Close this search box.

Peer Pressure: Why P2P Payment Needs To Be in Your Plans

by Fred Decker

How do you know when a new technology has really caught on? When it changes from a brand name to a verb. That’s why we all Google anything we’re curious about, and Uber to restaurants where we’ll Instagram our meals (perhaps after a bit of Photoshopping to make our photography look better). 

And when it’s time to pay the check, someone is almost certain to say, “I’ll get it, the rest of you can just Venmo me” (throwing cash into the middle of the table is so 20th century). Venmo, Cash App, and their like are all peer-to-peer or P2P payment methods, and for a growing number of people, they’re the preferred way to split a bill or send money. 

The Rise of P2P Payment

A peer-to-peer payment simply means that users can transfer money between themselves directly, cutting out the need for a financial institution to act as the intermediary. It’s not exactly a new idea — Western Union began offering money transfers on its still-new telegraph network all the way back in 1871 — but the contemporary version is a lot more efficient. 

Any two users on the same P2P platform can just find each other on the app, enter the amount, and send it with a tap (or a click on a website, if that’s how you roll). The person receiving the funds can leave them in the app for next time or withdraw them to a standard bank account if they have to be turned into “real money.”

That part can take up to a few days and might require a small fee, but it’s slowly becoming less important as more merchants and small vendors find ways to accept payments directly from the P2P vendor. 

How Big Is P2P Payment? 

If your institution hasn’t yet dipped a toe into the P2P waters, you might be shocked to learn precisely how sizable a market this is. 

Consider this: in Q3 of 2020, for the first time, the P2P platform Zelle reported over a billion transactions for the rolling 12-month period. The value of those payments totaled $84 billion in Q3 alone. To put that into further perspective, Zelle is only the second-biggest consumer P2P platform, behind Venmo. (Paypal is bigger than either by a wide margin and has been offering peer-to-peer funds transfer since 1999, but this kind of direct money sharing represents only a small part of its services.) 

There are a few different ways you can look at those figures, depending on your credit union’s position. If you’re prepared to integrate P2P payment into your digital offerings, it’s a glorious opportunity to build relevance with contemporary users. If you aren’t in a position to offer P2P services to your users, it’s a heart-stopping threat to your profitability. 

And there’s a still more fundamental way to look at P2P. When physical branches were the most important part of your strategy, you took great care to locate them where the people were. Today, people are using P2P payment platforms on their devices. Will they find you there? 

Offering P2P Payment Integration at Your Institution

If you’re interested in adding P2P support to your credit union’s offerings, Zelle is the logical starting place. It’s the banking industry’s own entry in the field, founded in 2016 by a bank consortium (it was called clearXchange back then), and currently boasts of partnerships with over 1000 banks and credit unions

There are good resources to help you integrate Zelle with your existing offerings, no matter how old your existing software or how small your IT department and budget. Naturally, it’s faster and easier with a more modern and flexible digital platform (spoiler: Lumin Digital’s outstanding Zelle integration is cited by customers as a reason to deploy our cloud-native platform).  

Other players are less bank-centric because they’re owned by payment-processing rivals: PayPal is Venmo’s parent, for example, and Cash App is owned by Square. Many users will still want to turn their Venmo or Cash App balances into cash (or the mortgage payment, or what have you), so they have to play nice with conventional financial institutions, but it can be a complex process unless your digital banking platform — like Lumin’s — has a robust set of application programming interfaces (APIs) to support that kind of third-party integration. 

But What About Security?

Suppose someone walked into your office today to pitch this payment method: “You give me a piece of paper with your name, address, and banking information, and I promise to only take out the amount you tell me, and not leave the paper lying around where just anyone can see it.” 

That sounds ridiculously risky today — an identity-theft starter kit, in fact — but because checks are old and familiar, it feels like a safe and conservative option. P2P payment platforms face the opposite challenge of being perceived as safe despite their novelty, as well as providing meaningful security in a real sense. That’s why platforms like Zelle emphasize scam avoidance in their consumer-facing communications but their partnerships with leading tech-infrastructure and security-infrastructure firms in their industry-facing communications.   

The P2P payment partner you choose to work with already builds security into the process from the ground up. Instead of passing your user’s actual account information to the app, for example, you’ll send a token that essentially just says, “Yup, that’s legit.” Realistically, if your credit union is still using decades-old legacy code, your own platform — despite your best efforts — is likely the weaker term in the equation rather than the P2P partner. 

They’re just as motivated as you are to keep users safe, and are probably better equipped to offer a nimble response to new threats. 

Reach Out Today

A brief blog post is a discussion starter at best, but the potential benefits of incorporating P2P payment into your platform (and the risks of getting left behind) speak for themselves. If your existing platform can’t readily handle that kind of deployment, it may also be time (or past time!) to look at making P2P just one part of an overall upgrade to your banking platform. 

Lumin Digital’s state-of-the-art, cloud-native platform could be that upgrade. It’s designed and built from the ground up with security in mind, and with the capacity to easily add new services — like P2P payment — efficiently and seamlessly. Contact us today to request a demonstration, and learn how it can position your credit union at the leading edge of technology. 


Western Union – 6 Fascinating Things About Western Union’s History

Electronic Payments International – PayPal History: Looking Back at the Milestones

Zelle Network – Zelle Network® Exceeds One Billion Payments in 12 Months, Setting a New Record for the Payments Network

Insider Intelligence – How the Biggest Mobile P2P Payment Players Stack Up

Reuters – INSIGHT- Big US Banks to Take on Tech Rivals With Instant Payments

Zelle – Get Started With Zelle

Lumin Digital – Lumin Digital to Provide Los Angeles Federal Credit Union With Digital Banking Solution

Zelle Blog – Sending Money Safely With Zelle

Zelle – Innovation. Powered by Partnerships