P2P, peer-to-peer or person-to-person payments, allow one person to transfer money instantly to another through a digital platform, normally an app, whose funds are drawn from a current account, a credit or debit card or a cash top-up. The service is offered through digital wallets: applications that are distinguished from more traditional payment instruments owing to their low costs - with standard versions often free - and the fact they are easy to request and use.
The use of P2P payment instruments, which fall under the "family" of alternative payments, has been growing sharply in the last few years. According to a research paper published by Statista¹, transactions with alternative payments will reach a global value of around fourteen trillion dollars by 2022, thanks to the rise of the Ecommerce channel and the increasingly more frequent use of proximity payments in store and, in general, in its alternative forms (e.g. totem, kiosks, self-service points, etc.).
P2P payment apps are used predominantly by the younger generations. We have analysed the topic in depth in an article dedicated to the generational comparison on the use of payment instruments which shows some of the advantages offered by these platforms: in addition to the already mentioned low costs, user experience and transparency are two of the most attractive features for those who, thanks to these solutions, often have their first contact with the world of financial services.
Millennials onwards choose the digital channel when looking for solutions to meet any type of needs. Information, social relations, purchases and simplified financial services are offered ever more through new instruments, increasingly more different from traditional and analogue ones.
One of the strengths of these applications is that they are easy to use. Registration is usually completed in just a few steps, to be carried out once the app has been downloaded, and it is activated very quickly, depending on the type of service offered.
After having activated the account, the digital wallet associated to the service must be loaded with funds from a credit or debit card, via credit transfer or, in some cases, also through cash from an ATM or an authorised physical point.
Crediting occurs instantaneously or may take a few days, depending on the instrument used to load funds and the service conditions. At this point, users can make a payment by choosing from their address book contacts who, if already users of the service, receive the money straight away, while if they are not already users, they receive an sms notification which notifies them of the transaction and invites them to subscribe to the service in order to receive the sum transferred.
Many P2P payment solutions also offer alternatives to the simple sending of money. The function that enables users to request money, perhaps in the form of repayment of a loan granted is highly valued, or to have whip-rounds between friends, to pay the bill in a pizzeria or to organise the purchase of a gift by a group of people.
Some applications, in addition to P2P transfers, offer P2B transfers, which normally require on-line authentication with the app credentials, while at physical sales points, this depends on the platform. HYPE, which we have first-hand experience with considering that it is a company in our Group, offers different modes of authentication: bringing your smartphone close to the POS enables you to make a NFC payment, select the store from the app or you can use the associated prepaid card, not always available with all digital wallets.
Many apps offer this type of service; examples of the most widely known in Italy and worldwide are HYPE, Satispay, PayPal, Alipay and WeChat Pay.
Despite all offering a P2P payment –also known as instant payment, very similar to one another, the choice of service may be based on different factors. We'll start by reiterating that an important element is the penetration of the instrument in your country or circle of acquaintances.
Alipay and WeChat Pay, for example, are applications targeted exclusively at Chinese users and include the P2B function, i.e. the possibility of paying at commercial enterprises; it is no coincidence that many Italian merchants, which operate in this market, are integrating these payment instruments in their POS terminals or Ecommerce sites. HYPE and Satispay which, like their Chinese competitors, offer the possibility of paying in store and online, are two of the most commonly used applications in Italy and the choice of one or the other can also be influenced by how much they are used by friends and relatives.
However, choosing the service is not only based on these features, but also on the value-added services that these applications are able to offer. In fact, these platforms are often distinguished from one another for the additional, free or paid functions depending on the business model chosen, which help to make the user experience unique and to ensure customer loyalty. There are applications that offer the possibility of creating virtual spaces or money-boxes to make it easier to save, perhaps linked to the purchase targets of a good or service, others have identified their killer function as the possibility to negotiate crypto-currencies, the elimination of withdrawal fees abroad or the offering of travel insurance services.
The adoption of alternative platforms to traditional payments is constantly growing, as we have seen previously, both because they are favoured and preferred by the younger generations and because they meet the ever more frequent need of Italian and European institutions to reduce the use of cash. In fact, these solutions are compliant with the PSD2 regulation which regulates payments within the European Union, also in P2B form for payments between people and companies.
Therefore, in conclusion, the acceptance of these collection methods can improve the customer's purchase experience and reduces the risk of the loss of sales opportunities due to an offer shortage in the check-out page or in store.
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