A Whole New World Of P2P (Peer to Peer) Payments For Merchants

Payments are an indispensable need for any business. What is more interesting is that there is always a new way of transferring money that is better, safer, faster, and more convenient. The need for a seamless exchange of funds between different parties demands faster and safer methods of money transfer. P2P which stands for ‘person to person,’ or ‘peer to peer’ fund transfer is another approach that has outgrown conventional methods and has seen a significant rise in the number of its users.

Millennial shoppers who are a major consumer force are accepting P2P payments and embracing this platform to carry out their day-to-day transactions. No need to carry cash or even debit/credit cards once you familiarize yourself with the P2P payment system. A simple mobile application, a link, or a QR code does the job and you can easily pay anyone from your smartphone in a matter of minutes.

How do P2P payments work?

Working on P2P payments is simple. Once a user has downloaded the application on their mobile device and registered themselves, all they need to do is add a funding source after due authentication and can start sending and receiving payments. Choose a recipient, add an amount, add remarks (optional) and click submit to send. You can also request funds from a person via a P2P payments application by sending a link through a text message or email or via a unique QR code.

What does it mean for consumers?

Most P2P apps work in a similar pattern as discussed above. A P2P app facilitates the transfer of funds from a funding source attached to your account to a designated person. The recipient can choose to keep these funds in the P2P application wallet or transfer them to the source/funding account. For customers, a P2P system provides an efficient way to exchange money between friends or family. It also eases their day-to-day lives as users can simply carry their smartphones and leave their wallets behind when they go out shopping.

How can merchants benefit from P2P payments?

Merchants can use P2P payments to tap into more customers, especially the millennial shoppers who are tech-savvy. Apart from being a handy payment solution for customers, P2P payments are useful for merchants too. Here are the 4 different ways by which merchants can accept P2P payments:

1. Peer to merchant payments:

Smaller businesses, independent merchants, sellers, arts, crafts, handicrafts sellers, local merchants, etc. can use this facility to receive payments from customers/peers. In this mode, merchants are usually on the receiving end of the transactions.

2. Peer to peer for businesses:

A number of payment providers like Square, PayPal, etc. offer services like paying via a link or QR codes. You might be familiar with this facility if you have ever opted for the ‘pay-on-delivery’ option while purchasing anything online. This QR code can be displayed on the app, in the store, or on the website and can be used to make quick payments. The users either click the link or scan the code to make the payment.

3. P2P for Ecommerce websites:

P2P payments are an effective tool for eCommerce checkouts. Merchants simply need to add a P2P button which customers can use to make direct payments to the merchant. The business owner or the merchant receives the funds with deductions for the transaction fees.

4. Requesting payments with P2P:

This service is appropriate for smaller businesses, pay-on-delivery orders, day to day services like paying the gardener, barber, milkman, maid, tutor, etc. Service providers can generate a ‘pay-me’ link which the customers can use to make the payments right from their smartphones.

Fees for P2P service:

Most of the companies that offer P2P payment services to merchants charge zero or a negligible fee. In comparison to credit/debit card processing fees, this fee is very low and merchants also do not need to acquire any hardware/devices like POS terminals, scanners, PIN pads, etc. A computer, a smartphone, and an account with a decent P2P service provider are all that are needed to start exchanging funds.

While most of the service providers may provide free P2P payment functionality to your business, some might charge a token fee of around 1-1.5% of the transaction amount. If a merchant opts for an instant deposit, more fees might be charged. However, this fee can be avoided by waiting for 4-5 days before transferring the funds to their linked bank accounts. This period of 4-5 days is referred to as a ‘hold period’ and can save the ‘instant-deposit’ fees. There are additional currency conversion charges for international payments or overseas transactions.

Potential security risks and benefits of P2P payments:

P2P payments are mostly concerned with offering ease of use, convenience, and speed. Quick payments facility right on the smartphone makes life so much easier. These payments are becoming widely popular among millennials because of their speed and ease.

Besides these benefits, P2P payments still pose certain security risks. Accidentally sending money to a person might cause a breach of private data and getting such transactions refunded becomes more difficult. Precautions are taken in the form of passwords and PINS but some the other breaches might occur. To lower these risks, only conduct P2P transactions with people you know.

Be safe, and avoid frauds!