P2P Payments Study: Mobile Drives Renewed Interest and Growth

Navigator Edition: July 2012
By: Patrick Carroll

In June of 2012, First Annapolis released its 2012 Person-to-Person (P2P) Payment Study.  The study provides insights on industry trends, service providers, and business models in the P2P market in the United States and includes an assessment of 12 leading players in the market today: Amazon, Bank of America, Chase, Clover, Dwolla, MoneySend, PayPal, Serve, USAA, Venmo, Wells Fargo, and Zashpay.

Electronic P2P is approximately an $80 to $120 billion market opportunity with rapid growth being driven more by use cases like ad-hoc bill payment, micro-merchant purchases, and intra-family transfers than by the “split the dinner bill” transactions historically associated with P2P.  The 2012 study indicates that current consumer P2P payment services generally fall into one of three core business models:  banking applications, electronic wallets, and standalone service providers.  These business models approach electronic P2P services with unique assets and consumer value propositions.  For example, banking implementations may leverage the large P2P networks of millions of online banking users such as Popmoney or clearXchange.  Wallets like Amazon and PayPal, in addition to their large existing customer bases, may also drive adoption through use cases such as integrated commerce functionality.  In other cases, standalone P2P service providers may differentiate themselves with unique capabilities such as social network integration.  Service providers that span the three business models have reported strong growth, particularly via the mobile channel.  While volume growth in this consumer payment segment is clear, P2P does not have a compelling standalone business model as most services remain free.

Though different models exist, most P2P services are developing functionality to facilitate a more streamlined consumer payment process.  For example, over half of the solutions evaluated now facilitate new user registration entirely from a mobile device, and 75% access the user’s existing phone contacts to populate recipient information, a feature that is correlated with a faster consumer transaction sequence.

The study identifies several key themes affecting how the P2P market is currently developing. Interest in P2P is on the rise as indicated by increased activity from both new and established players entering the market.  The importance of key use cases for P2P, such as paying household-related expenses, is not explicitly addressed by today’s players as indicated by the current lack of specific functionality.  Environmental factors such as the rapid increase in the number of smartphones and initial indications of large institutions’ willingness to collaborate to build bigger networks are encouraging signs.


Note:  Volume represents online and mobile P2P volume. Sample primarily represents FI implementations.
Sources:  CashEdge Presentation at NACHA’s Payments 2010 Conference, April 2010; CashEdge Presentation to the FRB, May 2011; USAA interview with Mobile Payments Today, April 2012; Fiserv Presentation at 2012 Card Forum and Expo, May 2012; Wells Fargo Presentation at 2012 Mobile Banking and Commerce Summit.

Finally, the study examines some key success factors for the P2P market and the related stage of development.   Providers are generally meeting customer needs related to pricing (easy to understand, mostly free) and convenience (easy to sign up and transact) that will help to drive more adoption.  But perhaps the most important drivers, availability and ubiquity, still need improvement before P2P becomes more mainstream.  Providers will need to work to ensure that the service is easy to find and widely available and that there is easy access to money in/money out channels in order to achieve a wider spread network effect.

Electronic P2P has come a long way since PayPal introduced solutions utilizing the Palm Pilot, but it still has significant barriers to overcome before becoming widely adopted.

For more information on the 2012 Person-to-Person Payment Study, please visit our webpage:

For more information, please contact Patrick Carroll, Analyst specializing in Mobile Commerce and Loyalty,

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