Wealth and Wants

Moving toward a cashless society with peer-to-peer payments

P2P services such as Zelle are more likely than mobile wallets to replace cash and checks


According to Zelle, about 8 in 10 online U.S. consumers have tried P2P technology, which is significantly more than mobile payments services such as Apple Pay and Samsung Pay. I think the next step for P2P payments is to expand from friends and family to small businesses and eventually point-of-sale transactions.

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Gen Xers and baby boomers are starting to use peer-to-peer (P2P) payments services, according to Zelle, one such service that is backed by several of the nation’s largest banks.

Zelle reports that 50 percent of first-time P2P users are 45 or older. It makes sense that millennials were the earliest adopters, and it’s interesting that Gen Xers and boomers are getting on board.

About 8 in 10 online U.S. consumers have tried P2P technology, Zelle says, which is significantly more than mobile payments services such as Apple Pay and Samsung Pay. I think the next step for P2P payments is to expand from friends and family (for example, splitting a dinner bill) to small businesses and eventually point-of-sale transactions.

I recently spoke with Zelle’s chief data officer, Ravi Loganathan, and he told me an increasing number of consumers are using Zelle to pay lawn care services and similar types of vendors. This is something I would welcome in my personal life.

I’ve written a flurry of checks recently to my daughter’s preschool, summer camp and dance studio. I also have to get exact change every Tuesday for “Lunch Bunch,” a cooking class and play group that she loves. I find cash and checks annoying (particularly since many of these organizations sit on the checks for weeks before depositing them), but I don’t really have a choice.

See related:  How to send, receive money using Zelle

What about credit cards?

Ideally, I would be able to use a credit card for everything. It would be easier, and I’d pay in full to earn rewards without paying interest. But I’m sure these small vendors don’t want to pay credit card processing fees, which often run between 2 and 3 percent. Paying through a service such as Zelle would be the next best thing. I already have access to Zelle through my bank’s mobile app, and there’s a good chance the vendors do, too.

Paying electronically would be a breeze and the funds would transfer instantly for free (speed is an area where Zelle beats its competitors). The banks would benefit, too, because it’s cheaper for them to process transactions electronically (through the ACH network) than by handling cash and checks. This truly is a win-win, and I think we’ll see Zelle and others attempt to raise awareness that you can pay vendors you trust through P2P technology.

See related:  Is it safe for merchants to accept new digital platforms like PayPal, Venmo and Zelle?

Trust is key

Zelle has gotten some bad publicity for inadvertently facilitating scams (for example, a consumer buys something from an online reseller and pays that stranger through Zelle – and then that person turns out to be a criminal who runs off with the payment but fails to send the goods). This is why they stress you need to know and trust the person you’re paying. But that could easily be a gardening service, a housekeeper, a preschool or a makeup artist. P2P doesn’t have to mean just friends and family.

Going cashless

I had a similar conversation in the makeup chair prior to a TV interview last month. The makeup artist told me she does bridal makeup as a side hustle. I told her I follow the credit card industry and was curious to know if she accepts credit cards. She said no because of the expense and because bridal is still very traditional and it’s not weird to ask for cash or a check, but she would be interested in doing something electronic with lower fees. A P2P service such as Zelle would be perfect for her.

We hear a lot about a mythical cashless society; the aforementioned Zelle study found 74 percent of online U.S. consumers find the idea of a cashless society appealing. But for all the talk about Apple Pay and its mobile payments competitors, they’re not the ones driving the cashless push. They mostly represent a different means of using a credit or debit card. Instead of dipping a piece of plastic (or metal) into a terminal, you tap your smartphone and the payment terminal reads the card information that way.

Mobile payments can be great, but what will truly replace cash and checks are P2P services like Zelle, which digitize the check you otherwise would have written to your lawn guy or the cash you would have handed to your housekeeper.

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