As the leading U.S. peer-to-peer payments service, Zelle has become a staple offering for most financial institutions. Even so, the network found room to expand last year, onboarding 337 new institutions.

Nearly all of these new partners were community banks or credit unions managing less than $10 billion in assets. Collectively, these institutions serve a broad mix of customers, including farmers, small businesses, and underserved communities.

Alongside this expansion, Zelle also highlighted the growing range of use cases on its platform. Although the network was originally designed for P2P payments, consumers are increasingly using Zelle for everyday transactions, including recurring expenses like rent and utility payments.

Embedding the Platform

Since its launch in 2017, Zelle has continued to grow by leaps and bounds, driven in large part by its formidable backing. The organization is owned by Early Warning Services, a consortium of seven of the largest U.S. financial institutions, including JPMorgan Chase, Bank of America, and Wells Fargo.

Zelle was initially launched in response to the surging popularity of P2P apps like Venmo, PayPal, and Cash App. However, the network diverged from that model by jettisoning its app and instead embedding its service directly into financial institutions’ mobile and online banking platforms.

A Successful Model

That approach has proven successful. Through the first half of last year, , U.S. consumers and small businesses completed roughly two billion transactions on Zelle—representing a 19% year-over-year increase. Total transaction value rose by nearly 25%, reaching almost $600 billion. Small business payments were the platform’s fastest-growing segment, increasing by nearly a third year-over-year.

Despite this momentum, Zelle has faced notable challenges in recent years. One of the platform’s biggest benefits—near-real-time settlement—can also be a liability. Once a payment is sent, it is often irrevocable, leaving limited recourse for users who are defrauded into authorizing transactions.

As scams have become more widespread, Zelle has drawn scrutiny from the U.S. Consumer Financial Protection Bureau, as well as a lawsuit from New York State over fraud protections on the platform. The lawsuit alleged that Early Warning Services was aware of the network’s vulnerabilities but failed to adequately address them.

In response, Zelle has maintained that because users were tricked into sending money, there was no inherent flaw in the system itself. However, JPMorgan Chase recently updated Zelle’s terms of service to grant the institution greater authority to delay or cancel payments—especially those originating from social media—largely in response to mounting fraud concerns.

The post Zelle Expands to Include Community Banks and New Use Cases appeared first on PaymentsJournal.

As the next step in its peer-to-peer (P2P) payments platform, PayPal is launching a feature that enables users to send payment links via text message, email, or direct message.

Within the app, the Links feature lets users enter a payment or request amount and generate a private, one-time link for the transaction. The sender can also add a note before sharing the link through their preferred channel, including chats.

Once the recipient accepts the payment, funds are transferred instantly to their PayPal account. Senders can cancel any requests before they are claimed, and unclaimed links automatically expire after 10 days.

With the Links launch, the fintech aims to attract more customers to its ecosystem.

Increasing Its Focus

Another significant aspect of PayPal Links is that U.S. users will be able to send crypto payments—including bitcoin, and Ethereum—to PayPal and Venmo, as well as other compatible digital wallets. Payments can also be sent using PayPal’s stablecoin, PYUSD, which the company launched two years ago.

Like many of its rivals, PayPal has ramped up its focus on digital assets in recent years. In addition to launching its stablecoin, it also recently introduced its Pay with Crypto service, a platform designed to connect PayPal’s ecosystem with existing crypto wallets from major platforms like Coinbase Wallet, MetaMask, Kraken, and OKX.

The Potential Synergy

One of main drivers behind Pay with Crypto was the need to solve persistent challenges in cross-border payments. To serve the same market, PayPal also launched its own solution: PayPal World.

Through this platform, PayPal and Venmo wallets can connect with global wallets, including India’s Unified Payment Interface (UPI), China’s WeChat Pay, and potentially Latin America’s Mercado Pago.

Although not all of PayPal’s systems are fully integrated yet, Diego Scotti, General Manager, Consumer Group at PayPal underscored the potential synergy between PayPal Links and PayPal World, noting that users could easily share a payment link in conversations with anyone worldwide.

At present, PayPal Links is limited to U.S. users, but the company plans to expand into the UK, Italy, and other markets later this month.

The post PayPal Users Can Send Payments and Requests Via Links appeared first on PaymentsJournal.

Splitting a peer-to-peer (P2P) payment has traditionally required all participants to be on the same platform, but a new feature from Cash App aims to bridge that gap.

The fintech’s Pools feature enables an organizer to create a shared fund for use cases like buying team uniforms, splitting the check, or funding a group trip. The organizer can set a target amount for the pool, then close it at any time and transfer the funds to their Cash App balance.

This kind of functionality isn’t new to P2P platforms. PayPal launched a money pooling feature last year, and Venmo Groups has offered a similar option for even longer. What sets Cash App Pools part is its flexibility: organizers can invite users both within the Cash App and by sending a link via text to Apple Pay or Google Pay users who don’t have Cash App accounts.

Enticing to the Ecosystem

In an era where many fintechs are striving to become one-stop-shop super apps, some companies are working to keep users within their ecosystem. However, Cash App isn’t chasing immediate revenue growth. Instead, the company is betting that non-users who participate in Pools will be enticed to become active users of the platform.

The launch is also notable as one of the few for Cash App in recent years. During this time, the Block-owned fintech has faced challenges from PayPal and Venmo.

Venmo has seen substantial revenue growth and boasts a highly sought-after customer base of younger adults, which has driven engagement with eBay and JetBlue in recent months.

PayPal has also been on a tear lately, launching platforms that connect major global digital wallets and enable crypto payments at smaller merchants’ checkouts. The company also unveiled its first-ever digital wallet for in-store purchases in Germany and integrated its payments platform with Perplexity’s artificial intelligence chat for AI-powered shopping.

Running Their Financial Life

Meanwhile, the most significant development for Cash App has been the potential addition of Afterpay’s BNPL service. According to CNBC, the Pools launch is part of Block’s effort to revitalize Cash App after a revenue slump.

Despite these struggles, Block still shares some of its competitors’ ambitions.

“We want Cash App to be the financial operating system for the next generation… to essentially be the money app where a customer can run their entire financial life,” said Owen Jennings, Head of Business at Cash App in a statement.

The post Cash App Group Payments to Include Apple and Google Users appeared first on PaymentsJournal.

Kraken, one of the world’s largest crypto exchanges, is continuing its expansion into mainstream financial services with the launch of its peer-to-peer (P2P) payments app.

The platform, dubbed Krak, allows users to send cross-border P2P payments in both fiat and crypto. The Krak app features an attached spend account and an earnings account that offers yield generation on more than 20 digital assets.

The app puts Kraken in competition with well-established P2P players like Venmo and Cash App. In addition to their substantial customer bases, both Venmo and Cash App support crypto transactions to varying degrees.

However, Kraken’s roots in digital assets mean Krak will offer a much wider crypto scope. Users will be able to send and request payments using 300 different assets, including both crypto and local currencies.

A Tough One to Crack

Kraken’s P2P launch marks the next step in the exchange’s broader push into mainstream financial services. The company recently introduced a debit card for its UK and European customers, allowing them to spend crypto assets at millions of merchant checkouts.

While building a more comprehensive financial ecosystem is a logical step for Kraken, it’s still unclear whether the exchange’s customers have a strong appetite for crypto-based payments—whether through a debit card or P2P app.

“It’s been a tough one to crack,” Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research, told PaymentsJournal. “A debit card, just like with other remittances, makes more sense when you use something that’s less volatile, like a stablecoin.”

“Accounts debited are great when you have crypto that has increased in value, but once the value of those tokens decreases, they don’t want to use the debit card,” he said. “Time will tell if they’ve cracked it, but I think they need to leverage something less volatile.”

Intent on Addition

Regardless of the traction these efforts gain, more crypto firms appear intent on adding conventional financial services. Stablecoin issuer Circle recently announced it is launching a cross-border payments network designed to connect financial institutions around the world.

International transactions were also the focus of Sling Money’s new P2P payment rail, built to serve as a bridge between local payment systems like ACH and stablecoins.  

Similarly, Kraken has several products in mind for Krak. According to Reuters, Kraken plans to add physical and virtual cards, as well as loan products, to the platform soon.

The post Kraken Moves Beyond Crypto with P2P App appeared first on PaymentsJournal.

As digital financial products continue to evolve, many credit unions have struggled to keep up. To help address this issue, Catalyst, in partnership with Neural Payments, has developed a peer-to-peer (P2P) solution that integrates with credit unions’ mobile apps.

This functionality may draw comparisons to Zelle, which allows customers of major financial institutions to send near-real-time P2P payments. Like Catalyst’s platform, Zelle operates solely within banks’ mobile apps, after the network discontinued its standalone app last year.

One common drawback of P2P apps is that recipients must have an account on the platform to receive funds. However, the Catalyst and Neural Payments solution is vendor-agnostic, allowing credit union members to send payments to anyone with a mobile number or email address. Funds will move directly from the sender’s credit union account to the recipient’s preferred account.

Though P2P payments are the central focus, the solution will also integrate instant payments and image deposits.

Maintaining the Personal Touch

Digital payment solutions have been part of everyday operations for larger financial institutions for years. However, many credit unions have struggled to provide the digital solutions their members increasingly expect while maintaining the personal touch they are known for.

The lack of digital solutions has hindered some credit unions—many of which have aging memberships—from making inroads with younger customers. Functionalities like P2P payments are a must for Gen Z users, who are heavily engaged with fintech companies. Only 25% of Gen Z consumers said they don’t use platforms like Venmo or Cash App, according to Javelin Strategy & Research.  

Doing Better with Small Businesses

While it may be challenging in many cases to draw younger consumers into the model, there is a strong opportunity for credit unions to expand their small business membership. Separate data from Javelin found that the percentage of businesses with any kind of relationship with a credit union increased from 6% to 9% last year.

That said, small business owners’ sentiment toward credit unions was positive, but one of their main concerns was the breadth of the institution’s digital banking services. This suggests that, regardless of the demographic credit unions target, they will likely need to leverage vendor platforms to deliver the digital solutions that are now expected by members.

The post For Credit Unions Seeking to Digitalize, Catalyst Offers In-App P2P Solution appeared first on PaymentsJournal.

Checkout is a critical part of the e-commerce experience, and PayPal aims to reduce friction for UK and European merchants with its Fastlane service.

Fastlane was initially announced for U.S. merchants last January and expanded more broadly in August. Its rollout in  the UK and EU will be facilitated by JPMorgan Payments (JPM), which will introduce the offering to its substantial merchant network.

PayPal highlighted that 70% of consumers consider checkout a crucial part of the shopping experience, yet cart abandonment remains high. The payments giant asserts that FastLane addresses this challenge by accelerating checkout speeds by over 36% compared to traditional guest checkout.

“This is a good partnership—PayPal needs the broader distribution that JPM can bring in the UK and EU, and the FastLane product gives JPM great tech to offer e-commerce merchants that reduces friction in guest checkouts,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“If you’re not familiar with FastLane, it works similar to Shopify’s ShopPay,” he said. “If you are shopping online and elect for guest checkout (you don’t have to have or want an account with the merchant), FastLane recognizes you as a PayPal consumer as soon as you enter your email address. FastLane then sends a code to the consumer’s mobile on file with PayPal to authenticate the customer and prepopulates their shipping and payment info.”

Friction Reduction

PayPal’s one-click option was rolled out last year alongside a host of other artificial intelligence initiatives, including a smart receipts program and an AI platform designed to help merchants leverage customer data for personalized recommendations.

While many of these AI initiatives received a tepid response initially, FastLane appears to have gained traction on a wider scale.  

Beyond AI, merchants continue to explore biometric authentication technology in the checkout experience. Early applications of biometric verification primarily focused on in-store transactions, such as Amazon’s pay-by-palm initiative at its Whole Foods stores.

However, biometric payments may offer even greater potential in e-commerce checkouts.  

“The real need for identity verification is with card-not-present transactions, and it would be great to see facial recognition technology deployed in conjunction with technology like 3D Secure 2.0, where biometrics can work to reduce both fraud and friction in ecommerce transactions,” Apgar told PaymentsJournal.

The post PayPal to Expand FastLane Service to UK and EU, With Assist from JPMorgan Payments appeared first on PaymentsJournal.

