For the modern consumer out dining with friends, the task of splitting the bill can seem like a headache, especially if cash is not available. However, with the rise of peer-to-peer (P2P) payment services like Venmo, PayPal, and Zelle, consumers can enjoy the convenience of sending or receiving money without ever having to break out their credit card. P2P payments work by linking an individual’s bank account or credit card to an online or mobile app that allows for the transferring of funds from one person to another. P2P payments are becoming so popular that total transaction volumes are forecasted to reach close to $341 billion by 2022.

The growth of P2P payment services is also finding its way into the business world, as well. In fact, a 2019 Small Business survey conducted by TD Bank found that 23% of small businesses are already using P2P services to collect payments, estimating P2P payments to US businesses will reach $74 billion by 2021. It’s clear consumers and business owners are eager to leverage P2P payments for retail transactions, but is it the right move for your business? Explore this guide to gain a better understanding of what P2P is and how it can impact business goals.

What is a P2P payment?

From a consumer perspective, P2P payment apps like Venmo, Zelle, and PayPal offer a similar look and feel. The consumer downloads the app, registers, and then links their credit card, debit card or bank account to the app. The app then transfers the funds from one of these sources to another person receiving the transaction.

However, P2P payments for business owners can work in a few ways:

1. In-person P2P. Many of the popular P2P apps offer business profiles, where business owners can create a custom QR code to display to their customers. Customers pay by scanning the QR code, which opens the business’s P2P app. Often, business profiles are searchable in the P2P app, making it convenient for the customer to search for the name of the business and then send the payment.
2. E-commerce P2P. Business owners that have an ecommerce platform can add P2P buttons to checkout pages. The customer then has the option of paying by credit card, debit card, or the P2P app of their choosing.
3. Reverse Request for P2P. Since most P2P apps have the option to request money, business owners can use the app to generate a link that gets sent to a customer email or via text message. The customer can follow this link to start the process of transferring funds.

P2P payment considerations

Before signing up for a P2P service, there are a few things about using P2P apps to know.

Advantages of P2P payments

1. The ease of use and convenience. One of the biggest pros to using P2P payments is how easily money can be transferred from person-to-person, or in this case, person to business. If a customer forgets their wallet at home or doesn’t have cash on hand, then having P2P payment services can save transactions that would have otherwise been abandoned.
2. Generally, these transactions are secure. Several P2P applications offer two-factor authentication and password verification, helping ensure accounts don’t get compromised. Also, many P2P apps give you the option to enable transaction notifications, so you’ll be able to know if someone is using your account without your permission.

Drawbacks of P2P payments

1. There may be delays in getting the money. Depending on the P2P payment service you use, the time it takes for money to transfer can vary. Some P2P apps charge a fee for immediate transfers to your bank account. If you wish to forgo the immediate transfer option, then you may be waiting one to three business days before the money shows up in your bank account.
2. A merchant fee may show up. While most P2P apps do not charge for creating a business account, you may be charged a per-transaction fee, ranging anywhere from 1 – 1.5 percent, depending on the provider.
3. There may be roadblocks to traditional accounting systems. Since a P2P bypasses traditional payment methods like a credit or debit card, it may be more difficult to account for all payments. Plus, without the regulation of business banking available for P2P services, you may not have the same safety measures in place.
4. Human errors may be a factor. Mistakes happen frequently on P2P apps and can come from either you or your customer. For example, your customer may not realize they selected the incorrect business profile before sending their payment, which could cause delays in payment or other issues. One solution is to have your QR code available to the customer at the point of sale. Otherwise, you may have to retrace your steps with the customer or potentially lose sale dollars if the money isn’t sent to the appropriate account.

Making your decision on P2P payments

Now, with more information in front of you about P2P payments and services, you can better decide whether or not this is the right option for your business. As the P2P payment process continues to evolve, it is important to understand the nuances of P2P. Discover more small business solutions from CenturyLink, including how to integrate technology into your business plan, develop a social media marketing plan and more.