Peer-to-peer payment systems, commonly referred to as “P2P”, allow you to transfer money using an app or secure website. Some common P2P services you may be familiar with include PayPal, Venmo, Popmoney, Zelle and Cash App. These platforms allow you to send money to family, friends and businesses from a linked bank account with the click of a button. P2P payments have also simplified things like splitting the bill at a restaurant or sending money to a friend who lives far away. With P2P services, there’s no need to rush to the ATM or write out a check in the event you owe someone money.
Let’s take a closer look at how P2P systems work and review some important considerations and tips.
How P2P Payments Work
Some peer-to-peer payment services, like Venmo, allow you to create a unique username so others can find you on the platform and send money to you or request payments from you. In addition, the sender and recipient will both typically need to have accounts on such a platform. Other systems, like Popmoney, allow you to send and request payments by simply entering the other person’s email address or phone number into the system. The recipient will then be alerted and will need to enter their bank account information in order to receive funds or send a payment to you. Some payment methods have become even simpler as P2P has evolved, such as Apple Pay which allows you to pay and request money through iMessage.
No matter which P2P service you end up using, in order to send and receive money with it you’ll need to link it to your funds. In most cases this is done by linking the service with your bank account, but some systems allow you to conduct payment transactions using a credit card or debit card as well. Some P2P payment services have even started offering their own debit cards.
Security Tips When Using P2P
With a peer-to-peer payment system, the user is responsible for locating who they’d like to send money to, and that comes with some risk. First off, it’s important to verify that you have the correct recipient designated before you send a payment. Some P2P services have built-in security measures to help with this. For example, Venmo allows for a profile picture to help ensure you’re transacting with the correct person, and will also ask for the last 4 digits of the recipient’s phone number if you haven’t had previous transactions with them.
Another thing to keep in mind with P2P payments is that in many cases, the money is sent immediately. Platforms like Popmoney can take a few days for the payment to go through, so in most cases you’re able to cancel a payment up until it begins processing. However, with services like Venmo, the payment is made instantly, and once the money leaves your account, you’re not able to reverse the payment. So, if you send money to the wrong person using a service like Venmo, you’ll typically be at the mercy of the recipient to get it back.
Unfortunately, P2P platforms have also become a target for scams. These scams can take many forms, including fake online retailers requesting payment via P2P, phony charities, and even a version where scammers send you “accidental” payments and then request them back.
Most P2P systems do have fraud monitoring in place to help identify unusual account activity, and your transactions are encrypted which means your linked bank account information is never transferred during a P2P payment. However, it is still recommended that you familiarize yourself with the security policies and resources of the specific P2P service you’ll be using, prior to adding your bank account info or moving forward with any transactions.
Here are some additional tips to help protect yourself when using P2P systems:
• Set up your account to require a PIN or fingerprint/face ID before completing a transaction
• Set up notifications so you’re alerted each time a transaction is made
• Only transfer money to people and vendors you trust
• Use a separate bank account for P2P apps so they can’t access your main bank account
• Don’t use P2P services to purchase products online
Most Common P2P Options & Fees to be Aware of
Most P2P apps allow you to send and receive money for free, however some do charge various fees. These can include charges for expedited payments, the ability to pay someone via a credit card, or even the ability to transfer the funds from the app into your bank account. Associated fees will vary by provider and some are highlighted below. While more and more P2P payment providers continue to enter the market, here are some of the most popular current options:
• Zelle. Zelle allows you to send money between U.S. bank accounts with no middle man account holding the transaction. With Zelle, either the sender or the recipient must access the P2P system through a participating financial institution. So, if your bank doesn’t support Zelle, you can’t send or receive money using the service unless the person you’re paying or getting money from does. Zelle itself does not charge any fees, however they recommend confirming that your bank doesn’t charge their own fee for using the platform.
• Venmo. One differentiating feature of Venmo is the ability to link it with a credit card, debit card or bank account. Select online merchants now accept Venmo as a form of payment, however it’s still a good idea to be cautious of online retailers that only accept P2P payments, as they could be a scam. There is no fee for payments that come out of your Venmo balance or those made via a linked debit card or bank account. However, there is a 3% charge if you want to fund payments through a credit card. If you receive payments via Venmo, you may want to transfer them from your Venmo account to a bank account or debit card. If you do, you have the option of “instant delivery”, or a delivery window of 1-3 business days. Instant transfers have a 1% fee up to a maximum of $10. Venmo has recently added a Venmo for Business function to allow retailers to have their own business profile as well.
• Cash App. This platform is very similar to Venmo and can also be linked to debit or credit cards as well as a bank account. Free transfers to an external account will take 1-3 business days and instant transfers have a 1.5% fee associated. The biggest standout feature of Cash App is that it allows you to invest in stocks directly through the app with as little as $1.
• Popmoney. This platform does not support paying via credit card, but you can link your bank account to send and receive payments. Many banks, including BankFive, utilize Popmoney for peer-to-peer payments through Online and Mobile Banking. You can also use Popmoney as a standalone service if your bank doesn’t offer it, but you should be aware of fees. Receiving money is always free with Popmoney, but there can be fees associated with sending money. With BankFive’s “Pay People” service, which is powered by Popmoney, standard delivery of payments is free, but expedited processing may incur additional charges.
• PayPal. PayPal allows you to send and receive money with friends, family and business associates. You can also use your PayPal account at select online merchants. There is no fee to fund your PayPal balance directly from your bank account. To use your debit or credit card, the platform charges a 2.9% fee. If you request a next day transfer, there is no fee. However, instant transfers have a 1% fee, maximum of $10.
P2P apps can simplify your cash transactions, especially with family and friends. While these systems have undoubtedly made paying people and receiving money much more convenient, it is important to fully understand their functionality, fees, and terms before using them. It’s also extremely important to know how to use them wisely and securely.
