Using an intermediary for the transfer of funds from one person to another electronically is referred to as Peer-to-peer payments.
Peer-to-peer payments evolved due to the maximum acceptance of the e-commerce business models.
The acquisition of PayPal, an electronic money transfer platform unleashed the maximum potential of the same.
First introduced in the year 1972, wherein a patent was filed for a secure transaction system.
This would include a remote PIN security system over telecommunication networks.
Thus bringing maximum usage of encryption technologies for telephone banking as well as internet security.
Not only e-commerce, but the rise of smartphones also added to the changing definition of financial transactions. Wherein the traditional methods of relying on the banking procedures were straightaway put to the back foot.
The growing popularity of smartphones paved the way for payment wallets. This helped the users in making secure and easy transactions with little to no fee involved.
The majority of the population in the U.S. are actively using smartphones for daily transactions. The number of such users amounts to more than 200 million.
The main intention of introducing smartphones into daily financial transactions was to address the needs like:
- Non-dependence of the customers on the bank staff.
- Making financial transactions from their comfort zones, thus not making them wait in long bank queues.
- 24/7 window for making the transactions.
Without the internet, the smartphone couldn't have redefined financial transactions.
With the introduction of the internet, customers now we're able to make their transactions quick.
Not only this they now had the privilege of not being dependent on traditional methods of banks for acquiring the transaction history.
With a busy lifestyle, users accepted this combination as an advantage in their daily life.
Now they had a whole of the banking procedures available in their smartphones and that too with faster speed and better connectivity.
E-commerce is the segment that has boosted as well as facilitated the electronic money transfer.
In the year 2019, online retail sales for physical goods in the U.S amounted to $365.2 billion. Prior to this, the sales amounted to $315.6 billion in 2018.
E-commerce giant eBay was the first to facilitate P2P transactions.
Products on eBay could be sold directly to the customers via direct payments made online.
- PayPal registered 305 million accounts in its fourth quarter of 2019.
- A forecast of 126 million users is being projected for the year 2020 for mobile peer-to-peer payment.
- A growth rate of 9.76% globally, amounting to $3217.34 million by 2024 is expected for P2P markets.
- Peer-to-peer payments for the year 2020 is expected to hit $396.48 billion.
Apart from being mostly used in IT operations, cloud technology has proved its need in the payment sector too.
The Cloud-based systems have added to the efficiency of the payment modules.
It has allowed customers to securely send or receive money with utmost security as well as flexibility.
When it comes to the security of online payments, cloud technology has set up the PCI DSS standards.
These standards are to be met by any platform before using the cloud for their payment models.
This technological revolution has the ability to change the current ways in which online transactions work.
It has benefited the mobile payment industry in the following ways:
- Transaction security through verifications; 5G technology enables the faster upload of multiple types of data for verifications.
- Paying fast; this ensures that there is no dropping of connections, no time lagging during the transaction.
Also Read: 5G Network Architecture Explained With Diagram
The market size of the P2P Payment is expected to reach $3217.34 million by 2020.
The online peer to peer company is currently focussing on the Asian market with a €20 million investment plan. The average margin of this company charge is about 0.45% of the overall trade.
This California based mobile payment company has reported a revenue of $959 million in its first quarter of 2019.
It allows its users to transfer money to each other for free with its Square’s Cash App.
Shares of the company jumped from 4.35% and amounted to $64.01 in the year 2019.
Dwolla is a United States-based e-commerce company that allows its users to transfer money to other financial institutions.
For the international payments, Dwolla has teamed up with Currencycloud.
Dwolla's teaming up with Currencycloud will allow its customers to expand their payments to more than 180 countries in 35 currencies.
This UK based online money transfer supports more than 750 currency routes across the world.
It has been termed as the most valued fintech start-up, with a valuation of $3.5 billion.
TransferWise has a dedicated transaction of £4 billion every month because of 5 million total customers.
PayPal was the pioneer in the online transaction system that wanted to provide a better alternative to cheques as well as money orders.
Its Holding revenue for December 2019 amounted to $4.961 billion.
Conclusion
Despite being an advantage to the majority of the users today, Peer-to-peer payments still have to address a lot of disadvantages which include unpredictability, frauds, security, and time taken to clear a transaction.
Also Read: All About the Digital Transformation in the Banking Sector
