Real-time person to person (P2P) mobile/digital payments are on the rise and even growing in the U.S. according to a new, perhaps optimistic, report from Aité Group.
“Mobile P2P payments have become an increasingly important battleground for financial institutions; tech giants such as Apple, PayPal, and Google; and fintech upstarts such as Venmo and Square,” writes Talie Baker, senior analyst at the Boston-based research and consulting firm.
Aaron Klein, policy director of the Center on Regulation and Markets at Brookings Institute, recently suggested that the reason major American banks are finally moving to real-time payments is that they recognize the threat that tech firms could displace them.
Mobile payments drive growth and profits.Photo by Tom Groenfeldt
Aité sees mobile payments as a way to drive loyalty and revenue.
“All of these companies are using mobile P2P payments to drive engagement with consumers and thereby monetize other aspects of their businesses to drive revenue,” according to Baker.
The basic definition of a real-time payments system is one that allows payment initiation 24/7/365, enables receipt of funds in less than one minute, is irrevocable, and provides confirmation of the transaction’s completion or rejection. The consumers surveyed were representative of the U.S. population, the consultancy said.
In Q2 2018, Aite Group conducted a quantitative study of 2,538 U.S. consumers age 18 or older who received funds disbursements in the 12-month period from June 2017 to May 2018
“While the P2P payments sector is still largely dominated by cash and checks, U.S. consumer adoption of mobile P2P payment methods is finally beginning to gain steam… In 2017, 57% of, or 144 million, U.S. consumers made at least one P2P payment, and 67.7 million U.S. consumers made at least one mobile P2P payment,” according to the report.
Smartphone penetration is high in the U.S. at 77% and the phones are used for, shopping, dating, reading books, getting directions and streaming television shows.
“While the financial services sector has been slower to get on board with digital transformation than other industry sectors, U.S. consumers are finally turning to their phones for making payments and managing personal finances.”
Does this overstate the use of P2P?
In 2017 “57% of U.S. consumers had one digital P2P payment account, and 27% of U.S. consumers had two or more digital P2P payment accounts.” This includes the most popular, PayPal (81%) followed by Zelle at 13% and Venmo (11%).
“In 2017, more than 70% of U.S. consumers across all age groups had a PayPal account, with more than 80% of U.S. consumers ages 25 to 54 owning a PayPal account. Facebook Messenger and Venmo are the most popular P2P payment accounts for U.S. consumers ages 18 to 24, with approximately 30% owning each type of payment account. More than 20% of U.S. consumers ages 25 to 40 own a Google Wallet, Venmo, or Zelle account.”
The report breaks down the percentages of user by age groups and app and how they access their accounts.
When it comes to how consumers view the importance of real-time for sending and receiving, the report breaks down its results in suspect granularity — extremely important, very important, important, slightly important and not important. Really? How much, by that degree, does anyone care?
Unsurprisingly, younger consumers were more likely to rate real-time as important than people over 65. (see my skeptical note on surveys here.
PayPal users are more apt to use a laptop (64%) than Venmo users (23%), while mobiles were far and away the tools of choice for Square Cash and Venmo, each at 66%.
Aité study concluded that mobile experience is key to driving adoption, and providers need to continue marketing to drive usage, not merely registration, for P2P accounts.
But after all the pie charts and bar charts the report admitted that “While consumer demand for real-time P2P payments is a bit muddled, it is key to driving long-term adoption.”
Nonetheless, it said “Real-time payments are poised to become status quo in the U.S., and real-time P2P payments are already becoming table stakes. Providers should educate consumers on the availability of real-time P2P payments services to drive customer loyalty.”