JPMorgan Chase is taking proactive measures against fraud on peer-to-peer payments by pre-emptively canceling Zelle payments associated with social media accounts.

An update to Zelle’s terms of service, slated to take effect on March 25, grants Chase the right to delay, block or cancel payments, specifically flagging social media as a high-risk area. Chase’s website clarifies that it will prohibit transfers identified as originating from social media interactions. Between June and December 2024, nearly half of Chase’s customers who filed Zelle or wire transfer fraud claims were scammed through schemes that originated on social platforms.

While Chase has not provided an official reason for the change, it may be responding to proposed legislation that would hold banks accountable for fraudulent transactions on P2P apps. Last August, Democrats introduced a bill aimed to help consumers recover funds lost to fraud on Zelle, Venmo, and similar platforms. Additionally, in December, the Consumer Financial Protection Board filed a lawsuit alleging that Chase, Wells Fargo, and Bank of America had failed to address criminal activity that contributed to scams on Zelle. Collectively, these banks handled 73% of all Zelle payments in 2023.

JPMorgan’s initial reaction to the CFPB suit was to emphasize its commitment to refunding customers for unauthorized transactions, including those involving scams. It also addressed a lawsuit of its own, though it was never filed.

While the shift in political control following last November’s elections has eased some legal issues, P2P fraud remains a major concern for the banks that own Zelle. According to the CFPB, customers of Chase, Wells Fargo and Bank of America have lost more than $870 million to criminals exploiting Zelle for fraudulent activity.

A Prime Target for Fraud

Zelle was launched in 2017 as a response to PayPal’s P2P app, Venmo. As early as 2018, published reports indicated that the platform was especially vulnerable to fraud.

While the speed of transactions was a key selling point, it also meant that once a payment was sent, it was nearly impossible to reverse. Criminals quickly realized they could exploit this by tricking users into sending money under false pretenses, knowing it would be virtually impossible to recover.

Fraud issues aside, it has been a banner year for Zelle. The service processed over $1 trillion in total payment value last year, the highest amount ever sent on a P2P payments platform in a single year.

The post Chase to Ban Zelle Payments Involving Social Media appeared first on PaymentsJournal.

Peer-to-peer (P2P) platform Zelle processed over $1 trillion in total payment value last year, which the company stated was the highest amount ever sent on a P2P payments platform in a single year.

Overall, Zelle processed 3.6 billion transactions last year, marking a 25% year-over-year increase. The platform also added 16 million users, bringing the total number of consumer and small business accounts on Zelle to 151 million. The fintech’s growth rate exceeded that of its P2P rival, PayPal, last year. According to CNBC, PayPal’s total payment value surpassed more than $400 billion.

Zelle is owned by Early Warning Services, a consortium of seven of the largest U.S. financial institutions, including JPMorgan Chase, Bank of America, and Wells Fargo. The platform was launched eight years ago, largely in response to the rising popularity of P2P apps like Venmo, PayPal, and Cash App.

Key Differentiators

One of Zelle’s key differentiators is its backing by major banks. Unlike its P2P peers, most transactions on Zelle take place through banks’ apps as opposed to its own. For that reason, Zelle recently shut down its standalone app entirely.

Another key feature of Zelle is that transactions occur instantly, bypassing the traditional two-to-three business-day delay seen with many other transaction types. Additionally, Zelle users avoid many of the extra fees commonly associated with competing solutions.

Criticisms and Competition

Despite the platform’s success, Zelle is facing several obstacles. Zelle payments are irrevocable, which can create issues when users send payments in error or under fraudulent pretenses. As a result, government agencies like the Consumer Financial Protection Bureau have raised concerns about who is responsible for reimbursing consumers in such instances. With many P2P platforms, it falls on the customer to  verify the recipient before sending payments.

Beyond regulatory concerns, Zelle is also navigating a competitive landscape. The platform not only faces competition from other P2P services but also from the bevy of payments technologies that have emerged in recent years.

Digital wallets like Samsung Pay and Apple Pay have integrated P2P payments while also support various payment types, such as credit cards and BNPL services, which can be used across retail and e-commerce transactions.

Additionally, FedNow and RTP continue to gain momentum. It means that despite a record-setting year, Zelle could still encounter roadblocks ahead.

The post Amid Increasing Competition, Zelle Leads the P2P Pack appeared first on PaymentsJournal.

Peer-to-peer (P2P) payments have become a popular method for individuals to transfer money quickly and easily, often in real-time. These transactions are typically facilitated through digital platforms like mobile apps, which offer various payment methods to fund them. From bank transfers and debit cards to digital wallets and cryptocurrency, the ways users can fund P2P payments are expanding.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Room for One More? Global Real-Time Pay-by-Bank Lessons for the U.S.

Top 4 Payment Methods Used to Fund P2P Payments

• Debit Cards – 46%
• Checking account(s) – 44%
• Credit card(s) – 36%
• Prepaid card(s) – 10%

Source: Javelin Strategy & Research: North American PaymentsInsights, December 2023

About Report

Pay-by-bank solutions are known by various names, including bank transfer, direct debit, and account-to-account payments. In countries like Brazil, India, and Thailand, where real-time, interoperable bank transfers are common, these payment methods have gained widespread popularity due to their ease of use and lower costs for merchants. However, in markets like the United States, where payment cards are more dominant, adoption has been slower.

This Javelin Strategy & Research report examines the rise of real-time pay-by-bank systems across different countries, the key growth opportunities for these payments, and the challenges and potential for expansion in the U.S. market.

The post What Payment Methods Are Used to Fund P2P Payments? appeared first on PaymentsJournal.

Kids under 17 made fewer transactions this summer, though the average spend per transaction was 3.8% higher than last year. According to data from USAA Bank, the average number of transactions per youth checking account decreased by 26% in June and 7.8% in July year-over-year. It’s also worth noting that June had two fewer business days compared to last year.

Though kids might be spending more, they are largely doing so in predictable places. Some of the top 15 retailers for children included gaming providers Steam, PlayStation, and Microsoft and big-box retailers such as Walmart and Target. Other popular summer spending destinations for kids were restaurants like Chick-Fil-A, Starbucks, and Chipotle.

One of the most significant insights from the report was the increased use of peer-to-peer payment platforms like Venmo and Cash App. The average Venmo payment in July was up 8.9% year-over-year, and total spending via Venmo increased by 12.9%.

“Summer is typically one of the busier seasons for youth spending, youth deposits and new youth account openings,” said Lemont Williamson, Product Manager for Youth Product at USAA Bank. “In 2024, we saw continued spending, but, just like with mom and dad, teenagers are being a little more intentional with how often they reach for that debit card or payment app.”

Fraud Risks

Parents are often hesitant to give financial tools to their children, especially as fraud cases continue to rise. P2P apps have been frequent targets for criminals who send manipulative notifications about fake rewards or tech support issues.

Additionally, criminals frequently impersonate many of the popular brands that younger consumer frequent, like Microsoft and Best Buy. According to the FTC, Microsoft impersonation scams cost consumers a total of $60 million in 2023.

Healthy Spending Habits

While fraud will always be a concern, there are substantial benefits to giving children their own cards and accounts. Youth debit accounts provide parents with an opportunity to discuss healthy spending habits with their children, and most accounts for kids come with robust parental controls.

Beyond traditional bank accounts, fintechs like GoHenry and Greenlight offer youth-specific debit products that include interactive lessons on spending. P2P platforms also offer youth products, and though they may not include financial education tools, they can be a great way for introduce kids to the world of digital banking.

The post Summer Spending Trends Show Kids Shopped Less, Spent More appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau may take action against JPMorgan Chase over fraud concerns related to peer-to-peer payment platform Zelle—prompting the bank to consider litigation against the CFPB.

Zelle, operated by Early Warning, is a joint venture by the major banks, including Bank of America, Wells Fargo, and Capital One. The platform has rapidly become the most popular P2P platform in the U.S., with over 2.9 billion transactions last year.

Unfortunately, this popularity has attracted criminals who have devised various methods to scam Zelle users, including phishing and impostor scams. The prevalence of fraud on the platform, coupled with concerns about victim reimbursement, led the CFPB to initiate a probe of JPMorgan Chase.

However, JPMorgan said in a statement that the CFPB is aware the bank goes “above and beyond” to refund customers for unauthorized transactions, including scams. The bank also stated that the bureau is overreaching, and is prepared to challenge the CFPB if necessary, including through litigation.

Consumer Education

Despite JPMorgan Chase’s assertions, Reuters reported that only 38% of JPMorgan Chase, Bank of America, and Wells Fargo customers were reimbursed for disputed fraud transactions in 2023, down from 62% in 2019.

“There is no question that consumers need protection—both from the outside world and themselves,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The solution might be better education, so consumers know that payments are irrevocable, or it might be to slow the process down, so there’s an option to cancel transactions when necessary.”

Relative Safety

Federal law requires banks to reimburse customers for unauthorized payments, but some banks have been hesitant to refund fraud victims. They worry that issuing refunds might encourage more criminal activity, potentially costing financial institutions billions.

However, as fraud escalates, it could drive some customers away from newer platforms and back to the relative safety of conventional payment systems.

“Fast payment options that allow consumers to move money quickly are something people want, but at the end of the day, if consumers do not understand the risks, or their banks are unwilling to have protections in place, the process will not fill the needs of everyday users,” Riley said. 

The post JPMorgan Chase Mulls Litigation Against CFPB Over Zelle Probe appeared first on PaymentsJournal.

As peer-to-peer payment apps like Zelle and Venmo gain popularity, so does the opportunity for criminals to entice victims into sending money in transactions that are very difficult to reverse. Newly proposed legislation would allow people who make fraudulent P2P payments to be reimbursed by the apps.

The proposed bill  would help consumers get their money back when they make payments to criminals  on Zelle, Venmo, and other platforms. Currently, the Electronic Fund Transfer Act of 1978 only protects customers from unauthorized transfers, such as when a credit card is stolen. The new legislation would protect consumers from liability when they are defrauded into making a transfer to criminals.

The law currently has an exemption for bank wire transfers. The proposed legislation would eliminate that exemption and allow consumers to get reimbursement for fraud in that area as well.

P2P Fraud – A Growing Concern

Transfer fraud is a growing problem as P2P apps become increasingly popular. Consumers and small businesses sent $806 billion in payments on Zelle last year alone, 28% more than in 2022. By the end of the year, Americans were sending an average of more than $100 million via Zelle every hour.

Meanwhile, reports of payment app fraud have risen by 62% in the past two years, according to the Federal Trade Commission. Consumers reported more than 22,000 instances of fraud, costing a total of $98 million on payment apps and services in just Q2 2024.

A Senate investigation released last month reported that JPMorgan, Bank of America, and Wells Fargo collectively reimbursed consumers for approximately 38%, or $64 million, of the $166 million worth of fraud disputes at these banks in 2023. Those three banks handle nearly three-quarters of all Zelle payments.

The number of wire transfer fraud claims reported to the Consumer Financial Protection Bureau has also been growing. They jumped from 88 in 2020 to 355 in 2023, and reached a whopping $500 million in the most recent quarter.

The newly proposed legislation follows a similar measure that passed in the UK last year. Starting October 7, UK payment service providers must reimburse victims of authorized push payment fraud, following regulations announced by the government’s Payment Services Regulator last year.

The post Congress Considers Reimbursement Rules for P2P Fraud appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau (CFPB) sued SoLo Funds, alleging the company deceived borrowers who believed they were receiving interest-free, zero-fee loans. The fintech, which facilitates peer-to-peer lending, is accused of misrepresenting the total cost of its loans by obscuring interest rates and charging users “tips” and “donations.”

While SoLo has faced issues with state-level regulators, the CFPB felt it was time for federal intervention. The bureau alleged SoLo committed several other violations, such as purposefully camouflaging contract details, falsely threatening users with credit score repercussions, and collecting on loans they shouldn’t have.

“The CFPB is suing SoLo for using digital trickery to hide interest and fees on its online loans,” CFPB Director Rohit Chopra said in a prepared statement. “Virtually all loans on the SoLo Platform include a lender ‘tip’ that goes to the lender, a SoLo ‘donation’ that goes to SoLo, or both…we are putting a stop to their fake tipping scheme.”

Forced Fees

SoLo leadership said they were taken aback by the lawsuit because they had been working to establish a regulatory framework with the CFPB for the past 18 months and felt the two sides had reached a resolution.

