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The changing face of peer-to-peer

By SaschaBreite, SIX Payment Services

There has been a growing acceptance and uptake of new peer-to-peer (P2P) payment methods in recent years, driven by a rising demand amongst consumers to make and receive payments instantly and facilitated by new e-commerce solutions, advances in technology and the proliferation of mobile devices.

With a smartphone P2P system, money can be transferred quickly, easily and securely between friends, family and acquaintances, replacing cash in everyday situations such as paying for a meal.

However the continuing issue is that no single P2P solution that has gained universal acceptance, with cash, bank transfers and even cheques retaining their positions as the preferred method of P2P payment amongst different groups.Whilst some do have some kind of P2P offering, in many cases, these are proprietary solutions and payments can only be made between customers of that particular bank. Key to success is a bank-agnostic architecture enabling a network of participating partner banks.

Non-traditional players in the markethave attempted to provide their own alternatives: PayPal offers a service which allows users to send and receive payments but requires an account to be opened and linked to a bank account and/or credit card, Google has its wallet service which is connected to G-mail whilst in Germanympass is the result of a collaboration between network operators, O2/Telefonica, Vodafone and T-Mobile.

The outcome is a fragmented landscape with different systems being preferred by different providers. As a result, progress and permeation has not been as swift as it might have been due to lingering uncertainty over the usability and longevityof any one offering.

For mobile P2P payments to really take off and meetthe demands of the modern consumer, a solution is needed that traverses banks whilst, at the same time, offering the requisite speed, efficiency and security.

Research and increasing use of internet and mobile banking suggest that consumers would be very accepting of this type of bank neutral solution. Almost three quarters of the m-banking users that took part in a research conducted by SIX said they would sign up to a  P2P service if it were free.

This truly universal system would have to be developed and run by a third party, such as a payments provider, and then integrated within all banks’ systems, offering benefits to both the banks and their customers.

It would allow customers to make payments to each other regardless of who they bank with. It would require a common identifier that can be linked to a person’s bank account, with a mobile phone number being the easiest, most practical and secure option. Ease of installation is key. Consumers do not want to spend time filling out lots of information so an app that is quick and easy to download and swiftly verify would promote acceptance.

At the same time, it would allow banks to challenge the non-financial institutions such as Google, and Samsung and their digital wallets at a time whenthere is additional pressure coming from Apple Pay and Android Pay announcing their plans to move into specific European markets. It also deepens the relationship with customers and reactivates the traditional trust level that financial institutions are about to lose when it comes to generation Y customers.

There is a vested interest for banks to be ahead of the curve on P2P as solutions evolve and also become peer-to-merchant (P2M) in nature. First movers are mainly two very diverse segments of merchants: on the bottom end it will be particularly pertinent for smaller merchants who may not have implemented card acceptance infrastructure on cost grounds but do own mobile devices and could accept payment in this way.They tend to have a higher readiness as they are more nimble and have fewer internal hurdles than their larger counterparts. On the other hand it is the big retailers omnipresent in a country or region that would benefit from universal instant POS payments to replace cash, also ramping up the coverage of such a new payment scheme.

A universal solution will go a long way to ensuring a strong future for P2P, assuring customers that they can make and receive payments from anyone.  It needs to be reliable, secure and work instantly. There is room to innovate but these facets are the basic foundations required for success.

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