How to choose a P2P payment service

Here are the features to consider when choosing an app for paying friends


How to choose a P2P payment service Rob Goebel, Lana Kotioukova/


How to choose a P2P payment service Rob Goebel, Lana Kotioukova/


Whether you need to split the dinner check with a friend, pay a baby sitter, settle a bill for a professional service or send money across the country without writing a check, you’ve got an ever-growing list of peer-to-peer, or person-to-person (P2P) payment services you can use to complete the transaction digitally. Choosing one can seem overwhelming, but there are several factors that can help you narrow down your choices.

A P2P service allows you to transfer money to someone through your mobile phone or other digital device, using either the recipient’s phone number, email address or user name for the app. The funds may come from your bank or credit card account, or you may prepay funds into the P2P account. The speed and ease of the services are what makes them so popular, with a third of cardholders saying they use a P2P provider, according to a February 2016 Auriemma Consulting Group study surveying 800 credit card holders. “It’s apparent that overall users overwhelmingly find the services to be quick for making, accepting and clearing payments, and find them to be very user-friendly,” says Jaclyn Holmes, senior manager at ACG.

Most of the major banks offer this service, but there are also multiple third-party applications. One of the most popular, Venmo, has become so well-known among millennials it’s become a verb, as in “I’ll Venmo you the money” (though according to an SEC filing by PayPal, which owns Venmo, the company is currently being investigated by the Federal Trade Commission to determine whether they have been engaged in deceptive or unfair practices). Venmo, however, is just one of many providers consumers are turning to for P2P payments. Others include PayPal.Me, Square Cash and Facebook, though the market is constantly changing.

Whether you’re using a P2P service now or trying to decide if one is right for you, there are some specific features to look for before giving out your financial information.

Anytime you are working with a service that requires your personal information, especially bank account numbers, you’ll want to make sure your data is being protected. “Look for P2P services that require more than one method of authentication to verify your identity for a login or other transaction,” says Vanita Pandey, vice president at cybersecurity firm ThreatMetrix. “It’s also important to choose a service that will send you notifications if any of your account information, such as your password, is changed.”

If you do experience a data breach or if someone hacks into your account while using a service, Pandey recommends changing your password, but that’s just the start. You should also continue monitoring your account for any unusual activity. “We see the aftermath of a data breach for years, so consumers need to be much more aware of how their digital identities are being used.”

One way you can help take charge of security is to make sure you’ve enabled a password or fingerprint authentication measure for your phone, as well as a password to access your P2P app.

Users overwhelmingly find the services to be quick for making, accepting, and clearing payments, and find them to be very user-friendly.

— Jaclyn Holmes
Auriemma Consulting Group

The level of security varies among providers. Some concentrate more on reducing friction for the user, while others make registration more time-consuming, requiring additional authentication measures for both you and the recipient before enabling the transfer.

If privacy is important to you, also find out what kind of information the service shares about you. If you don’t want to give all of your information to a third-party site, then your bank’s P2P service may be the best option.

Some apps have a social networking component with a real-time feed showing money-transferring activity. The social aspect may be fun and can help you get your friends to sign up with the app, Pandey warns against giving too much information out that the public can access. “While it may be safe to share the details with a trusted and reputed payment platform, it is important to note that the more information one shares with these providers, the more vulnerable one is to a potential data breach or leakage,” she says. “In a world where billions of credentials have been breached and are available on the dark web, every piece of information being shared provides another clue to the fraudsters looking to stitch together a user’s identity.”

One example that shows how others can access what you might consider a private feed is the site that allegedly shows real Venmo transactions, including user photos, involving “drugs, booze and sex.” If a provider does have a social feed, you can usually set your account to private, so your activity isn’t being shown.