The company insists its fees are discretionary, but during the SoLo application process, users only have a choice on which percentage to donate, and 0% is not an option.

SoLo also gave lenders the impression they would receive fees, making customers who fail to “donate” unlikely to receive a loan. The CFPB estimated that 99.5% of all loans on the platform at the end of 2022 included fees.

Ill-Gotten Gains

The CFPB has had fintechs in its sights for some time. The bureau recently penalized Chime for not returning refunds to its customers on time. The CFPB has asserted that fintechs that handle large amounts of transactions should be held to the same standards as banks and credit unions.

SoLo received an early seven-figure investment from tennis champion Serena Williams and achieved over one million users as of early 2023. It bills itself as a company that is democratizing access to capital by facilitating community finance.

The CFPB’s action comes after the company has already faced suits from California, Connecticut, Maryland, and the District of Columbia. Part of the bureau’s goal is to change SoLo’s business practices and prevent future violations. It also aims to force the fintech to return its “ill-gotten gains.”

The post CFPB Alleges P2P Lender SoLo Used Deceptive Tactics appeared first on PaymentsJournal.

French payments app Lydia, which has over eight million users, announced it will split its mobile banking operations into a new brand, Sumeria.

Lydia, launched in 2013, started as a P2P platform but quickly grew to include bank accounts, crypto, personal loans, and stock trading.

The decision to spin off its digital banking aspects and create a challenger bank was spurred by necessity. As the app added features, it estranged many users who appreciated Lydia’s P2P simplicity. The two million users who used the digital banking aspects—and sometimes paid fees to use them—will now be served by Sumeria.

No Carbon Copy

It’s not uncommon for P2P platforms to add mobile banking solutions. PayPal, Venmo, and Cash App have incorporated everything from credit cards to cryptocurrency in their apps. 

It’s less common to fully split out digital banking into a new brand due to concerns about alienating users. Adding to possible confusion for Lydia customers, the company is also relaunching Lydia as a new app that’s solely focused on P2P.

Though Sumeria users receive a bank account and a debit card, the brand aims to be more than a carbon copy of other mobile-first banks. Customers will earn interest on their accounts based on the number of times they use their cards.

For the first three months, customers earn 4% interest so long as they use their cards 15 times per month. After that, users earn 2% interest, regardless of the account, if they meet the requisite number of swipes.

A Local Focus

Beyond the unique interest model, Lydia hopes Sumeria will catch on by setting its sights smaller. While other payments apps have international aspirations, Sumeria will focus on the French, German, and Spanish markets where the company is firmly established. Lydia believes the local focus will attract and engage users who want a personalized banking solution.

Even if the scope is smaller, Lydia has strong ambitions for Sumeria. It will reportedly invest €100 million in the digital bank and hire 400 employees in the next few years. Lydia hopes the digital banking app will have five million users by 2027.

The post French P2P App Lydia Spins Off Digital Banking appeared first on PaymentsJournal.

Since Elon Musk announced X’s intention to become a payments platform, the company has made significant strides. The social media platform secured licenses to transmit money in 25 states and has licenses pending approval in several others.

Initial expectations for the platform are that X users will be able to tip each other and send peer-to-peer (P2P) payments in-app. But a recent X post by Chief Information Security Officer Christopher Stanley makes it clear that X’s aspirations for the platform go far beyond P2P payments.

“I can pull money into X and store it in my X Wallet and send money to any X Payments user,” Stanley wrote. “Think Venmo at first. Then, as things evolve, you can gain interest, buy products, eventually use it to buy things in stores (think Apple Pay).”

One-Stop Shop

Musk has been very transparent about his ambitions to expand the app into a one-stop shop, a la Alipay. What hasn’t been clear is just how quickly he can transform the social media platform into a full-fledged financial institution.

In December, Musk announced X would support payments, and since then, the company has taken critical steps toward reaching its planned mid-2024 launch. Tennessee recently granted the company a money transmitter license, with several more states still pending license approvals.  

Making Banking Obsolete

Cryptocurrency owners anticipated the platform’s launch because of Musk’s well-documented fondness for crypto. But at this point there’s no word on when crypto transactions will be supported by X Payments.

While X will likely leave the door open to future crypto expansion, the company is more focused on making bank accounts obsolete for X users. It’s still unclear how willing users will be to share their financial data with the often controversial company. Regardless, Musk wants X Payments to encompass “someone’s entire financial life,” a sentiment Stanley echoed.

“The end goal is if you ever have any incentive to take money out of our system, then we have failed, you shouldn’t ever need to take money out because you should be able to do anything you need on our platform,” Stanley wrote.

The post X Payments Platform Aspires to More Than P2P appeared first on PaymentsJournal.

Financial institutions are increasingly navigating a sea of scams and fraud. With the evolution of emerging technologies, new avenues for attack have opened, leaving banks, credit unions, and their accountholders more vulnerable.

As peer-to-peer (P2P) payments become an expectation, the risks for banks and credit unions edge higher. The real-time nature of P2P payments and the “relationship” between the scammer and the victim, makes it exceedingly difficult for banks to detect and mitigate P2P scams.

In a recent PaymentsJournal podcast, Kannan Srinivasan, Vice President of Risk Management at Fiserv, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, explored the key differences between scams and fraud, the prevalence of P2P scams versus other types of scams, and the best approach for financial institutions to implementing P2P payments.

Differentiating Between Scams and Fraud

Incidences of scams and fraud have gained traction in recent years, and it’s easy to use these terms interchangeably to describe any type of financial wrongdoing by criminals. But there’s a distinction. The proper classification of these types of fraud can aid in developing the countermeasures to address them.

Fraud can be divided into three types: first-party, second-party, and third-party.

“First-party fraud is when the crime is committed by the owner of the account,” Riley said. “It might be a bad return, it might be a claim of non-service on a merchant, something along that line. And then you have second-party fraud, where fraud is committed by another person and there’s a relationship that the owner of the account has with the other person. It might be allowing them to use the card or something along that line.”

“But third-party fraud is really one of the most common when it comes to payments, and that’s when there’s another party that’s unrelated to the account using it in one form or another,” he said.

Within third-party fraud is a deeper classification where the act can be readily identified as a fraud or a scam. An act of fraud normally involves the illicit use of another person’s information, such as in identify theft and credit card fraud.

With scams, the focus is on deceiving victims into giving up their money or their personal information, which can occur in P2P payments like those driven by romance scams and phishing emails.

“If somebody gained access to your bank account and made a payment without your permission, that’s typically considered unauthorized,” Srinivasan said. “It’s an unauthorized activity. Think about it as credentials compromised, username and password are stolen. You clicked on a phishing link and provided your login or bank account information.

“Those are all considered fraud or unauthorized activity, versus if you were knowingly involved in a transaction,” he said. “Somebody may have pretended to be a bank, but you were involved in a transaction, and you authorized a transaction. This is typically defined as scam.”

P2P Scams Versus Overall Scams

Recent news reports about a marked escalation in P2P scams don’t tell the whole story. Although incidences have increased, they are far less than the total amount of fraud losses.

“According to new data from FTC, total fraud losses reported in 2022 was $8.8 billion, compared to P2P and money transfers, (which) were about $1.7 billion,” Srinivasan said. “In general, P2P fraud has much lower exposure for our financial institutions compared to other products, such as check fraud or card fraud losses.”

Srinivasan noted that the sensationalism and attention aimed at P2P payments fraud can be traced to their relative newness in the payments space and the real-time nature of the transactions.

Why Scams Are Particularly Troublesome

Financial institutions and other organizations are not the only ones leveraging the latest technology. Scammers are also using these tools to evolve and stay a step ahead, lurking behind seemingly trustworthy brands.

Some of the most nefarious tactics to deceive unsuspecting customers include deepfakes, where scammers create fake videos and audio of bank employees via artificial intelligence, deceiving customers by leaving a voicemail or recording phone calls in which bank account information is requested.

Generative AI is also being leveraged for highly customized phishing emails, posing yet another potential threat for financial institutions.

With AI technology, bad guys can launch automated bot attacks at scale,” Srinivasan said. “We see a large number of new-account-opening fraud, where fraudsters might be creating mule accounts to collect funds, so they create tons of spoofed emails specifically targeted to a geography.”

Increasingly prevalent are faked emails, texts, and invoices, all with the aim to deceive customers into making payments and giving up other sensitive information.

And with the explosion of e-commerce, this has become yet another expansive playground for scammers to take part in. “We’re in a world now where electronic commerce is growing 20% yearly in the U.S.,” Riley said. “You’re getting further away from that point-of-sale, somebody who has to go to a store and tender it. You have more of the anonymous nature of the internet.”

“So many things can happen in a very short period of time,” he said. “When you stack on top of the fact that things are going faster, it becomes a much tighter playing field. It’s encouraging when you talk about the Zelle numbers on fraud going down, but just recognize that it’s an ongoing base job and people will be fighting fraud for the rest of time.”

How Zelle Payment Dispute Rates Compare to Other P2P Apps

According to the Bank Policy Institute, Zelle continues to be the safest P2P network. Three times as many disputed transactions were made to PayPal as to Zelle, and for CashApp, there were six times as many.

Zelle requires customers to already have a bank account, fulfilling the know-your-customer (KYC) requirements. Any incidences of fraud are reported back to the Zelle Network so other banks can make use of this critical information.

P2P Payments: With Zelle a “Must-Have” Should Financial Institutions Be Wary?

P2P payments, and specifically Zelle, have solidified as a must-have for financial institutions. Customers demand it, and therefore it is table stakes, not just a nice-to-have offering.

“You look at how real-time payments have grown and faster payments and every other channel that’s going against that market, there’s a demand for it,” Riley said.

“Even on the credit side, some of the contraction that was built into the process is starting to wane,” he said. “But when it comes to addressing real live funds and real live accounts, people want that money moved quickly, that’s for sure.”

With the flurry of new stories of disputed transactions, losses reported by customers, and now liability shifting over to financial institutions, banks and credit unions feel apprehensive about including these types of payments. But there is more to be gained than lost. Financial institutions stand to attract more customers, boost brand loyalty, and create new revenue streams. And they don’t have to navigate this area alone. It’s about forming a strategic partnership with experts in this space.

“One of the things which we recommend is leveraging the expertise of a reliable partner,” Srinivasan said. “Fiserv reduces the work burden for the financial institution significantly in terms of not just operational human expenses but also technology costs.

“Fiserv has the risk management protocols and strategy in place to help mitigate various kinds of scams and fraud,” he said. “Based on fraud and scams, we also design the user interface to interact and alert consumers on the transaction. Our consumers are the last line of defense so Safety messages and communication with your consumer on the app or email and text, is an important factor, too.”

The evidence clearly suggests consumers are safer with Zelle vs. alternate payments. With Zelle, financial and other risk management controls come into play, which in most circumstances are more robust compared to controls from alternate payment providers.

Overall Zelle Network fraud has dropped by over 35% year over year and financial institutions are continuing to bring fraud down to protect consumers. Real-time payments including P2P payments will continue to see increased adoption. With adequate preparation and strategy financial institutions are in great shape to delight consumers—safely and securely.

Interest in learning more? Contact zelle@fiserv.com.

The post Navigating The P2P Minefield appeared first on PaymentsJournal.

Theft from Venmo, PayPal, Zelle and other payment apps has been “skyrocketing” recently, according to the Manhattan District Attorney’s office. DA Alvin Bragg sent a letter to the providers of these payment apps, demanding enhanced security measures, including lower transfer limits, additional password security, additional wait times for large transactions, and increased monitoring for unusual activity.

Bragg’s letter is a follow up to a 2022 letter that Massachusetts Senator Elizabeth Warren’s office sent to the banking industry. Warren’s office said its investigation into Zelle showed that fraud claims had tripled between 2020 and 2022, costing consumers hundreds of millions of dollars. Warren was also part of a group of four Democratic senators that asked for further investigation into payment platform fraud last year.

Zelle is now by far the largest peer-to-peer payment system in America. In 2022, the app’s transactions totaled $490 billion, up 59% from the prior year. In contrast, Venmo handled $230 billion and had 62.8 million active U.S. users in 2023.

Sophisticated Crimes

Many of the attacks that Bragg refers to are common muggings. In an interview with CNN, he described reports of crooks approaching ordinary citizens demanding their phones, The thieves would then transfer money out of their accounts via a payment transfer under threat of physical harm.

