If you’ve ever needed to pay someone back for a coffee, for rent and other utilities or split a meal, you might be familiar with peer to peer (P2P) payment services.
P2P payment apps have recently emerged as a convenient payment option, enabling digital payments and money transfers between consumers in an easy and quick manner. In fact, the P2P payment market is projected to grow to US$3.4 billion in 2024, up from US$2.95 billion in 2023. This growth has been underpinned by soaring smartphone and internet penetration rates, with P2P platforms increasingly expanding integrations into social media to improve their accessibility and ease of use.
In this article, we delve into how P2P payments work, their popularity across the globe, as well as their advantages and disadvantages.
What does P2P mean?
Peer to peer or P2P payments are a payment method made to facilitate the direct transfer of funds between individuals or peers, typically through digital platforms or mobile applications. This method allows for quicker, more convenient and secure transactions.
P2P payments are becoming increasingly popular due to their ease of use and accessibility, enabling users to send and receive money with just a few taps on their smartphones or clicks on their computers.
For instance, imagine you owe a friend £20 for movie tickets. Instead of giving them cash, you can use a P2P payment app on your phone to transfer the amount owed with a single tap, allowing the money to be transferred from your bank account to theirs instantly.
How do peer to peer payments work?
P2P systems facilitate seamless money transfers between individuals, primarily through dedicated websites or mobile applications. Popular digital platforms like PayPal, WeChat Pay and Google Pay™ exemplify this trend, offering users a convenient means to send and receive funds directly to and from another person's bank account, bypassing traditional intermediaries.
Here's a breakdown of how peer to peer transactions work:
- Create an account: Users initiate the process by signing up for a P2P payment service, such as PayPal. During registration, they provide essential contact details, including name, email address, phone number and address. After registration, every user goes over a verification process.
- Link a funding method: Users must link their personal bank account or payment card to the P2P service. This step enables fund transfers. Noting that some verification takes place in the background to ensure the P2P user is the account holder of said bank account.
- Add a recipient: Once logged in, users navigate to the payment interface, typically accessible in just a few clicks. They can search for recipients using contact details such as an email, phone number or username.
- Initiate a P2P payment: Users select the recipient and specify the amount they wish to send before submitting the payment. The service will then deduct funds via their connected payment method and transfer them to the specified recipient.
- Keep or withdraw funds: If the user wishes to deposit funds into their bank account, they can withdraw money from their P2P service and transfer it to their linked bank account. Alternatively, users can keep the funds in their P2P service account to use for future purchases.
Depending on the service, P2P payments can be completed within minutes or may take a couple of days to finalise. It's important to note that P2P transactions are often limited to users within the same system. For instance, PayPal users cannot directly transfer funds to or receive money from Venmo users due to platform restrictions.
Popular P2P payment apps
PayPal
PayPal is a global payment method that supports P2P payments, allowing customers to make purchases online, in-app or using funds in their PayPal account. By Q2 2024, there were 429 million active PayPal accounts globally. Additionally, PayPal supports Buy Now Pay Later capabilities, enabling users to make payments in instalments. Please note PayPal offerings vary depending on the country the customer is based in.
WeChat Pay
WeChat Pay is a digital wallet provided by super app WeChat, which supports peer to peer payments among Chinese shoppers. Users can connect their credit or debit cards to load funds onto their accounts. WeChat Pay has grown significantly over the last few years, with an estimated 1.06 billion users as of 2024, making it a key payment method for the Chinese market.
Pix
Established by the Central Bank of Brazil (Banco Central) in 2020, Pix is a relatively new peer to peer payment that has quickly gained traction across Brazil. Account holders can instantly make payments and transfer funds between accounts using a Pix key. In 2023, it was estimated that Pix made up over a third (39%) of all eCommerce payments, which is almost on par with cards at 41%.
BLIK
Introduced in 2015, BLIK is a leading online payment method in Poland. At the end of Q1 2024, BLIK was actively used by 16.3 million users. People can easily and conveniently make payments and send money using a secure six-digit code. The recipient will then receive a notification in their banking app to accept the funds.
Are peer to peer payments safe?
Whereas P2P transactions are widely preferred for their speed and convenience, a recent J.D. Report showed that 8% of all customers in the US say they’ve been victimised by a P2P scam in 2023. Because the funds being sent are available to the recipient almost instantly with little chance of getting the money back once it has been transferred, P2P platforms are more susceptible to online fraud.
