P2P Payments Take Aim at Checks, Not Cash

February 22, 2013
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archer_takesaimWith so many new person-to-person payments services, will we soon be able to leave those dirty, wrinkled dollar bills behind and skip the bothersome trips to the ATM? Probably not. Instead, P2P seems to be angling to tear up your paper checks.

ProfitStars, a Jack Henry company, announced that its iPay solution had processed more than 1.8 million payments during the last six months of 2012. The face value of those payments totaled $1.2 billion.

For what exactly are ProfitStars consumers using P2P payments? P2P is often marketed as a cash replacement, for situations like dinner with friends. Don’t have cash? Just send the money over using your smartphone. But a quick look at the numbers above from ProfitStars indicates that the average payment is far greater than a small reimbursement like this.

“People are using P2P for things like rent, not repaying friends for dinner,” said Greg Adelsen, president of iPay Solutions, the P2P unit within ProfitStars. “The average payment we’re seeing is over $700 — so that’s not lunch.”

This suggests that P2P is taking a bite out of personal check use, rather than cash. Pageonce knows this. Its product, Pay Anyone, explicitly takes aim at the “hyperlocal” market — daycare centers, soccer leagues — where the personal check is king.

P2P services are approaching ubiquity — PayPal, Fiserv’s Popmoney, the big banks’ joint offering clearXchange, and FIS’s People Pay. People Pay made headlines recently for working to speed up P2P payments by controlling both ends of the transaction with its PayNet network. When FIS doesn’t control both ends of the transaction, it uses the existing electronic funds transfer (EFT) or much-maligned Automated Clearing House (ACH) rails.

“Each provider is trying to get there, to speed up settlement,” said Adelsen of ProfitStars. The ultimate goal, of course, is instantaneous, or “real time” settlement. “You can do this with an ‘on us’ transaction,” an allusion to controlling both ends of the transaction as PayPal does. “Someday ACH will go away, but that’s a couple years away.”

With services like P2P becoming faster and easier and more ubiquitous, the personal checks’ days might be numbered.

Join us at Bank Innovation 2013 to learn more about the role of P2P in banking.

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