Paying person to person

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January 05, 2018

Each year, the U.S. Treasury Department prints upward of 7 billion currency notes, but American consumers appear to have less and less use for them. Instead, they’re flashing credit cards, shopping online — and using person-to-person (P2P) payment platforms to handle personal transactions. 


“Cash will always have a certain cachet, but there are compelling practical benefits to making payments digitally,” says Gareth Gaston, Executive Vice President of Omnichannel at U.S. Bank. In this Q&A, Gaston offers insights into how P2P is reinventing the payment space.


Cash was once the default payment medium; now it’s becoming passé. Why?


Gaston: Over the last decade, the payment space has seen a boom in technology-based payment alternatives, including both mobile banking apps and digital payment platforms like PayPal, Google Wallet and Zelle®. Cash may have once been king, but consumers are increasingly drawn to the convenience, speed and safety of paying electronically.


Is cash obsolete? 


Gaston: No, but people are definitely using less of it. As mobile transactions proliferate year over year, ATM withdrawals and branch visits are declining. In a recent U.S. Bank survey, 50 percent of the respondents said they carry cash less than half the time. When they do, nearly half keep less than $20 in their pocket and three-quarters keep less than $50.


Tab 2

January 05, 2018

Is the shift toward digital payments a generational trend?


Gaston: It is, but by no means is it limited to younger consumers. The U.S. Bank survey showed that 49 percent of millennials (ages 19-36), 44 percent of Generation Xers (37-52) and 32 percent of baby boomers (53-71) have made digital payments. It’s no secret that younger persons embrace new technology more readily than older persons, but the appeal of digital payment options clearly cuts across generational lines.


Where does P2P fit in the mix?


Gaston: P2P is a subset of the digital payment phenomenon. As the term suggests, it is used by people rather than by businesses, and it’s growing at a tremendous rate, with nearly $500 million in P2P transactions in 2016. More than one-third of U.S. consumers made a P2P payment last year, according to Javelin Strategy & Research. By 2021, one out of every two consumers is projected to be using P2P. 


How is P2P used — and how does it work?


Gaston: P2P refers to payment systems that let you transfer money via your smartphone from a linked debit card or bank account to another person, using the recipient’s mobile phone number, email address or account information. It’s an extremely convenient way to split a dinner check, send a birthday gift or share common expenses like rent or utility bills with a roommate. It eliminates the need to wait for a check to arrive or wait in an ATM line because you forgot to get cash on your way to work. 


Can you make point-of-sale purchases with P2P?


Gaston: No. For now, P2P is used for sending money to another person. That said, we’re starting to see some similar electronic business-to-consumer applications, with insurers paying out claims and retailers making refunds to consumers electronically.


How secure are P2P transactions?


Gaston: Most systems employ authentication processes, anti-virus protection, fraud monitoring and encryption blocks to thwart hackers and keep your money safe. And, of course, not carrying physical cash adds a level of security.


What does the P2P market look like today?


Gaston: Square Cash, Google Wallet, Apple Pay and Venmo, which is owned by PayPal and growing by 25 percent a year, are the main players. The newest entrant to the P2P market is Zelle — and it could be the most promising.


Do U.S. Bank customers have access to Zelle?


Gaston: Yes. Zelle was launched this year by Early Warning Services and will be available to customers at more than 50 U.S. financial institutions. Already, 13 financial institutions are currently live with Zelle, U.S. Bank among them — and connect to some 86 million people nationwide. In fact, within 30 days of its launch, the number of P2P payments sent by U.S. Bank customers tripled. 


How does Zelle compare with other P2P platforms?


Gaston: For one thing, it has made significant investments in security, which is understandably a key concern of customers. In contrast to non-bank platforms, payments are transferred directly between bank accounts and use a registered email address or mobile phone number. That minimizes the vulnerability that comes with having to share information with a third party. Also, every Zelle payment made by a U.S. Bank customer is protected by the U.S. Bank Online Risk-Free Guarantee. All told, these security measures make for a safer platform.

Tab 3

January 05, 2018

Does Zelle process payments as fast as other platforms?


Gaston: Funds are typically transferred in minutes* to an enrolled recipient’s debit card or checking account. Transactions on other platforms may take a full day or more to clear.


Is there a charge for using Zelle?


Gaston: Zelle is absolutely free to customers of U.S. Bank. That’s not necessarily the case with some other providers, which may impose a per-transaction processing charge.


How can U.S. Bank customers access and use Zelle?


Gaston: Customers can access Zelle on a mobile phone from within the U.S. Bank Mobile App, which can be downloaded from a mobile phone’s app store, or on a computer from the Online Banking page on the U.S. Bank website.



Are you personally sold on Zelle?


Gaston: Absolutely. If my wife and I are out for the evening, it’s great to be able to come home and pay the babysitter without worrying if I have enough cash — or need to make a detour to the ATM.



*To send money in minutes with Zelle, you must have an eligible U.S. Bank account and mobile number registered in your Online and Mobile Banking profile for at least three calendar days. Transactions typically occur in minutes between enrolled Zelle users. First-time payments to new enrollees may take up to three business days after enrollment. Recipients must have an eligible bank account in the United States. Terms and conditions apply.


Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC, and are used herein under license.



Banking & Credit , Markets & Economy