But there have also been more sophisticated methods. In one effort, a team of thieves would ask Lyft drivers if they could put in a new address into the Lyft driver’s phone. Once they had the phone in hand, they would transfer assets to their own bank accounts using Cash App. According to court records, as much as $6,500 was taken from 50 Lyft drivers in 2020.

As a solution, Bragg asked for more safety measures, such as lowering the limit of daily transfers, requiring wait times on larger transfers, and for a confirmation when suspicious transfers occur. Even something as small as canceling a transaction would help, Bragg said.

Zelle Responds

A spokesperson for Early Warning Systems, the operator of Zelle, provided the following statement to PaymentsJournal:

“We are aware of isolated criminal incidents described in the Manhattan District Attorney’s letter. Providing a safe and reliable service to consumers is the top priority of Early Warning Services, LLC, the network operator of Zelle®, and our 2,100 participating banks and credit unions. As a result of our continued efforts to build on Zelle’s strong foundation of security, less than one tenth of one percent of transactions are reported as fraud or scams, and that percentage keeps getting smaller.

“Our efforts include implementing industry-leading fraud and scam prevention measures for consumers like in-app safety notifications, and send limits and restrictions. For network banks and credit unions, we’re helping to screen out bad actors with free tools. We also invest in ongoing consumer education efforts and have brokered public-private partnerships to do so.

“All Zelle Network® participating financial institutions are required to reimburse consumers for confirmed fraud claims. Consumers should contact the local authorities and their bank and credit union if they were a victim of a crime to begin the claims process.”

For its part, Venmo says it hasn’t seen a significant rise in what it calls bank jacking reports. The initial Warren report chose 2020 as a baseline, which was when Venmo and Zelle first took off as P2P solutions in response to the pandemic. Venmo recommends that users take security measures to protect their accounts, including facial recognition, multifactor authentication, and a PIN code.

The post Manhattan DA Vows to Combat Payment App Theft appeared first on PaymentsJournal.

Venmo announced the launch of its newest in-app feature, Venmo Groups, which facilitates the splitting of bills among a group for ongoing expenses. This launch underlines consumers’ growing use of digital payment apps to divvy expenses among friends and family members.

By eliminating the need to designate one person to keep track of all expenses, Venmo Group enables all users to add expenses, see what amounts are due, and settle up. As long as the group exists, new expenses can be added and calculated.

Venmo users simply need to go to their “Me” page to access the new Groups feature. Users can create a new group under the “Group” tab. With a couple of taps, new members of the group can add expenses and settle bills.

“We know managing ongoing expenses in a group can be challenging, in particular when each member covers different costs with different amounts at different times,” Erika Sanchez, Vice President and General Manager at Venmo, said in a prepared statement. “As one of our most requested features, Venmo Groups offers a seamless solution for users to better track and settle shared expenses in group settings.”

“Consumers are increasingly using digital payments for all types of transactions, and it may be difficult to keep track of all of them,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Venmo’s new feature allows users to better manage their various expenses, especially those that they regularly split with colleagues, family, friends, roommates, and others.

“Venmo Groups helps eliminate cumbersome spreadsheets and awkward social interactions, such as constantly having to ask your roommates for their share of the rent or utility bill. It seems like a valuable feature that will help Venmo users maintain healthy financial accounts and social relationships.”

Venmo Moves Forward as Regulation Looms

Venmo has been dipping into a variety of ventures and partnerships this year. In its recent foray into the cryptocurrency space, Venmo announced that its users can now transfer cryptocurrencies between Venmo wallets, PayPal accounts, external wallets, and exchanges. This followed the 2021 launch of its in-app trading platform for crypto assets. At that time, only buying and selling cryptocurrencies was available.

In line with the growing consumer interest in secure digital payments, Venmo partnered with Hallmark to enable customers to send money securely via Venmo within a physical Hallmark card. It also highlights the bridging of the gap between two generations, with older consumers preferring to send cash or checks with a greeting card and the younger generation preferring to receive digital payments.

Amid Venmo’s numerous undertakings within the growing P2P space, the Consumer Financial Protection Bureau (CFPB) recently proposed a rule that could bring large, non-financial digital payment providers under the same regulation and oversight as banks and credit unions.

It is still early to determine whether, if passed, these regulations would fuel or hamper growth within this emerging market.

The post Venmo Launches Venmo Groups to Split Common Expenses appeared first on PaymentsJournal.

Hallmark has teamed up with Venmo to allow consumers to send money securely with a greeting card. Erika Sanchez, Vice President and General Manager at Venmo, notes that this collaboration will essentially bridge a gap between older generations who prefer to give cash gifts in physical greeting cards and the younger generations now accustomed to receiving everything, including cash, digitally.

“It’s a creative and fun collaboration between Venmo and Hallmark that thoughtfully combines traditional mail with digital payments,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research.

“Personally, I love sending greeting cards to friends and family, and they appreciate receiving them in the mail. This provides a practical option for gifting money inside your greeting card. It’s safer and more convenient than including cash or checks. I could see people using this for common cash-gifting occasions like weddings or grandkids’ birthdays,” she said.      

Customers can select from Hallmark’s new line of greeting cards. Once a card is selected, they simply scan a QR code, unique to each card. Then they select the amount they want to send to the recipient. They can also include a personal message.

Only the recipient can access the money with this feature, which is done by scanning the QR code printed on the receipt. The sender and the receiver must both have Venmo accounts to use this feature. Furthermore, the gift must be redeemed within 180 days or the funds will be sent back to the sender’s account.

“Our new collaboration with Venmo represents an innovative new way to let someone know you’re thinking of them with simple, secure, and seamless cash gifting,” Darren Abbott, Hallmark’s Senior Vice President of Global Product Development and Innovation, said in a prepared statement.

“Gifting trends are constantly evolving, and we want to stay at the forefront of what consumers need to share thoughtful and unique gifts with the ones they love.”

P2P Payments Market Continues to Expand

With customers increasingly turning to online shopping, mobile banking, and now peer-to-peer (P2P) payments, it is no wonder that use cases will only broaden across various markets worldwide.

Another key driver in the growing popularity of P2P payments is the demand for faster payments. Consumers want not only instant payments but also convenient and secure payments. It is increasingly uncommon for consumers to walk around with cash, let alone the right amount. With P2P payments, users can pay their friends and family quickly.

This trend is ongoing, and P2P providers would do well to continually evolve to meet shifting consumer needs.

The post Hallmark and Venmo Partnership Enables Digital Cash Gifting appeared first on PaymentsJournal.

More people are using debit cards, bank transfers, and cryptocurrency to pay for goods than ever before. In 2021 alone, there were $989 billion of non-cash transactions, while future estimates predict that $2 trillion of cashless payments will take place every year by 2026.

However, the future of cashless payments is still a little murky. A future without cash would impact individuals without bank accounts and many consumers are concerned about the ethics of shared e-commerce data.  

That said, the benefits of cashless payments still vastly outweigh the drawbacks. Consumers who embrace cashless payments can manage their money and businesses can use social commerce to bolster their revenue and reduce their operational costs.

Cashless Payments Trends

Cash is still king, but non-cash payments like contactless cards and peer-to-peer payments (P2P) are steadily gaining popularity. This trend is likely driven by young consumers, who feel more comfortable navigating a cashless world. A recent Pew Research Center survey even found that only 45% of Americans aged 18 – 45 “try to have cash on hand”, compared to 71% of those aged 50+.

Pew Research Center surveys also found that less affluent Americans are far more likely to be reliant on cash than their wealthier peers. 30% of households with an income below $30,000 say they use cash for “all or almost all” purchases, while only 6% of households with income about $50,000 use cash today.

A widespread increase in digital and social commerce will drive the future of non-cash payments, too. Social commerce is a subsector of e-commerce that has been on the rise in recent years due to the increased popularity of social media channels like TikTok and Instagram. Online consumer-to-business (C2B) transactions can help consumers use their connected bank account and innately enhance the consumer journey.

The Benefits of Cashless Payments

Going cashless is good news for those of us who struggle with mental arithmetic. Financial tech (fintech) like contactless card payments is extremely convenient, too. Removing the need to visit the bank for cash withdrawals frees up time and may encourage greater consumer spending.

Small to medium businesses (SMBs) can also reap the rewards of cashless payments. The benefits of going cashless as an SMB include:

• Increased Revenue: Cashless transactions will dominate the payment industry in the future. SMBs that embrace cashless can enjoy increased customer retention which, in turn, bolsters revenue.
• Speed: Consumers don’t want to wait in line to make their purchases. Queue times can be slashed by installing cashless devices that complete the transaction process in moments rather than minutes.
• Lower Operating Costs: Storing and transporting cash is costly. Cashless SMBs can save the money they would spend on armored couriers and reinvest profits to support growth.
• Account Accuracy: Non-cash payments remove the risk of human error. SMBs that utilize cashless payment can usually find accounting software that integrates with their payment portals, too.

Going cashless is great for businesses. Quicker transactions improve the customer experience and may translate into increased sales volumes.

Carrying around less cash can improve security, too. Coins and notes can be lost, stolen, or counterfeited. Cashless payment systems, however, are usually encrypted and can be easily tracked to improve security.

Challenges and Solutions 

Businesses and financial institutions are gearing up for a cashless future. However, before we turn our back on nickels and dimes, it’s worth considering the drawbacks of a cashless society.

Going cashless puts vulnerable people at risk. That’s why cities some cities and states have introduced legislation to prohibit cashless businesses.  The argument behind proposals like these is that folks who do not have access to a bank account are still able to buy goods and procure services just like everyone else. This is particularly important for folks with lower incomes, who may struggle to keep up with credit card payments and feel disenfranchised by the move towards a cashless future.

Going cashless may exacerbate some financial cybersecurity concerns, too. In an entirely cashless enterprise, malicious actors may be able to gain access to private data and expose personal financial information This is a real concern for people who bank online, as “open finance” features give authorized users a 360-degree view of their banking details. If a person’s banking details are stolen, their entire life savings may be at risk.

Fortunately, the future of cashless payments is evolving in response to these challenges. Today, many financial institutions have embraced a “zero trust” approach to their cybersecurity ecosystem. This minimizes the risk of malicious actors gaining access to accounts and firms up data protection efforts.

Conclusion

Cashless payments are on the rise. Going cashless is convenient, secure, and time-efficient for businesses and consumers alike. However, companies and government agencies need to respond to the rise of social commerce and contactless transactions. Advancements in cybersecurity are needed to keep personal data safe, and more pro-cash legislation may be necessary to ensure everyone can still pay for basic goods and services.

The post Exploring The Future of Cashless Payments appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau (CFPB) has issued a notice to consumers, strongly advising against keeping funds in nonbank P2P apps, including Venmo, Cash App, and PayPal.  

That’s because when P2P users receive money, the funds are not funneled into their bank or credit union account, but are instead held and invested. Because funds stored in payments apps don’t fall under the same protections as banks and credit unions, there’s a greater risk that consumers may lose their funds in the event the company’s investments fail.  

Furthermore, very little to no information exists within the user agreements that indicate where the funds are held or invested, or what these implications would mean if things were to go south. 

“The CFPB actions serve as a timely warning to consumers, who may feel a false sense of security with P2P balances,” said Jordan Hirschfield, Director of Prepaid Payments at Javelin Research & Strategy. “The service provided by the apps are fantastic and convenient, but consumers should be careful not to maintain large balances that can be at risk.” 

“Each app has simple and efficient ways to transfer balances to secured bank accounts when consumers feel they need to protect their balance. I’d add that similar themes could apply to stored value accounts on retail and food and beverage apps as well, which operate slightly differently but also do not offer insured balances,” he said.  

Funds that are deposited into a federally-insured bank and credit union are backed by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration  

The Popularity of P2P Apps 

We have covered why the P2P market continues to grow, and in short, consumers want the flexibility to make payments quickly and easily.  

According to the CFPB, more than three-quarters of U.S. adults have used a payment app, with younger consumers more likely to leverage it than their older cohorts. In fact, close to 85% of consumers ages 18 to 29 have used a P2P app.  

Given the growing popularity of P2P apps, with transaction volume among all of the P2P providers in 2022 reaching roughly $893 billion—and projected to surpass a trillion dollars by 2027—it’s important that consumers are more aware of where they store their money and the implications of storing it in nonbank payment apps.  

