Peer-to-peer payment systems are often Money Transfer apps.
Examples are Venmo, PayPal, Zelle, and Square Cash. These payment systems allow users to send one another money. P2P customers use their mobile devices via a linked card or bank account to send money.
How P2P Payments Work
Say you’re having lunch with your friend Anna and you want to split the check. Anna pays using her debit card. You open your phone, and using the app of your choice, you pull up Anna on your list of contacts. You type the amount you want to send, and Presto! You’ve paid Anna back.
Network Effects in Money Transfers
The network effect happens when there’s greater use of a product, which increases its value. If you think about Facebook or Instagram, it’s easy to see why the more people are in a network, the more valuable it is. The same applies to P2P payments. The more of your friends that are in the network, the more relevant it is. Payment systems also benefit if there are vast numbers of transactions.
The Rise of Digital Money
Another network effect is the fact that consumers are ready to move past the use of paper checks. P2P systems are becoming more common in the world of business. Consumers can receive payments for insurance claims and refunds from retailers right away. Waiting for a check in the mail has become archaic. This convenience increases the value of P2P systems even more. P2P adoption first caught on with Millennials, but now all generations use it.
Gaining Insights on P2P Payment Technology
Consumers are now sending each other billions of dollars through digital apps. As a result, the peer-to-peer payments market is booming. The leading players in the space are Venmo (owned by PayPal) and Zelle. Square Cash is also holding its own. Millennials are still the primary market. They use P2P payments to split utilities, pay rent, care for their families, and buy gifts.
Understanding Consumer Behavior
The development of P2P payment technology is no surprise. This culture is fast-paced and mobile-oriented, and it likes instant gratification. If you need something done, your smartphone can do it for you. Payment technology breaks down traditional barriers. Something as simple as paying Anna back for lunch used to be inconvenient and annoying. P2P eliminates almost every painful step in the process. It enables you to reimburse Anna in under a minute.
P2P Systems an Effective Solution for Micropayments
Micropayments are financial transactions that involve tiny sums of money. PayPal defines anything less than US$12 as a micropayment, whereas for Visa, the amount is US$20. In practice, t’s difficult for businesses to recoup micropayment processing costs. A growth area in micropayments has been using them in online virtual reality games. P2P payment systems make it easier and cheaper to settle micropayments.
Micropayments are a modern solution to an old problem. For a micropayment system to work, it must have large transaction volumes. It must also have small transaction fees, and the payment must be instant. Most blockchains now have a link to a cryptocurrency. With micropayments, central banks can connect them to standard currencies. Once we have widespread adoption of micropayments, it will change the way we do business.
Why is Market Research Important for the P2P Payments Industry?
Market research is crucial to understand the customers who use P2P payments. It helps businesses to understand their competitors and how they approach the market. New companies should test P2P payments before launch. They need to ensure that it’s compatible with their system. Market research helps companies make the right decisions. This goes not only on P2P and micropayments but also for every other aspect of a business.
About P2P Payment Market Research
SIS Research offers Market Research services, including Consumer Research, Customer Loyalty, and Segmentation, Industry Tracking, Competitive Analysis, and FinTech Strategy Consulting. SIS provides Focus Groups, Surveys, Consumer Online Communities, and Global Market Expansion strategies. Call us today to schedule a consultation.