Person-to-person money movement is right there with mobile payments as the number one trend over the past fifteen years. It’s been a hot topic at every conference I have been to in my career and is never far from the payments discussion at any financial institution I have ever stepped foot in (over 200 globally at this point). The experience and ease of moving money from one person to another have evolved a lot over the years, now occurring in milliseconds, whether domestic or global. However, it hasn’t always been this easy and still is inconsistent 20 years after the launch of PayPal, which helped start this whole thing. So let’s take a look back at where we’ve been and where we are going.
The 2000s – P2P Launches
It’s weird to think that 2000 was over 20 years ago. I know every generation goes through something like this, but 2000 had so much build-up as the 1990s waned that by the time Y2K arrived, we knew things were about to be different. And as Elon Musk and PayPal launched into revolutionizing payments, another equally important trend was unfolding. Everyone suddenly had cell phones, enabling communication no matter where they were at all times. By the middle of the 2000s, cellphones became smartphones, and in the world of payments, three new companies/products solely focused on money movement from an individual to another individual launched, Venmo in 2009, and PopMoney and clearXchange in 2010. The biggest question I recall from this time was, how to generate revenue from what was free money movement?
The 2010s – P2P for the Masses
By 2010, digital banking was in full swing. You could deposit your checks from anywhere with a smartphone though most of us were still getting used to doing that at an ATM versus in the branch. Sending friends money was still dominated by either handing them cash in person, sending them a check, or setting them up on your bill pay center to outsource the check-writing process to your bank. This is unless they were on the PopMoney network or serviced by the same bank. For me, P2P started when a friend mentioned Venmo, and the rest of that story, as they say, is history. My circle of friends adopted the app, and the same few dollars have bounced back and forth ever since! Venmo jumped the shark and got to the consumer market, one that clearXchange and Popmoney had been navigating through the financial institutions to reach slowly and steadily for most of the decade. Then clearXchange merged with Early Warning, and the financial institutions got what they were looking for with the launch of the Zelle Network. Also worth noting here, in 2017, The Clearing House (whose ownership overlaps with EWS) launched a real-time money movement network, RTP®, enabling real-time payments to move instantly from any account connected to the network to another.
The 2020s – Today and Tomorrow
Today, the original use case of P2P payments, done by both the P2P closed-loop players, is dominated by CashApp and Venmo. Also in the space is the entirety of the GAFA (Google Pay and Apple Pay) crowd and the dominant player in the bank space, Zelle. The question that irked the market back in the early 2000s remained though. How do I monetize these transactions? For many financial institutions, the P2P space still represented a cost. However, the closed-loop players started to adapt their offering. While the money movement from person to person as well as money into the network remained free, the applications started to introduce fees and new features that started to capitalize on their large user bases. Whether that’s merchant acceptance fees, instant transfers out of the wallet to a bank account, or purchasing crypto, the evolution of P2P has moved way beyond the initial use case. However, simplifying the money movement from one bank account to another bank account is a story that will continue to evolve. With the RTP network gaining in reach and the coming launch of the FedNow network, the P2P space will likely continue to grow and expand, and the ubiquity of reach is getting closer to reality.
Learn more in the webinar, Payments Modernization Update: What FedNow, Nacha, and TCH Updates Mean to Your Payments Strategy.
Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert about RfP, please contact us at (908) 791-2916 or info@alacriti.com.