The post CFPB Warns Against Keeping Funds in P2P Apps  appeared first on PaymentsJournal.

Venmo announced that its users will be able to transfer cryptocurrencies between Venmo wallets, PayPal accounts, and external wallets and exchanges.

Venmo’s introduction of full crypto wallet functionality is a big step towards the normalization of crypto payments. This move comes after the company launched its in-app trading platform for crypto assets in 2021. Until now, the app only supported buying and selling crypto assets, not transferring them.

Venmo’s push into crypto payments is a reaction to the increasing competition in the mobile peer-to-peer (P2P) payments market. While Venmo remains one of the most popular payment apps in the U.S., competitors including Cash App have also risen to prominence. Cash App entered the crypto payments space in 2018, giving it a head start over Venmo.

Through this rollout, Venmo users can identify a recipient with their wallet address or generate a unique identifying QR code that they can share with others. However, Venmo has not yet stated how fees and transaction costs will work for crypto transfers.

The integration of crypto transfers in such a popular payment app like Venmo shows that even traditional financial institutions like PayPal are recognizing the value of cryptocurrencies. It also marks a shift in the payments industry towards more efficient and cost-effective P2P payments, which can be facilitated by cryptocurrencies.

In the grand scheme of things, the move by Venmo shows how the fintech industry is increasingly integrating with the crypto world.

Looking ahead, we can expect to see more fintech companies and payment apps incorporating cryptocurrencies into their platforms. As more consumers become comfortable with using cryptocurrencies for payments, the industry will continue to grow and mature.

The post Venmo to Support P2P Cryptocurrency Transfers appeared first on PaymentsJournal.

Walmart expects roughly 65% of its stores will be serviced by automation by the end of 2026. AI will also be used in Walmart’s warehouses and stores in an effort to streamline its e-commerce fulfillment facilities and keep up with online orders.  

The retail behemoth estimates that close to 55% of its fulfillment center volume will pass through fully automated facilities. And while the news comes on the heels of Walmart announcing that it plans to lay off roughly 2,000 employees from facilities that fulfill online orders, during an investor call, John Furner, CEO and U.S. President at Walmart, said: Over-time, we’ll have the same number of associates, possibly even more, but we’ll have a larger business and they’ll be new roles that’ll emerge that are more technical…and they’ll pay more.”   

Automation Brings Higher Efficiency and Lower Cost to Walmart

Artificial intelligence has the potential to revolutionize retail on many levels. Robots that are driven by advanced machine learning algorithms can tackle the unloading, sorting, and the moving of products in fulfilment centers. Drones, with the use of radio-frequency identification (RFID) tags on every unit, would fly over their location, read the tags, and keep tabs on inventory levels.  

AI can also leverage both operational and historical data in order to improve processes such as pricing tactics, the management of inventory, and demand forecasting.  

All these processes can provide a more seamless order fulfillment operation, which can enhance customer service. Additionally, the use of AI can also be leveraged to offer tailor-made product recommendations which translates into customer loyalty, lower costs, and greater efficiency. 

The post Walmart Will Implement AI and Automation to Speed Up Online Orders  appeared first on PaymentsJournal.

WhatsApp is letting consumers in Brazil pay businesses directly through the Meta-owned messaging app. This has been years in the making, after previous unsuccessful attempt. 

Regulatory Roadblocks 

Meta first rolled out peer-to-peer payments in Brazil in 2020, where WhatsApp users were able to send funds to their contacts via the app. However, that was halted due to regulatory constraints.  

Previously, WhatsApp users could pay merchants by using a merchant-generated payment link that was sent on the app. Users were not too keen on using this method as it proved to be troublesome, with too many steps.  

On its blog, WhatsApp noted that:  

“This seamless and secure checkout experience will be a game-changer for people and small businesses looking to buy and sell on WhatsApp without having to go to a website, open another app or pay in person. We’re rolling out today to a small number of businesses and will be available to many more in the coming months.”   

Improving Business Transactions in Brazil 

Last year, WhatsApp released a directory of participating businesses that enable users in Brazil to search for food and drink to travel merchants. Users can then make a selection of the items they want to purchase and do so directly within WhatsApp.  

WhatsApp users can pay by using Mastercard and Visa debit, credit, prepaid cards issued by participating banks. For businesses to accept these payments, they can link a service providers Mercado Pago or Cielo to their account, as they already have the necessary peer-to-peer infrastructure on WhatsApp in Brazil.  

P2P payments and use cases continue to make a significant gains, thanks to growing adoption of mobile and e-commerce payments.   

The post Consumers in Brazil Can Now Pay Via WhatsApp  appeared first on PaymentsJournal.

According to an article on Mashable, Elon Musk is sticking to his plans to develop Twitter into a payments platform for in-app payments, as well as a peer-to-peer (P2P) payments app.

This news is more than just hearsay. Twitter registered in November to be a money transmitter with the U.S. Treasury’s Financial Crimes Enforcement Network and is now applying for further regulatory licensing. Twitter has also appointed Esther Crawford, former Director of Product Management to lead its Twitter Payments team.

Given Musk’s background with X.com and PayPal it makes sense that payments would eventually enter the Twittersphere as a product. Given the rise of social commerce, larger technology companies such as Apple and Google moving into payments, and “Super Apps” such as Alipay and WeChat, Twitter Payments is ambitious to say the least.

The company plans to enter a payments market that is highly competitive with contenders that have decades of experience and a firm standing in the market. In an incredible stroke of payments irony, Musk will be taking on his former company PayPal, particularly their Venmo app, which is one of the most successful P2P apps in the marketplace today. PayPal also has nearly double the customer base of Twitter. As of Q2 2022, PayPal had 429 million active accounts, while Twitter reported 237.8 million active users. Analyst firms are also forecasting a decline in Twitter’s customer base citing the platforms infrastructural and content moderation problems.

The launch of Twitter Payments will help alleviate some of the revenue loss from large global brands pulling ad spend during the acquisition, but will it be enough to fill the holes on a sinking ship? The massive layoffs in 2022 marked a turning point in the company’s strategic future, but it has us questioning if Twitter has enough employees to successfully deliver on Twitter Payments.

Another major problem is generating trust as a financial services provider. Earlier this month, Twitter was in the news for a massive data breach and it has had its share of cybersecurity issues in the past. For consumers, transacting on an e-commerce site is now commonplace, but storing your money with a social media platform (Musk did propose a high-yield money market account) is a whole other range of emotions. When the product launches, it will take time for Twitter Payments to garner trust, which is not simply something that happens over a few tweets.

Overview by Ben Danner, Research Analyst at Mercator Advisory Group.

The post Twitter Payments Continues to Build Momentum appeared first on PaymentsJournal.

Globally, the peer-to-peer (P2P) payments market is set to reach $4.93 billion in 2026, according to a recent report. The research also cites how the Russia-Ukraine war has dashed any hopes for economic recovery worldwide, at least for now. The conflict has led to sanctions on various countries, leading to supply chain disruptions and an increase in commodity prices. 

P2P payments market growth can be attributed to the growing adoption of online banking, mobile banking, as well as e-commerce. Both advanced and convenient features offered by online and mobile banking platforms are key drivers within the P2P payments market. With continued technological advancement spearheaded by various players in the P2P payments market, there is no doubt that their use will only continue to grow in popularity.  

The growing demand for faster payments by consumers cannot be ignored. This has led to an expansion of use cases such as bill pay, account-to-account transfer, as well as the movement of funds person-to-person. We have written about the importance of faster payments and what consumers are looking for in a P2P solution here.  

“Consumers have adopted P2P into their daily payments routines, especially as a quick method to pay friends and family easily in place of cash,” said Jordan Hirschfield, Director of Prepaid Advisory Service at Mercator Advisory Group. “The continued efforts to reduce and mitigate fraud and theft through P2P will enable next generation growth. This includes allowing P2P to function as a trusted alternative at point-of-sale to benefit both consumers and merchants.”  

The post Global P2P Payments Market Continues to Experience Significant Growth  appeared first on PaymentsJournal.

Zelle payments are more popular than ever, but some consumer protections are not in place to adequately protect users. In 2021, Zelle transacted $490 billion worth of payments, and the numbers are growing. More than 1,800 banks utilize Zelle’s P2P money transfer system. Zelle users deduct cash from their checking account and send it to the payee. This allows the payee immediate access to that cash. Since Zelle payments are considered “immediate payments,” settlement is final.  This makes the nature of Zelle payments irrevocable, an issue that becomes prominent when dealing with scammers. In an article posted by Wall Street Journal, big banks are banding together to create remedies for scammed consumers. They are hoping to be a step ahead of regulators.

How Did This Become a Problem in the First Place?

Scammers got clever and took advantage of the irrevocable nature of Zelle’s instant payments. Many consumers sent cash to what appeared to be their own bank accounts. But the scammers hooked their accounts up to the receiving end of the payment.

Many consumers may assume they are protected against scams; banks are required by legislation to refund consumers for transactions they did not authorize. This works for traditional debit and credit transactions. But since there is no real “authorization” messaging in immediate payment processing, some banks refuse to provide reimbursement to the consumer. Some banks on the Zelle network have their own policies in place to reimburse scammed consumers, but there is no consistency across all financial institutions today.

What Is Being Done?

Lawmakers are pressuring banks into doing more to help victims of P2P payment scams in a consistent manner. The Consumer Financial Protection Bureau is in the works of preparing new guidance aimed at requiring banks to provide reimbursements to scammed consumers on Zelle and other P2P money transfer systems. The banks would simply need to withdraw the cash from the scam account and deposit it back into the consumer’s account. If the guidance is solidified into new rules, all banks participating on Zelle’s network would have to comply.

The big banks behind Zelle are partially on board with the legislators. Zelle’s owners include Bank of America, Capital One, Chase, PNC, Truist, U.S. Bancorp and Wells Fargo. According to WSJ, “by agreeing to share liability inside Zelle’s system and guaranteeing to reimburse each other, the banks hope more customers will get their money back.” However, there are limitations. The banks would not extend reimbursement protections to consumers seeking refunds for goods or services they did not receive, or for people who made type-o’s when inputting the receiver’s account.

The new guidance is rumored to become effective in 2023. According to the WSJ:

• The new refund rules could kick in as soon as early next year. The banks are running tests to make sure the changes wouldn’t result in a fresh surge of scams. 
• If the new rules are put in place, financial institutions that participate in Zelle would have to agree to them or risk being kicked out of the network, people familiar with the matter said.

With the push to faster payments, fleshing out the liability issue is imperative for financial institutions… and consumers.

Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Mercator Advisory Group.

The post Banks Take a Proactive Stand to Resolve Zelle Issues before Regulators Make their Mark appeared first on PaymentsJournal.

The American Bankers Association released a letter to the Consumer Financial Protection Bureau. In it they underscore their belief that regulations on peer-to-peer (P2P) payments would provide negative results for consumers. They also indicate that it would not significantly impact overall fraud within P2P payments use. The ABA’s announcement provides additional information on their viewpoint:

“ABA and two community bankers attended a listening session with CFPB staff on Sept. 29. The letter reiterated and supplemented points made in the listening session to explain some of the scams banks and their customers are experiencing, steps banks take to prevent scams and other fraud, and the significant banking industry efforts to educate customers about how to avoid being a victim of fraud. In addition, it highlighted ABA members’ concern about the implications and unintended consequences if liability for payments that consumers authorize—but later claim were part of a scam—is shifted to banks.”

P2P Payments – A Cash Alternative

The ABA letter underscores the greatest benefit and issues with P2P payments. It is essentially a cash alternative and less analogous to credit and debit products. Of course, because of the digital connection to bank accounts the education piece becomes critical for financial institutions. It ensures the proper use by its consumers.  As I noted in my recent “U.S. 2022 Person-to-Person (P2P) Payments Market Update” report and as the ABVA writes, consumer education is the linchpin to FIs efforts to combat fraud within the P2P ecosystem. P2P providers currently offer a myriad of options. These options serve to educate consumers about the risks involved in sending money through their service. Or, the options provide limits to the amount of money that can be accessed unless a consumer verifies their account. Verification generally requires providing information such as full name, mailing address, date of birth, and the last four digits of the user’s Social Security number.

