Technically speaking, every transaction is a peer-to-peer (P2P) transfer. Whether you’re using cash, credit cards or ACH payments, there is a buyer/sender on one side and a seller/receiver on the other.
Though in recent years, the definition of P2P transfers has evolved to describe a new way of exchanging money, goods, and services — one that doesn’t rely on traditional intermediaries like banks or credit card companies.
Today, these payments allow for the transfer of funds between two parties using individual banking accounts or credit cards through an online or mobile P2P service.
If you need to send a friend, family member, or supplier money, you:
This seems simple enough. Yet when it comes to P2P transfers, what are the primary advantages and disadvantages — especially when talking about ease of use and security? Let’s take a look.
One of the most appealing benefits of P2P transfers is the ease of use and convenience of being able to send money to a friend for a dinner tab or pay a handyman for a service call, for example.
Since all transactions happen electronically without requiring a middleman, P2P systems may carry extremely low transaction fees ranging from 2-3 percent, and some systems may not even charge fees at all.1
Many users also enjoy much lower currency conversion rates, between 75 and 90 percent savings, by bypassing banks and brokers.2
P2P networks may also be more secure in many respects because they’re encrypted and have fraud monitoring capabilities. Some apps and online solutions are even incorporating biometrics and automatic notifications for every transaction.3
P2P networks also offer anonymity. Because very little personally identifiable information is attached to any transaction, this helps minimize the risk of data breaches.
P2P networks have tremendous appeal, but they aren’t without their drawbacks. Below are some of the key disadvantages of P2P transactions:
Offering multiple payment options helps attract new customers and grow sales. Be sure to research the different P2P solutions to see which platforms work best for your business needs. If you would like to discuss your credit card processing capabilities, contact our merchant services team today.
1 “What Are Peer-to-Peer Payments,” Nerdwallet, 31 May 2019
2 “Understand Peer-to-Peer Foreign Currency Exchange,” Investopedia, 2 March 2020
3 “Advantages and Risks of P2P Payments,” Due, 23 June 2017