Peer-to-peer payment apps grow – no cash, no check

Woman in a cafe using smartphone for contactless payment

Devin Meineke considers himself lucky if he has US$10 (RM43) cash in his pockets at any given time. So it's a good thing he has a cellphone. 

Peer-to-peer payment apps that allow easy money transfers are growing in popularity. 

A growing number of people – particularly millennials – are using peer-to-peer mobile-payment apps including Cash, Square and Venmo. 

"This is really about convenience," said Meineke, a 23-year-old tax accountant in Orlando. "People my age don't really have cash anymore." 

Paying a landlord rent, splitting a dinner check with friends and buying concert tickets with a group have all become easier: Open the app, ask your friend's username, and a few taps on the screen will instantly send them money. 

A Bank of America study released this month shows that 62% of consumers 18 to 34 years old use peer-to-peer, or P2P, apps regularly. That rate outpaces the general public's rate of 36% for adopting P2P payments. 

"There was decent penetration, up and down," said Bernard Hampton, head of consumer banking for Bank of America's Southeast division. "But clearly, as you think of the younger generation's interest, the momentum will only increase." 

In the bank's study, nearly 50% of those who do not use P2P apps say they will likely do so in the future. 

Traditional banks have reacted to the apps' success by establishing ClearXchange, a platform that lets customers of eight financial institutions – including giants JP Morgan Chase, Wells Fargo and Bank of America – send money from their account to others. 

"Time continues to be important to people, and consumers continue to have access to more information," Hampton said. "When I think about their banking relationship, it's 'How do we support that and give them that access?'" 

Tech might not be the only hurdle banks face with some customers, said Matt Schulz, an Austin, Texas-based analyst with CreditCards.com. 

"You can't underestimate the banks' ability to be a player in this space and just how hard it will be to disrupt them," Schulz said. "But the truth is, most data you read shows that younger folks are less trusting of banks and more trusting of technology companies. That creates a challenge for them." 

It's an environment that is not helped by the banking industry's slow rate of change, Schulz said. 

"It's been a desire on the banks' part to step their game up here, but things can move a little bit glacially in that industry," he said. 

Google, Apple and Microsoft have jumped into the mobile-wallet industry as well. 

PayPal has been doing it since 2002, when it was bought by eBay – and has since bought Venmo. Last year, in a 135% jump from the previous year, Venmo handled transactions worth US$17.6bil (RM75.25bil). 

Venmo handled US$6.8bil (RM29.07bil) in transactions in the first quarter of this year alone. 

Venmo, which Meineke uses, offers two options. Users can establish a balance from which to withdraw money by moving money from a credit card, debit card or bank account. Or users can load their Venmo account with banking and card information so that money can be withdrawn directly as needed. Some other apps might only allow one of those options. 

"We are in a time where money is more digital and [younger people] are more comfortable with their finances being digital," Venmo spokesman Josh Criscoe said. "We are also more comfortable sharing information." 

Venmo has embraced the social aspect of sending money – the app allows for a note to be written to accompany the payment notification. Emojis can be included: A recent study found Venmo's most-used emoji was pizza. 

"The social element makes it fun," Criscoe said. "It changes a payment into an opportunity to remember the experience." 

That's one of the reasons Meineke likes to use Venmo. Though initially sceptical, he downloaded it when he owed an out-of-town friend money. 

He says he now uses it at least once a week, picking up checks at a restaurant and having friends pay him back through the app. 

"It has become the thing everyone is doing," he said. — The Orlando Sentinel/Tribune News Service