While widespread use of person-to-person payment technology has not yet taken off, it's an important seed for financial institutions to plant in order to stay competitive with emerging mobile payments technology.
As consumers become more comfortable and confident using their smartphones and other devices for mobile banking, it's essential that FIs offer new services that move consumers along the curve to mobile payments. However, new research indicates that FIs and their payment technology partners have their work cut out for them regarding widespread consumer acceptance and use of P2P payments.
A recent Synergistics study found four out of 10 households with Internet access had heard of P2P payments. According to the survey, awareness was highest (54 percent) for people between the ages of 18 and 34 (no surprise there, as this is traditionally a demographic composed of early adopters).
The study reported only 9 percent of survey participates had used P2P payments. A 2011 Javelin study showed, however, that 23 percent of participants had used some form of P2P funds transfer in the previous year.
As both studies indicate, the opportunity to be "first" in offering P2P services is huge for FIs. That said, there are barriers to widespread adoption that FIs, and the industry as a whole, will need to address.
One such barrier is the absence of a "pain point" that P2P technology alleviates for consumers. Additionally, many new smartphones today lack the hardware required to make P2P payments, although that is quickly changing. Yet another challenge is the lack of connections in place to enable quick payments between consumers using different FIs or payment schemes.
Another potential obstacle is the speed and efficiency of P2P payments. First Annapolis Consulting conducted a study in 2011 of how long it takes to complete a P2P transaction. Amazon.com's TextPayMe ranked first in the study, with 90 seconds, while most others took around 2.5 minutes to complete. According to the study, MasterCard's MoneySend took six minutes.
In order for P2P to really catch on, it must be quicker and easier than cashing a check or locating an ATM, and there must be access to most FIs or payments systems. It's also important for the retail industry to begin adopting P2P technology at the point of sale; since the amount of money exchanged between individuals pales in comparison to commercial transactions.
Although the industry is still evolving, the impact P2P technology will have on community FIs is likely to be significant. As such, it remains important for your teams to be educated and mindful of the technology your customers are adopting. How you will compete must be a part of the strategic plan.
Terry is an integral part of the Shazam team, bringing more than 20 years of financial and electronic funds transfer industry experience and expertise that keeps Shazam at the forefront of EFT technology. He leads all IT strategy and development.