The peer-to-peer (P2P) payment industry, through digital platforms such as Venmo and Google Wallet, has become a preferred method for monetary transactions as a younger tech-savvy generation ages and gains more spending power. The question facing the industry is how to monetize the inevitable dominance of this technology from a generation that has come to expect these types of services for free.
There is little doubt P2P payments will grow significantly over time ($17 billion annually by 2019 and 126 million adults per year by 2020 – Sources: Forrester Research and Javelin Strategy & Research).
As an example, PayPal-owned Venmo – $17.6 billion in payments in 2016 – charges a fee for users who prefer credit cards but not on debit cards. Facebook’s Messenger payments (debit card only) doesn’t charge a fee and considers it a way to keep users on their platform. Snapchat’s Snapcash and Square’s Square Cash also offer P2P payments but none of them are generating significant revenue to date from this feature.
The current conventional wisdom is to use their technology plus their base of P2P users and follow a path to monetization by expanding into the mobile POS market and charging merchants and businesses who are OK with paying transaction fees. For example, Venmo plans on allowing its users to pay for goods and services with their app and charge merchants transaction fees. However, the initial “Pay with Venmo” rollout was extremely limited (event tickets on Gametime and delivered food on Munchery).
Others believe another path to monetization is to sell their technology. For example, Mastercard does not offer a direct-to-consumer P2P app but their Mastercard Send offers businesses the technology to reimburse their customers without having to send a check in the mail. Early adaptors of Mastercard Send include Berkshire Hathaway Travel Protection and FreeShipping.com. As the technology becomes commoditized, it’s too early to predict if this is a viable monetization strategy.
Although the exact paths to P2P payment monetization are still unclear, the massive growth in usage will inevitably lead to unforeseen opportunities – at least that’s what the industry players are banking on.