If you mistype an email address, or your payment gets sent to the wrong person or in the wrong amount, it’s important to know what kind of guarantee the service provides. According to the Federal Deposit Insurance Corporation (FDIC), if the money comes out of a credit card or bank account you have on file, you have the right under federal law to have the issue resolved. However, if the money comes from a prepaid amount you have stored with the service provider, you’ll have to go through the provider to reclaim your cash. Make sure you read the terms of service before joining so you know what to expect if you run into an issue.

Consumer Action, a nonprofit organization that informs consumers of their rights, recommends linking a credit card instead of your bank account to your P2P service, to lower your liability if a fraudster gets access to the P2P account. “We think credit cards offer better protection,” advises Linda Sherry, director of national priorities for Consumer Action. “You avoid the fact that they might drain your bank account and your liability is capped at $50.”

Banks may also refund fraudulent debit transactions, but there is a more stringent turnaround time to report the fraud than with credit card transactions, and your liability isn’t necessarily capped at $50 if you don’t meet the deadline.

If you do decide to use your credit card for money transfers, note that P2P providers may charge a small percentage per transaction (usually around 3 percent). If you plan to make large payments through such a service, that 3 percent transaction fee can add up.

Many providers don’t charge a fee if you use your debit card or bank account to transfer money, some don’t charge any fee at all even with a credit card, while others charge a set amount per transaction, no matter how much is sent or where the funds come from. And if you plan to use a service to send money internationally, be sure to find out what kind of fee is charged, as it could be higher than for a domestic transfer.

Transaction limits
If you just plan on splitting the occasional dinner, the amount you’re allowed to transfer each time may not be relevant. But if you want to use a service for larger sums, you’ll want to make sure your provider will allow you to transfer what you need. Limits can vary drastically, from $250 to $5,000.

Speed and accessibility
Some services take five or six days to clear a transaction, while others can do it within one day or less. Bank of America and U.S. Bank recently introduced real-time transfers, but only between customers of those banks (though other major banks are expected to join them later in 2016). So, if speed is important to you, this is another feature you’ll want to look for.

Consider also how easy it is for recipients to get a transfer -- do they need to sign up for the service to receive the funds, belong to the same bank, or can they simply receive the money through a secure email link without needing to sign up for a particular service? Most banks’ P2P services only require the sender be a customer and the recipient have a valid email address. For third-party apps, the FAQ page of the provider will be able to tell you if a recipient needs to also download the application.

You’ll want to let the recipient know to look out for the email if you are sending them funds through a particular provider so the message doesn’t get sent to the trash or lost in a spam folder. If you need to send money internationally, that will also be a deciding factor in what service to use as some only do domestic transfers.

Look for P2P services that require more than one method of authentication to verify your identity for a login or other transaction.

— Vanita Pandey

Tracking features
The ACG survey showed that more than 80 percent of P2P consumers use the service to easily keep track of money owed to friends and family. However, you shouldn’t just track what you owe, but also what you’ve paid out using the service. “I would not want to have one of these services if it didn’t offer me the ability to review my transactions, similar to a statement,” says Sherry. “I would recommend that anyone who uses this make sure they have a function like that and check it on a regular basis.” 

Customer service
Similar to tracking features, a robust customer service team may also be an important factor for you if you plan to frequently transfer money. If you see a mistake in your payments, want to cancel your account or communicate with a live person when you have a question, then an accessible customer service representative is helpful.

Transferring money quickly and efficiently through your phone is a convenience that one day you may not be able to imagine living without. However, as with any technology that comes with many choices, spending the time upfront to find a reliable and secure provider can save you a lot of hassle down the line. “It’s better to avoid a problem than resolve one,” advises Sherry. By doing some research on what features are offered, reading the provider’s terms and conditions, and understanding what you’re agreeing to, you’ll be better equipped to choose a service that won’t make you pay tomorrow for the convenience of today. 

See related: Infographic: Gen Z leads in use of mobile payments, Mobile payments laws have gaps but you can still stay safe,

Published: June 27, 2016

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-22-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.