Considering this, P2P platforms have increased their security measures against cybercrime. Besides encryption technology and warning signals like monitoring for unusual account activity, many P2P require two-factor authentication (2FA) security. PayPal's Authy app is an example of this where users receive a text with a code to verify who they are.
P2P payment trends across the globe
According to Precedence Research, the global P2P payment market was projected to be valued at US$2.21 trillion in 2022 and is expected to hit around US$11.62 trillion by 2032, growing at a CAGR of 18.10% between 2023 and 2032. In fact, a 2024 study by PYMNTS shows that nearly 82% of consumers in Brazil send money using P2P services. The only country that surpasses Brazil is India, where nine in 10 consumers use P2P technology. Meanwhile, 51% of US consumers and 52% of UK residents use P2P services.
Further to this, data from Statista shows that PayPal is gaining ground in the P2P online payment ecosystem. To illustrate, transactions processed via PayPal have grown considerably in some countries around the world, with Germany (90%), Italy (88%), Spain (86%), France (86%), Mexico (82%) and South Africa (80%) leading the adoption in 2024.
On a regional level, Latin America has one of the largest market shares of P2P payments made via bank transfers. This includes the majority of consumers (92%) in Chile, accompanied by users in Peru (85%), Colombia (79%) and Argentina (79%).
Countries in the Asia Pacific also present a strong preference for P2P bank transfers, including India (81%), Indonesia (88%) and Australia (74%).
What are the benefits of P2P payments?
Like any other payment method, P2P payments have various benefits.
- Easy and fast – Transferring funds with a P2P service to anyone in a user’s network normally takes minimum time and effort, as the information needed for completing the transaction is included in the app. This means that any future payments to the same user will require fewer details to be done.
- Increased security – P2P transactions are encrypted and offer two-factor authentication (2FA), so it’s more challenging to commit any fraudulent activities.
- Improved flexibility – Peer to peer payments can be made via a mobile or website. Additionally, users can choose to link their payment cards, bank accounts or prepaid cards to transfer funds.
- Boosted conversions – Convert more customers by offering their preferred payment methods at the checkout like P2P payment apps. Specifically, younger consumers are the biggest adopters, with at least half of (53%) consumers aged 18-25 saying they use P2P payments.
What are some alternatives to peer to peer payments?
Beyond peer to peer transactions, there are also a few other alternative payment methods, which include:
Local and global card schemes
Card payments remain the payment method of choice globally, accounting for around a third (34%) of all online purchases worldwide in 2023. While global payment cards like Visa and Mastercard are widely adopted across the world, it’s crucial for merchants to offer localised card schemes like Chile’s CMR Falabella, Brazil’s Hipercard and Uruguay’s Lider to cater to varying payment preferences.
Manual bank transfers or online banking
Manual bank transfers, also known as online banking, allow customers to pay directly with their bank account. During the checkout process, customers will have the option to select their preferred bank and will be redirected to their banking environment to finalise the payment.
eWallets or digital wallets
This mobile payment method allows credit and debit cards to be securely stored in a digital Wallet like Apple Pay or Google Pay. This means the user doesn’t have to enter their card payment data or carry the physical card to complete a transaction, simplifying the purchase process.
Direct Debit
A Direct Debit is a type of payment method where the merchant pulls funds directly from a customer’s bank account. The customer must provide formal authorisation for this to take place, typically via a signed mandate. SEPA Direct Debit is an example of this, which aims to streamline cross-border direct debits in Europe.
Prepaid cards and vouchers
Prepaid vouchers allow customers to pay for online purchases using cash, such as OXXO and Boleto Bancário. The customer usually receives a scannable voucher with a transaction reference number that they can bring to a bank, ATM or convenience store to complete the payment in cash. Prepaid cards are another type of transaction that allows customers to top up a card with funds and use it to pay for goods and services, such as Neosurf and Paysafecard.
As payment preferences differ by region and market, it's best to provide a mix of payment methods alongside peer to peer options to maximise conversions at the checkout.
How can emerchantpay help?
With 20 years of experience in online payment processing, emerchantpay is committed to empowering our merchants to create a smooth and safe payment experience. Central to this is a checkout journey that’s adapted to the payment preferences of target customers, including P2P online transfers. Our global team is equipped with expert insights as well as fraud and risk management tools that can support you to make informed business decisions and boost your revenue.
Want to know more about how you can accept P2P payments seamlessly? Contact one of our payment experts today.