For more information on BankFive’s “Pay People” service, or to learn more about opening a bank account and setting up Online Banking to make peer-to-peer payments through it, don’t hesitate to contact us today!
Let’s take a closer look at how P2P systems work and review some important considerations and tips.
How P2P Payments Work
Some peer-to-peer payment services, like Venmo, allow you to create a unique username so others can find you on the platform and send money to you or request payments from you. In addition, the sender and recipient will both typically need to have accounts on such a platform. Other systems, like Popmoney, allow you to send and request payments by simply entering the other person’s email address or phone number into the system. The recipient will then be alerted and will need to enter their bank account information in order to receive funds or send a payment to you. Some payment methods have become even simpler as P2P has evolved, such as Apple Pay which allows you to pay and request money through iMessage.
No matter which P2P service you end up using, in order to send and receive money with it you’ll need to link it to your funds. In most cases this is done by linking the service with your bank account, but some systems allow you to conduct payment transactions using a credit card or debit card as well. Some P2P payment services have even started offering their own debit cards.
Security Tips When Using P2P
With a peer-to-peer payment system, the user is responsible for locating who they’d like to send money to, and that comes with some risk. First off, it’s important to verify that you have the correct recipient designated before you send a payment. Some P2P services have built-in security measures to help with this. For example, Venmo allows for a profile picture to help ensure you’re transacting with the correct person, and will also ask for the last 4 digits of the recipient’s phone number if you haven’t had previous transactions with them.
Another thing to keep in mind with P2P payments is that in many cases, the money is sent immediately. Platforms like Popmoney can take a few days for the payment to go through, so in most cases you’re able to cancel a payment up until it begins processing. However, with services like Venmo, the payment is made instantly, and once the money leaves your account, you’re not able to reverse the payment. So, if you send money to the wrong person using a service like Venmo, you’ll typically be at the mercy of the recipient to get it back.
Unfortunately, P2P platforms have also become a target for scams. These scams can take many forms, including fake online retailers requesting payment via P2P, phony charities, and even a version where scammers send you “accidental” payments and then request them back.
Most P2P systems do have fraud monitoring in place to help identify unusual account activity, and your transactions are encrypted which means your linked bank account information is never transferred during a P2P payment. However, it is still recommended that you familiarize yourself with the security policies and resources of the specific P2P service you’ll be using, prior to adding your bank account info or moving forward with any transactions.
Here are some additional tips to help protect yourself when using P2P systems:
• Set up your account to require a PIN or fingerprint/face ID before completing a transaction
• Set up notifications so you’re alerted each time a transaction is made
• Only transfer money to people and vendors you trust
• Use a separate bank account for P2P apps so they can’t access your main bank account
• Don’t use P2P services to purchase products online
Most Common P2P Options & Fees to be Aware of
Most P2P apps allow you to send and receive money for free, however some do charge various fees. These can include charges for expedited payments, the ability to pay someone via a credit card, or even the ability to transfer the funds from the app into your bank account. Associated fees will vary by provider and some are highlighted below. While more and more P2P payment providers continue to enter the market, here are some of the most popular current options:
• Zelle. Zelle allows you to send money between U.S. bank accounts with no middle man account holding the transaction. With Zelle, either the sender or the recipient must access the P2P system through a participating financial institution. So, if your bank doesn’t support Zelle, you can’t send or receive money using the service unless the person you’re paying or getting money from does. Zelle itself does not charge any fees, however they recommend confirming that your bank doesn’t charge their own fee for using the platform.
• Venmo. One differentiating feature of Venmo is the ability to link it with a credit card, debit card or bank account. Select online merchants now accept Venmo as a form of payment, however it’s still a good idea to be cautious of online retailers that only accept P2P payments, as they could be a scam. There is no fee for payments that come out of your Venmo balance or those made via a linked debit card or bank account. However, there is a 3% charge if you want to fund payments through a credit card. If you receive payments via Venmo, you may want to transfer them from your Venmo account to a bank account or debit card. If you do, you have the option of “instant delivery”, or a delivery window of 1-3 business days. Instant transfers have a 1% fee up to a maximum of $10. Venmo has recently added a Venmo for Business function to allow retailers to have their own business profile as well.
• Cash App. This platform is very similar to Venmo and can also be linked to debit or credit cards as well as a bank account. Free transfers to an external account will take 1-3 business days and instant transfers have a 1.5% fee associated. The biggest standout feature of Cash App is that it allows you to invest in stocks directly through the app with as little as $1.
• Popmoney. This platform does not support paying via credit card, but you can link your bank account to send and receive payments. Many banks, including BankFive, utilize Popmoney for peer-to-peer payments through Online and Mobile Banking. You can also use Popmoney as a standalone service if your bank doesn’t offer it, but you should be aware of fees. Receiving money is always free with Popmoney, but there can be fees associated with sending money. With BankFive’s “Pay People” service, which is powered by Popmoney, standard delivery of payments is free, but expedited processing may incur additional charges.
• PayPal. PayPal allows you to send and receive money with friends, family and business associates. You can also use your PayPal account at select online merchants. There is no fee to fund your PayPal balance directly from your bank account. To use your debit or credit card, the platform charges a 2.9% fee. If you request a next day transfer, there is no fee. However, instant transfers have a 1% fee, maximum of $10.
P2P apps can simplify your cash transactions, especially with family and friends. While these systems have undoubtedly made paying people and receiving money much more convenient, it is important to fully understand their functionality, fees, and terms before using them. It’s also extremely important to know how to use them wisely and securely.
For more information on BankFive’s “Pay People” service, or to learn more about opening a bank account and setting up Online Banking to make peer-to-peer payments through it, don’t hesitate to contact us today!