Fraud for P2P Payments Transactions

The ABA also notes that incidents of fraud in P2P transactions remain very low. This exemplifies that in the past 5 years of Zelle transactions reports of fraud represent less than 1% of total transactions. When these limited fraud transactions are brought to their attention, the ability of the FI to take action can be limited:

“It also noted that banks also have limited insight or opportunity to intervene in consumers’ payment decisions, the association said. ‘Indeed, consumers are in the best position to know the reasons they are sending money, the circumstances of the payment, and who the recipient is.’”

The ABA point of not having better clarity into the transaction is a critical message in their limited ability to rectify potentially fraudulent activity. Credit and debit transactions have much greater detail. This is for both the card of the consumer and the type and location of the merchant. P2P transactions can be fairly anonymous and have no underlying transactional detail. Creating processes to combat them would likely strip P2P services of the main value proposition of a free, simple and instant way to send money electronically between people.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post ABA Believes P2P Payments Regulations Will Decrease Value appeared first on PaymentsJournal.

Bitcoin is unique in that there are a finite number of them: 21 million. The Lightning Network is essentially a second layer on top of the bitcoin blockchain that enables instant, scalable payments. With Lightning, you can send and receive money almost instantly, and for very low fees. That makes it ideal for micropayments, or small payments that are too expensive to make with traditional methods like credit cards or Paypal. How will this affect P2P crypto payments?

According to a Twitter post by Cash App’s Bitcoin Product Lead, the company will now allow its 44 million users to send and receive bitcoin payments on the Lightning Network. That’s a significant move for the P2P crypto payment space.

Utilizing the Lightning Network solves a big problem for everyday bitcoin usage because it speeds up transactions to near instantaneous rates with small or no fees, and solves for making bitcoin micropayments. Cash App has set a $999 limit for sending or receiving payments every seven days.

According to its website, all transactions using a QR code will default through the Lightning Network unless a user reaches their limit, or they choose to send through the traditional Bitcoin Network.

Overall, consumer interest in using crypto to make payments is low, and crypto is still primarily used as an investment vehicle. As integrations abound and transacting becomes frictionless, maybe further adoption will occur.   

Overview by Ben Danner, Research Analyst at Mercator Advisory Group.

The post P2P Crypto Payments Gets a Boost with Lightning Network’s Integration on Cash App appeared first on PaymentsJournal.

Monett, Mo., October 25, 2022 – Jack Henry™ (Nasdaq: JKHY) announced today the launch of its standalone person-to-person (P2P) payments solution. Powered by the Payrailz^® Digital Payments Platform, which Jack Henry acquired September 1, 2022, the P2P solution is now available for standalone implementation or as a strategic component of the full Payrailz payments platform. 

Operating as the industry’s only financial institution-centric, open-loop, real-time P2P payments solution, Jack Henry’s offering provides a flexible, convenient way to send money to virtually anyone. Unlike closed-loop solutions, open-loop solutions do not require senders and receivers to belong to the same payment network. One-time and recurring payments can be made using the recipient’s mobile number or email address with flexible delivery options, split-pay functionality, good funds settlement, and the ability to credit funds to checking and savings accounts, debit cards, and Venmo accounts, with other options in development. Fraud mitigation is optimized with a multi-layered approach that includes one-time passwords (OTP) and the in-development Fraud Monitor, which will score 100% of P2P payments in real-time. This API-enabled solution can be seamlessly integrated into existing digital banking platforms.

Today, people expect secure, convenient, flexible ways to send and receive money in the moment of need and this next-generation solution enables banks and credit unions to meet those expectations. Offering convenience-driven, real-time payments allows money to be securely sent to virtually anyone in three clicks, allows banks and credit unions to remain at the center of the payment experience, and ultimately reduces payments friction and financial fragmentation.

“The demand for P2P payments is strong and growing, and offering instant payments has evolved from a competitive distinction into a competitive necessity,” said Tede Forman, president of payment solutions at Jack Henry. “Jack Henry has been on the leading edge of faster payments offering our clients ready-built conduits to the new networks. Our experience supporting more than 400 financial institutions that are already live on the Zelle^® and RTP^® networks, with another 156 in various stages of implementation, has demonstrated that many banks and credit unions are offering access to multiple faster payment networks. We believe the strategic addition of the open-loop Payrailz P2P solution provides our clients and prospects with additional and distinct functionality, optionality, and flexibility and enables us to more seamlessly support the near- and long-term digital and payment strategies of diverse banks and credit unions.”

About Jack Henry & Associates, Inc.

Jack Henry(Nasdaq: JKHY) is a well-rounded financial technology company that strengthens connections between financial institutions and the people and businesses they serve. We are a S&P 500 company that prioritizes openness, collaboration, and user centricity – offering banks and credit unions a vibrant ecosystem of internally developed modern capabilities as well as the ability to integrate with leading fintechs. For more than 45 years, Jack Henry has provided technology solutions to enable clients to innovate faster, strategically differentiate, and successfully compete while serving the evolving needs of their accountholders. We empower approximately 8,000 clients with people-inspired innovation, personal service, and insight-driven solutions that help reduce the barriers to financial health. Additional information is available at www.jackhenry.com.

Statements made in this news release that are not historical facts are “forward-looking statements.” Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed in the Company’s Securities and Exchange Commission filings, including the Company’s most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Any forward-looking statement made in this news release speaks only as of the date of the news release, and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise.

The post Jack Henry™ Launches Standalone, Real-Time Person-to-Person (P2P) Payments   appeared first on PaymentsJournal.

Person-to-person (P2P) payments are a way to send or receive money from another person without going through a bank or other financial institution. Person-to-person payments are becoming more and more common. Whether you’re paying a contractor for work done or sending money to a friend, there are many options available for sending and receiving payments. While person-to-person payments are convenient, they also come with some risks. With any payment transaction, there is always the potential for fraud. Where does Zelle fit in?

Zelle Celebrates 5-year Anniversary

Last week, Early Warning Services celebrated the 5-year anniversary of P2P app Zelle.   An article in The Financial Brand noted some of the statistics achieved over this timeframe:

• Zelle app is offered by 1,750 banks and credit unions, with a reach of 80% of US checking accounts
• It has processed over five billion transactions and nearly $1.5 trillion since its launch in late 2017
• The average Zelle transaction comes in at about $275.

Zelle has achieved some of its recent growth through business transactions, both as business-to-consumer disbursements and as consumers use the app to pay small businesses.  While business activity is ramping up, CEO Al Ko does not see Zelle as a point-of-sale solution that would challenge traditional card payments:

At this point Ko sees Zelle as consuming more and more of the portion of payments that once relied on cash and checks, offering greater speed over the latter and the immediacy of the former. He likes to call Zelle “digital cash.”

However, he doesn’t see Zelle moving into ecommerce in a way that would supplant credit cards. A major use case for digital wallets is ecommerce as well, so he sees any role for Zelle in that space as something down the road. Even if the company developed a role there, “I would expect card-based payments to rule the roost.”

Addressing P2P Fraud

Zelle and other P2P services have been in the news lately for the attention is has received from legislators and class action lawsuits against financial institutions offering Zelle regarding the product’s safety.  Financial institutions have been sending notices to its customers about how to avoid becoming a victim of P2P fraud. The CFPB is reportedly looking into the matter and may issue new rules regarding the liability of losses for these transactions.  The article had this to say on the topic:

Zelle has been roasted on Capitol Hill, in the media and elsewhere about customer losses. Ultimately, reimbursement of customers for funds stolen is between their financial institution and themselves.

The issue falls into two categories. Ko explains the difference, in his view. Fraud, he explains, “is where somebody gets into your account and makes an unauthorized transaction. That’s exceptionally low.”

On the other hand, the volume of scams has been growing. These are situations where people fall for online romance cons and other deceptions. “These are situations where you paid someone, you authorized it, but it turns out it was a mistake, or you were duped,” says Ko.

Ko says Zelle has been spending more and more on user education, to alert people to the risk of scams. In addition, he says, the service has been introducing “smart friction” points in transactions to make users stop and think a moment about money being sent to a new payee.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Early Warning Service’s Zelle Marks 5-Year Anniversary and $1.5 T in Payments Transferred appeared first on PaymentsJournal.

Occurrences of fraud utilizing peer-to-peer (P2P) payment apps such as PayPal, Venmo or Zelle continue to rise while also escaping regulatory oversight because of distinctions in how the transactions are authorized. The Regulatory Review’s Andrew Kliewer writes further:

“This increasingly common scenario reveals a critical distinction in what consumer protection law considers to be an “unauthorized transaction.” When thieves hack consumers’ accounts or steal their phones and transfer money, the Electronic Fund Transfer Act (EFTA) considers the resulting transactions to be unauthorized and requires banks or payment services to refund them.

But in instances where scammers trick individuals into authorizing payments themselves, Regulation E, which implements the EFTA, does not protect the payments. This subtle distinction marks the difference between an easy refund and the loss of thousands of dollars for victims of fraud.”

Financial Institutions currently are insulated from refunded transactions, where the victim authorized payment through a fraudulent trick, creating customer service conflict between the individual, the P2P app, and the financial institutions. In cases with products like Zelle, which are supported directly from the financial institution, the FI and App operate as essentially the same entity in the view of the payer, heightening the sense of service due to rectify the situation on behalf of the customer.

Mercator Advisory Group research shows that P2P providers rank near the bottom of their peers in terms of customer service surrounding fraud occurrences, likely because of the limited regulations surrounding customer authorized transactions, even when that transaction was spurred by deceptive acts. The dissatisfaction occurs with the larger group and these actions occur industry wide as my colleague Sarah Grotta reported this spring, although Zelle continues to get a larger share of criticism. The growth of P2P transactions and subsequent fraud is creating a groundswell of support to increase the powers of Regulation E to cover more ground in the sector, as Kliewer reports:

“In short, the features of P2P apps that make them successful—convenience and speed—also make them susceptible to scams. This vulnerability has led some consumer advocates to call for the CFPB to update Regulation E to include under the definition of unauthorized payments instances where thieves trick or coerce victims into making P2P payments.”

The expansion of Regulation E can bring positive and negative changes for both providers and consumers. While increased regulation can help consumers gain additional security, it could also lead to steps that make P2P transactions more burdensome, taking away the natural advantages of speed and simplicity that have supported systemic growth. Kliewer highlights the potential for abuse if consumers can request chargebacks for transactions spurred by bad actors. In this case, rectifying one kind of fraud could result in an increase of other fraud activities, but having bad actors make legitimate payments and then make a claim. The article explains further that these scenarios can result in creative actions by P2P providers to be more preventative:

“Expanding Regulation E’s coverage could, however, prod P2P payment providers to help prevent fraud in the first place. Experts point to several steps these companies could take to tamp down on fraud, such as encouraging users not to share their usernames publicly and providing customer support hotlines. If P2P payment providers were on the hook for fraudulent activity, they may have more incentive to take such preventative actions.”

The clear implication of the current lack of regulatory coverage and tools available to assist consumers is that there will be actions on one or both sides of the spectrum due to the sheer magnitude of P2P transactions occurring and the attention that brings to the industry when fraud goes undeterred.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post P2P Fraud Continues to Befuddle Regulators appeared first on PaymentsJournal.

In recent years, there has been a growing trend of people using person-to-person (P2P) payment platforms to send and receive money. P2P payments are made directly between two individuals, without the need for a third-party financial institution. This type of payment is often used for personal transactions, such as splitting a bill or sending a gift, but it can also be used for businesses. There are a number of advantages to using P2P payments, including convenience, speed, and security.

Lawyers must really see an opportunity for a windfall in the P2P payments app business. Several class action lawsuits have been filed against banks and credit unions regarding the way that consumer losses are treated when a P2P user authorizes a payment transaction only later to find out that they were defrauded though social engineering or other means. As Bloomberg Law reported, a class action lawsuit now has ensnared PayPal’s Venmo:

Paypal Inc. was accused of failing to inform consumers about the inherent dangers of using Venmo.

San Jose man claims in a proposed class-action lawsuit that Venmo is a favorite of fraudsters because its transactions are “instantaneous and unrecoverable,” making it all but impossible for consumers to recoup their losses after they realize they’ve been scammed

Man claims he lost $2,450 to someone who offered him a job and told him to buy goods and supplies using Venmo, and then disappeared.

