As a CEO and veteran in the payments industry, I am often asked by our partners, independent sales consultants and clients where is payments heading and what impact does person to person payments like Cash App, Venmo, Zelle and a host of others have on card acceptance and the cost of accepting payments.
To answer this question let’s take a look back at the evolution of payments since the introduction of credit card acceptance. Some of you may remember the day of looking up card numbers in a book, or using those card imprinters “knucklebusters”. I certainly did get my knuckles busted once or twice.
1960s: The Rise of Credit Cards
- 1960: Bank of America launches the BankAmericard, the first modern credit card (later became Visa).
- 1966: MasterCharge (now Mastercard) is introduced as competition.
- 1967: The first automated teller machine (ATM) is deployed in London by Barclays.
1970s: The Foundation of Electronic Payments
- 1973: The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network is founded to streamline global financial transactions.
- 1974: The first online banking services emerge in the U.S.
- 1979: Visa introduces the first point-of-sale (POS) terminals, allowing merchants to accept electronic card payments.
- 1981: IBM introduces the Magnetic Stripe Card, making credit card transactions faster.
- 1983: David Chaum develops the concept of digital currency, laying the groundwork for cryptocurrencies.
- 1987: The first debit card is introduced, linking directly to bank accounts.
- 1989: The first online banking system launches, allowing customers to view balances and transfer funds remotely.
- 1994: Stanford Federal Credit Union becomes the first institution to offer internet banking.
- 1995: Amazon and eBay launch, driving demand for digital payment solutions.
- 1998: PayPal is founded, revolutionizing online payments.
- 2004: The first contactless payment cards are issued, allowing tap-to-pay functionality.
- 2007: Apple releases the iPhone, opening the door for mobile payments.
- 2009: Bitcoin is introduced by Satoshi Nakamoto, marking the start of decentralized digital currency.
- 2011: Google Wallet launches, one of the first mobile wallets.
- 2013: Venmo gains popularity, making P2P payments mainstream.
- 2014: Apple Pay debuts, integrating contactless mobile payments.
- 2017: The real-time payments (RTP) network launches in the U.S., allowing instant bank transfers.
- 2020: The COVID-19 pandemic accelerates contactless and digital payments adoption.
- 2021: Cryptocurrencies and central bank digital currencies (CBDCs) gain global attention.
- 2023: The U.S. Federal Reserve launches FedNow, enabling real-time payments between banks.
- Payments have evolved from cash-based transactions to digital and real-time processing.
- Security and convenience continue to drive innovation, from credit cards to cryptocurrencies.
- The future includes AI-driven fraud prevention, biometric authentication, and blockchain-based payments.
Now that you have context on the past let’s talk about person to person payments. There is a lot to consider if you are a business owner that may vary by the platform (another term frequently used is payment form factor).
1. Security Considerations
P2P payments have become incredibly convenient, but security is a major concern. Platforms like Venmo, PayPal, Zelle, and Cash App implement encryption, fraud monitoring, and two-factor authentication to protect users. However, risks such as scams, unauthorized transactions, and phishing attacks still exist. Users should enable security features like PINs, biometric authentication, and transaction notifications to minimize risks.
2. Reasons to Embrace P2P Payments
- Convenience: Quick and easy transactions eliminate the need for cash or checks.
- Speed: Instant transfers allow for immediate access to funds.
- Low Cost: Many P2P services offer free transactions when using bank transfers.
- Global Reach: Some platforms support international transfers, making it easier to send money abroad.
- Integration: P2P payments are now integrated into social media, e-commerce, and even business transactions, enhancing their usability.
Many payment processors and point-of-sale (POS) providers have been slow to fully integrate person-to-person (P2P) payments, though some are making strides. Here’s a breakdown of their approach:
- PayPal & Venmo: PayPal owns Venmo, which allows seamless P2P payments, and is pushing deeper integrations into business transactions.
- Square & Cash App: Square (now Block) owns Cash App, making it easy for businesses and individuals to transfer funds.
- Apple Pay & Google Pay: Both support P2P transactions alongside their tap-to-pay POS systems.
- Zelle & Banks: Many banks offer Zelle as a P2P option, though its integration with retail payments is still developing.
- Regulatory & Fraud Concerns: P2P transactions are more susceptible to scams and money laundering, leading to cautious adoption by payment processors.
- Revenue Model Issues: Traditional payment providers make money from merchant transactions, while many P2P payments are free or low-cost.
- Market Segmentation: POS systems focus on business-to-consumer (B2C) transactions, while P2P payments are typically for personal use.
- Integration Challenges: Merging P2P with existing POS technology requires backend changes and additional security measures.
For more reference and information:
Perspective from AllState, Your Good Hands Company
https://www.allstateidentityprotection.com/content-hub/payment-app-safety-tips
