or let the app itself split the whole amount evenly between the participants, in case everybody uses the same platform.
Security is, understandably, very important when it comes to moving your money, the electronic way. By using your regular bank’s Person to Person transfer solution, you can trust that your bank has got your back. There’s no need for the money to be deposited with a third party service that may not provide the same quality service and privacy protection. For the most part, P2P payment services are secure as the transactions are encrypted and all payments must be verified with your PIN. Therefore, no payments can be sent without your permission. Different payment applications vary in terms of security strength but in general, these applications are safe to use.
There are plenty of situations where this type of payment comes in handy, and there’s a lot to like about P2P payments. The faster transactions, lower fees, and high-security of Peer-to-Peer transaction systems are making for an incredibly appealing alternative that the younger generations are fully embracing.