From what I have seen in the market, P2P app providers are meeting their obligations under Regulation E and providing recourse to consumers when transactions are unauthorized, meaning someone has stolen account data or broken into the P2P app and have sent money without the account owner’s knowledge. 

Consumer authorized transactions are another matter. Most app providers have some mitigation tools in place to educate consumers and get them to consider how they are using the app:

• They warn consumers to send money only to people they know and trust. 
• They may put transaction limits in place. 
• They may require users to confirm their intentions to send money to an individual if it’s the first time they are sending funds to a particular email or mobile number or if funds are being designated to a number not in the user’s phone contacts.

These are all commonly used tactics that some consumers just ignore and click through.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post PayPal Also Ensnared in the P2P Payments Class-Action Lawsuit Frenzy appeared first on PaymentsJournal.

An article in The Wall Street Journal give high praise to Block and its ability to generate revenue and income from its Cash App product. The article notes that revenue from Cash App is closing in on the level of revenue generated from Square’s merchant processing business.

Once a simple P2P app, Cash App has expanded into a payments “super app” that includes a debit card, a Buy Now, Pay Later option, investing in equities, and crypto services (of course). Here is more from the article that suggest that Block will do well, despite the recent turmoil experienced by tech and fintech stocks:

With the market turning against money-losing companies, the onus is on once highflying growth stocks to show a clear path to big profits. Block, the operator of both Square and Cash App, has the pieces to make a compelling case. Even if user or e-commerce growth slows, Block’s consumer Cash App is rapidly adding ways to monetize its existing users via additional financial services, as well as to help boost its Square seller business. Rather than adding still more users, this kind of per-user revenue expansion is what investors are looking for now across many fintech companies, ranging from PayPal to Robinhood Markets.

With Cash App, the average monthly active user brought in just over $1,000 to their accounts in the first quarter of 2022. And Cash App monetized those inflows into gross profit—defined as revenue minus certain transaction processing, bitcoin and hardware costs—at a rate of just under 1.2%. For an active customer in March doing direct deposit with Cash App, that increased their inflows on average by 6½ times compared with someone just using Cash App’s peer-to-peer payments service. On top of that, an active account in March that was an active user of the company’s debit-card, stock-trading or borrowing services increased their monetization rate on average to 1.7 times that of a peer-to-peer-only user.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Cash App Finds Its Revenue Sweet-Spot appeared first on PaymentsJournal.

When Zelle was first launched, there were no plans to use the app for anything other than person-to-person (P2P) or consumer-to-business (C2B) invoiced account transfers. As Fool.com noted in an article based on the Wall Street Journal’s original reporting, that could be changing. The large banks that own Early Warning Services, the company that runs Zelle, are considering allowing merchants to accept Zelle for purchases. Why the change of heart? Two things, I think: 

• The success of Zelle to attract and continue to grow its consumer base
• Competition from the likes of Venmo and Cash App

If the banks decide to make this move (it’s not certain yet they will, but I suspect it’s highly probable) it will be beneficial for them. They can add this solution to their stable of acceptance devices for their merchant clients and control the pricing. Merchants will like it because of the large, installed consumer base and the fact that Zelle is not associated with the card network rules, plus transactions can be received in real time. The downsides are that this represents a new vector for fraud and the consumer adoption is unknown. Unless incentives and protections are aligned such that consumers also benefit, adoption will be minimal.

From the Fool.com article:

America’s big banks are in a football huddle about whether to call an audible that would screen credit card companies out from one of their most lucrative revenue sources.

According to The Wall Street Journal, several notable Wall Street names are considering expanding their use of money transfer service Zelle to retail purchases, which would come at the expense of card issuers like Mastercard or Visa. Who owns Zelle? The banks.

The banks are reportedly considering creating a payment option on Zelle where money could go from a customer’s bank account to a merchant. Zelle, used by 1,425 banks and credit unions, handled 1.8 billion transactions last year, with $490 billion changing hands. That’s more than double 2019 figures and laps Venmo’s $230 billion worth of processed transactions.

According to sources who spoke to the WSJ, Wells Fargo and Bank of America are in favor of the move, but JPMorgan, US Bank, and Capital One are on the fence.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Zelle at the Point-of-Sale… Maybe appeared first on PaymentsJournal.

Peer-to-Peer App Safety and Security Concerns in Canada:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID

Peer-to-Peer App Safety and Security Concerns in Canada:

• 71% of Canadian respondents paid for a product or service that they ordered but which was never delivered.
• 46% of Canadian respondents lost money using a P2P service.
• 42% of Canadian respondents reported their bank account as compromised after using a P2P app.
• 38% of Canadian respondents received a fraudulent charge using a P2P service.
• 32% of Canadian respondents sent money to the wrong recipient using a P2P app.

About Report

Mercator Advisory Group’s most recent report, 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID, analyzes the impact of COVID within Canada on consumer payment preferences. The report reveals generational differences in the use of a range of payment forms including cash, cheques, cards, and digital payments.

The report is based on the North American PaymentsInsights survey, administered in 2021 to a nationally representative sample of 1,002 Canadian consumers, ages 18 years or older.

“Payment technology is creating rapid shifts in consumer payment preferences, with COVID acting as a direct change agent, resulting in declines in use of paper payments via cash or cheques. At the same time, we are seeing emerging technologies such as peer-to-peer payments making a large impact on the consumer payment market,” says Amy Dunckelmann, VP, Research Operations at Mercator Advisory Group.

The post Peer-to-Peer App Safety and Security Concerns in Canada: appeared first on PaymentsJournal.

Canadian Use of Non-Bank or Credit Union P2P Apps:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID

Canadian Use of Non-Bank or Credit Union P2P Apps:

• 20% of Canadian respondents use one non-bank/CU P2P app.
• 5% of Canadian respondents use two non-bank/CU P2P apps.
• 7% of Canadian respondents use three non-bank/CU P2P apps.
• 9% of Canadian respondents use four non-bank/CU P2P apps.
• 4% of Canadian respondents use five or more non-bank/CU P2P apps.
• 55% of Canadian respondents do not use any non-bank/CU P2P apps.

About Report

Mercator Advisory Group’s most recent report, 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID, analyzes the impact of COVID within Canada on consumer payment preferences. The report reveals generational differences in the use of a range of payment forms including cash, cheques, cards, and digital payments.

The report is based on the North American PaymentsInsights survey, administered in 2021 to a nationally representative sample of 1,002 Canadian consumers, ages 18 years or older.

“Payment technology is creating rapid shifts in consumer payment preferences, with COVID acting as a direct change agent, resulting in declines in use of paper payments via cash or cheques. At the same time, we are seeing emerging technologies such as peer-to-peer payments making a large impact on the consumer payment market,” says Amy Dunckelmann, VP, Research Operations at Mercator Advisory Group.

The post Canadian Use of Non-Bank or Credit Union P2P Apps: appeared first on PaymentsJournal.

Canadian Use of P2P Payment Apps Supported by Financial Institutions:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID

Canadian Use of P2P Payment Apps Supported by Financial Institutions:

• 38% of Canadian respondents use one FI-supported P2P app.
• 16% of Canadian respondents use two FI-supported P2P apps.
• 10% of Canadian respondents use three FI-supported P2P apps.
• 9% of Canadian respondents use four FI-supported P2P apps.
• 7% of Canadian respondents use five or more FI-supported P2P apps.
• 19% of Canadian respondents do not use any FI-supported P2P apps.

About Report

Mercator Advisory Group’s most recent report, 2022 North American PaymentsInsights, Canada: The Rise of Digital Payments Emerging from COVID, analyzes the impact of COVID within Canada on consumer payment preferences. The report reveals generational differences in the use of a range of payment forms including cash, cheques, cards, and digital payments.

The report is based on the North American PaymentsInsights survey, administered in 2021 to a nationally representative sample of 1,002 Canadian consumers, ages 18 years or older.

“Payment technology is creating rapid shifts in consumer payment preferences, with COVID acting as a direct change agent, resulting in declines in use of paper payments via cash or cheques. At the same time, we are seeing emerging technologies such as peer-to-peer payments making a large impact on the consumer payment market,” says Amy Dunckelmann, VP, Research Operations at Mercator Advisory Group.

The post Canadian Use of P2P Payment Apps Supported by Financial Institutions: appeared first on PaymentsJournal.

Importance of Real-Time or Faster Payments for Receiving Funds In a P2P App:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Receiving Funds In a P2P App:

• 17.9% of consumers rate real-time or faster payments use for receiving funds in a P2P app as very important.
• 20.5% of consumers rate real-time or faster payments use for receiving funds in a P2P app as important.
• 24.6% of consumers rate real-time or faster payments use for receiving funds in a P2P app as somewhat important.
• 13.7% of consumers rate real-time or faster payments use for receiving funds in a P2P app as not important.
• 23.4% of consumers rate real-time or faster payments use for receiving funds in a P2P app as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Faster Payments for Receiving Funds in a P2P App: appeared first on PaymentsJournal.

Importance of Real-Time or Faster Payments for Sending Funds Through a P2P App:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Sending Funds Through a P2P App:

• 17.7% of consumers rate real-time or faster payments use for sending funds through a P2P app as very important.
• 17.6% of consumers rate real-time or faster payments use for sending funds through a P2P app as important.
• 25% of consumers rate real-time or faster payments use for sending funds through a P2P app as somewhat important.
• 15.2% of consumers rate real-time or faster payments use for sending funds through a P2P app as not important.
• 24.5% of consumers rate real-time or faster payments use for sending funds through a P2P app as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Faster Payments for Sending Funds Through a P2P App: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Consumers Tend to Use Just One App for P2P Transactions:

• 48% of consumers regularly use just one P2P app.
• 26% of consumers regularly use two P2P apps.
• 25% of consumers regularly use three P2P apps.
• 21% of consumers regularly use four P2P apps.
• 16% of consumers regularly use five or more P2P apps.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Consumers Tend to Use Just One App for P2P Transactions: appeared first on PaymentsJournal.

A lot of press has been given recently to scams perpetrated through the person-to-person (P2P) app Zelle. What the headlines get wrong is that it’s not just a Zelle scam – it is a payments industry issue that uses Zelle, Venmo, PayPal, Cash App, prepaid cards, and other form factors to facilitate funds movement from unsuspecting victims. The P2P app providers – all of them – have done a good job to try and educate consumers about these scams, and they trigger alerts to help users think twice about who they are sending money to, but the scams persist. Those of us in the banking and payments business may find it hard to understand how consumers can fall for some of these tricks, but the thieves are getting pretty sophisticated. Consumer Affairs outlined how many of these scams operate:

Like many scams, this one is based on the claim that the scammer is trying to protect the victim from fraud.

The target receives a text that appears to be from their bank asking if they attempted a Zelle transaction. Regardless of how they answer, the target next receives a phone call from the scammer, who spoofs the number so it shows up as coming from the target’s bank. 

The victim will then receive a set of instructions that ultimately winds up compromising their bank account information. The scammers use the information to withdraw funds and make off with their ill-gotten gains.

Zelle draws sharp distinctions between fraudulent activity and scams. If the victim did not authorize a transaction, then the theft is fraud and the victim can usually be reimbursed. It’s a different story if the victim acts on instructions from a scammer.

“Even if you were tricked or persuaded into authorizing a payment for a good or service someone said they were going to provide, but they didn’t fulfill it, this would be considered a scam,” Zelle says on its website. “Because you authorized the payment, you may not be able to get your money back.”

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post It’s Not Just a “Zelle Scam” appeared first on PaymentsJournal.

The full rollout of WhatsApp Payments in India in Fall of 2021 could serve as a harbinger of access to Peer-to-Peer payments in underserved communities worldwide. The sheer scale of WhatsApp in India provides a guide of how to create new opportunities through the existing and widely adopted platform. As Manan Dixit explains in The Economic Times:

“Given the sheer ubiquity of the platform, WhatsApp’s foray into the digital payments landscape could potentially be a game-changer. WhatsApp’s 400 million-plus user base, India could see a significant increase in digital payments. Digital payment usage is soaring in urban areas across the country. Digital payments in rural India will be encouraged by the growing use of WhatsApp in these areas. While every other mobile user is on WhatsApp, bringing in the ease of money transfer while chatting, without even having to skip the window, completely elevates the convenience factor. In fact, the simple chatting feature is the edge that WhatsApp Payment has over its competitors that seldom extend an interactive feature.”

