P2P Providers Search for Sustainable Business Models, Differentiation

Navigator Edition: April 2016
By: David Cencula and Jeff Crawford

Competition has heated up in the rapidly expanding mobile and online peer-to-peer payments space. Venmo, PayPal’s social payments platform, reported processing over $1B in total payments during January 2016, an increase of over 250% from a year ago1. Chase’s QuickPay service reportedly processed over $2B2 in total payments during the same month. See Figure 1 for Venmo’s growth over the course of the last three years.

Figure 1: Venmo Payment Volume by Quarter

Figure-1_-Venmo-Payment-Volume-by-QuarterSource: Business Insider, PayPal Q3 and Q4 Earnings Calls.

While increased user adoption and transaction growth remain at the forefront, P2P providers are focused on building their networks, improving existing offerings, and expanding their footprint into adjacent spaces. Banks and core processors are seeking to differentiate their P2P offerings to drive customer loyalty, while other competitors are expanding their product offerings to develop more direct revenue models.




Banks Move to Real-Time

U.S. Bank and Bank of America announced on March 3 and 9, 2016, respectively, that they have started processing real-time P2P transactions on Early Warning’s clearXchange network. The move allows customers of two of the top five U.S. banks to send money to, and request payments from, anyone across the country in real-time.

U.S. Bank customers may use the Send Money feature at flat rates of $2.95 for next-day transfers and $6.95 for real-time payments; P2P service is free for Bank of America customers.  The banks hope the move will allow them to keep customers’ P2P payments in-house, instead of losing them to Venmo or another third-party product.




Processors Look to Keep Pace

On the Fiserv Q4 2015 earnings call, CEO Jeffery Yabuki announced that annual Popmoney transactions increased by approximately 20% over the prior year.  Potential drivers of future growth include Fiserv’s agreement with CARE, a worldwide humanitarian organization, to accept donations using Popmoney, and the ability to withdraw cash from an ATM without a card using a bank’s mobile solution (the service, known internally as CardFree Cash, will be branded externally as Popmoney).

FIS also provides financial institutions with a white-label P2P payment solution (People Pay). Transactions are processed through the PayNet network, FIS’ real-time payments solution that runs on EFT rails. Although less visible in P2P than Fiserv’s Popmoney, FIS was an early market leader in the real-time space, and announced in October 2015 that it would team with The Clearing House on TCH’s real-time payments initiative.




Venmo Expands into In-App Purchases

PayPal announced in late January that Venmo would be piloting in-app purchase functionalty known as Pay with Venmo.  Initial partnerships include Gametime, a ticketing app, and Munchery, a food delivery service. As of April 27, there were approximately 550,000 Venmo users included in the pilot. PayPal announced they are on track to expand the service to additional merchants and the full Venmo customer base in the second half of 2016.

Venmo is currently free for consumers using their bank account or debit cards. During the PayPal Q3 2015 earnings call, CEO Dan Schulman noted Venmo merchant fees would be consistent with PayPal brand fees, which currently stand at 2.9% + $0.30 per transaction. The service will remain free for consumers. Although Schulman does not expect meaningful revenue from Venmo until 2017 or 2018, the move suggests that PayPal sees consumer-to-business transactions as a way to monetize the Venmo brand.

The P2P space continues to be dynamic, with increasing levels of investment from banks, processors, and technology providers. We expect to see the race to build a network brand and ubiquity to continue in the near term.  Longer term, we expect banks and processors to focus on implementing real-time solutions, while third-party competitors (notably, Venmo) focus on monetizing their solution through direct payment acceptance. While it is too early to predict if the latter will be a viable strategy, it is safe to say consumers will continue to have a variety of P2P payment options.

1 PayPal Q4 2015 Earnings Call.
2 “Banks are teaming up to launch a Venmo killer” Quartz, March 2, 2016.

For more information, please contact  David Cencula, Senior Analyst,; or Jeff Crawford, Senior Manager, Both specialize in Payments Strategy and Innovation.

To read the rest of this article, please subscribe to

The Navigator Newsletter