WhatsApp’s market prevalence creates an easy entry point into Peer-to-Peer payments for underserved communities within India, which could serve as a guide for further expansion into related communities worldwide. In addition, given the large number of users worldwide of Meta’s platforms, merchants could also see benefit from acceptance of P2P payments through WhatsApp and other related services.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post WhatsApp in India Today, Global P2P Payments Access Tomorrow appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Examining P2P’s Remarkable Growth and Promising Future Projections

4 Factors Supporting P2P’s Dramatic Growth:

P2P has a projected growth rate of 37.8% from 2019 to 2023. There are a number of factors that are supporting P2P’s dramatic growth, including: 

1. Widespread access to smartphones.
2. Growing comfort with digital platforms for financial transactions. 
3. Adoption by financial institutions and removal of fees. 
4. COVID-19 and the necessities of social distancing and contactless payments. 

About Viewpoint

While P2P adoption began slowly, recent years have seen truly remarkable growth in both the number and volume of person-to-person transactions, and the shift towards P2P is expected to continue for the foreseeable future. This viewpoint reviews the history of the U.S. P2P market, examines the implications of P2P’s rise for other payment types, and offers projections for the future.

The post 4 Factors Supporting P2P’s Dramatic Growth: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Examining P2P’s Remarkable Growth and Promising Future Projections

The Decline of Checks and the Shift to P2P:

• The overall number of checks written annually fell from 22.5 billion in 2012 to 15.5 billion in 2018.
• P2P transactions have seen extraordinary growth during this same period, rising from 138 million in 2012 to 711.7 million in 2018.
• The levels of utility still differ by magnitudes, with the rate of checks written remaining much higher than P2P transactions.
• Mercator Advisory Group forecasts a 1.4% decline in the growth rate of checks through 2023.
• P2P is estimated to grow at a rate of 37.8% during the same period. 

About Viewpoint

While P2P adoption began slowly, recent years have seen truly remarkable growth in both the number and volume of person-to-person transactions, and the shift towards P2P is expected to continue for the foreseeable future. This viewpoint reviews the history of the U.S. P2P market, examines the implications of P2P’s rise for other payment types, and offers projections for the future.

The post The Decline of Checks and the Shift to P2P: appeared first on PaymentsJournal.

In an interview with PaymentsJournal at the 2021 Money 20/20 event, Deborah Baxley, partner at Paygility Advisors, spoke about P2P payments, what faster payment methods are out there, and the importance of a layered authorization approach. 

Can you talk to us about what your organization is seeing with Mobile P2P Payment Volumes?    

As you can see from the chart, there was a steady uptick in mobile and p2p payments in general sort of under trajectory. And then all of a sudden 2020 happened, and it hit a hockey stick. It was just unbelievable. The growth rate of mobile P2P payments in 2020 was triple what was forecast. Then the question is, what’s going to happen in 2021? Is it going to level out again? Or is it going to keep going up? I think perhaps the pandemic has changed people’s behavior enough that they’re not handing cash to each other anymore, they’re going to keep using Venmo or whatever it might be. 

Do you believe that we are just seeing the beginning of the rise in P2P Payments? 

I expect the TCH, The Clearing House, offering “RTP” Real Time Payments, very imaginative name – and the Fed offering FedNow are both going to be more at least initially oriented towards B2B and perhaps B2C disbursements. A good example is insurance companies. I don’t know why in the 21st century, insurance companies are still mailing checks out, but a lot of them are. And those are both going to be really good use cases for those as well as earned wage access, early pay and bill payment. There could be some consumer applications. But the existing apps like Zelle, it will probably cobble together a number of different things. They are using RTP now, both for settlement as well as some money send if the bank is on their network. But they’ve cobbled it together with the debit push, which is Mastercard Send, Visa Direct, and ACH. They’re just putting everything together to get complete ubiquity across the whole country, and all bank accounts.  

Can you explain the difference between all these new rails and faster payment methods coming up or currently in the marketplace? 

The main difference is the message standard. There’s ISO 20022, which is a more modern message standard.  I believe it was introduced in 2005. And it’s got all sorts of room for data. Including in the case of businesses, you could put the invoice data in with the payment which dramatically simplifies the reconciliation in the backend. So that’s a really good thing. They also have RFP, request for payment, which is sort of like sending an invoice. But you push the button, and the money comes back to me if I didn’t request for payment. Whereas the Mastercard Send Visa Direct, which is the debit push, are using the much older ISO 8583 message standard. It was introduced in I believe in 1989. It’s a credit card standard. They’re using it debit cards, but it is almost instant. The way Visa and Mastercard have set it up is that the banks receiving one of these are obliged to credit your account within 30 minutes. Usually, it’s within seconds. But the settlement could be overnight. 

What are the key topics or trends that you have been discussing at Money 2020? 

Well, there’s certainly a lot of talk about stable coins and different blockchain applications. There was a session yesterday about non fungible tokens, NFTs, which was even in the news a few weeks ago. So those are some really hot topics. There’s more fintechs here than I’ve seen in previous years. It’s a pretty exciting show. 

What is your organization doing with data to provide additional value and actionable Insights? 

I used to work for a data warehousing company. And one of the new buzzwords I think is so cute is data lake house. It’s the idea that you don’t separate warehouse data, like historical data from real time analytics. It’s all the same thing now. We used to always separate operational data store from warehouse where you were doing analytics, it has to be real time. There’s not that much value in doing past analytics. One of the most important areas in addition to marketing and doing customer experience is security and authentication, especially with real time payments. Most of these systems are irrevocable, which means you can’t dispute the transaction, you can’t get the money back when it’s gone, it’s gone. It’s like handing somebody cash. It makes that even more important for the providers, the banks and the networks that are providing the real time payments to do as much authentication and fraud analytics before the transaction goes out. It is to protect consumers and to protect the banks as well. 

How does your organization utilize a layered approach when it comes to authentication and authorization? 

With the proper kind of authentication, you can be kind of paradoxically both more secure and more convenient at the same time. Instead of juggling 100 passwords, which everyone has password fatigue, I have 500 passwords. If you can use other signals like device integrity, IP address, and behavioral biometrics, to score the riskiness of a transaction and only introduce friction if it’s above a certain risk level. But then on the other hand, if I’m withdrawing money from my account. Maybe sending it to my 401k. If they didn’t ask me anything, I would think does that mean anybody else could log in here and move my money out? So you want to kind of balance the friction with the consumer comfort as well. 

Do you believe that super apps will become as popular in the U.S. as they have in other countries? 

I’ve done quite a bit of study about this lately, I think what some banking players in the US are looking at it as a set of financial functions, like bank accounts and stuff like the payments. But what the Chinese super apps have done is stitched together a whole ecosystem. It’s not just banking, it’s ordering your ride, your groceries, and everything. It’s all tied together and stitched together with payments. I think that’s the key. And they’re also using mini apps, which means there’s not a lot of downloads keeps you within the super app ecosystem. But it’s very easy to use, you don’t have to manage and download a whole bunch of different apps and use a bunch of storage on your phone. I think what many of the US contenders are missing is the shopping aspect. And that Pay Pal would have in spades because they’re not only payments and financial services, but they’re also shopping. They’re also, if you turn it on its head, they could have Super App type functions for their merchants. Some very sophisticated targeting and loyalty or whatever it might be for these small merchants on their platform, helping them as much as they’re helping the consumers. I think if anyone is going to be successful, it might be PayPal, but it kind of remains to be see if the train has left the station and maybe it will never catch on. But I think they have the best chance 

The post P2P Payment Growth: Just The Tip of The Iceberg? appeared first on PaymentsJournal.

Scottsdale, AZ., October 21, 2021 – Early Warning Services, LLC, the network operator behind Zelle®, and Fiserv, Inc., a leading global provider of payments and financial services technology, in partnership with financial institutions, empower minority and underserved communities to access real-time payments through Zelle®. The two organizations are each offering a rebate to qualifying minority depository institutions (MDIs) that sign up to offer Zelle®. Banesco USA is the most recent MDI to join the Zelle Network®. Banesco USA provides banking services to diverse communities and is a leading community bank in technological innovation.

“MDIs play a crucial role for minority and underserved communities, including both consumers and small businesses,” said Lou Anne Alexander, Chief Product Officer at Early Warning. “By partnering with Fiserv, we make it even easier for these financial institutions to access the Zelle Network®, giving their customers additional tools to help meet their financial goals.”

Banesco USA customers can now look for Zelle® in their BanescoMobile banking app to send money to friends and family, wherever they bank in the U.S. Money sent with Zelle® goes directly from one bank account in the U.S. to another, using only a recipient’s email address or U.S. mobile number. Funds are typically available within minutes when both parties are already enrolled with Zelle®.

“We’re focused on building long-lasting relationships with our customers, and that means continually evolving our offerings to meet their needs,” said Gustavo Rengifo, SVP Products and Digital Banking Officer at Banesco USA. “The addition of Zelle® expands our current money movement capabilities with a real-time digital payment option that offers the speed and ease of use people expect.”

“Fiserv chooses to stand for diversity and inclusion, and we are committed to help enable equitable access to financial services,” said Neil Wilcox, Head of Corporate Social Responsibility at Fiserv. “Real time payments, such as those made through Zelle®, empower people to better manage their financial lives, and MDIs play a key role in bringing these capabilities to the historically underserved communities who can benefit from them most.” 

Consumers should only use Zelle® to send and receive money with friends, family and people they know and trust.

Now through June 30, 2022, eligible MDIs can sign and submit their participant agreement to receive special rebates.

About Banesco USA
Founded in 2006 and based in Coral Gables, Banesco USA is an independent Florida state-chartered bank (https://BanescoUSA.com/OFR-Cert-of-Good-Standing.pdf) with $2.06 billion in assets as of June 31, 2021. The bank has four branches in South Florida: Coral Gables, Hialeah, Aventura, and Brickell; and one in San Juan, Puerto Rico. Banesco USA. Visit www.BanescoUSA.com  for additional information

About Fiserv
Fiserv, Inc. (NASDAQ: FISV) aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover^® cloud-based point-of-sale solution. Fiserv is a member of the S&P 500^® Index and the FORTUNE^® 500, and is among FORTUNE World’s Most Admired Companies^®. Visit fiserv.com and follow on social media for more information and the latest company news.

About Early Warning Services, LLC
Early Warning Services, LLC is a fintech company owned by seven of the country’s largest banks. For almost three decades, our identity, authentication and payment solutions have been empowering financial institutions to make confident decisions, enable payments and mitigate fraud. Today, Early Warning is best known as the owner and operator of the Zelle Network®, a financial services network focused on transforming payment experiences. The combination of Early Warning’s risk and payment solutions enable the financial services industry to move money fast, safe and easy, so people can live their best financial lives. To learn more about Early Warning, visit www.earlywarning.com 

The post Zelle® and Fiserv Launch Program to Bring Real-Time P2P Payments to Minority Depository Institutions appeared first on PaymentsJournal.

No one could have predicted what 2020 would bring. That sentiment rings true across nearly every aspect of our lives, and the way consumers pay is no exception. Now well into 2021, changes in behavior offer insight into the evolution of digital payment trends since the pandemic began.

American Express periodically releases Amex Trendex, a trend report covering a slew of financial services topics. Its recently released Amex Trendex: 2021 Digital Payments Edition offers new data highlighting the trending topics in digital payments. Two of the trends addressed in the report are Buy Now, Pay Later (BNPL) and peer-to-peer (P2P) payments.

Now trending: Buy Now, Pay Later

Buy Now, Pay Later is one of the hottest digital payment trends in the industry. BNPL is a short-term lending option that enables consumers to make purchases without paying the entire cost upfront. Instead, they pay off the balance off in interest-free installments over a set period of time. The perk of these payments being interest-free generally only applies if customers make all their payments on time. Missing or being late on payments can result in customers acquiring interest or late fees for the purchase.

According to the Amex Trendex survey, two in five (39%) of consumers have used a BNPL option in the past year. Popular BNPL options like Afterpay, Sezzle, Affirm, and Klarna have made it possible for consumers to bring home those big-ticket items with the flexibility of not having to worry about the total cost on day one. Consumers are slightly more likely to use BNPL when making a purchase online than at a brick-and-mortar location.  

“If you ever tried a BNPL loan, you’d find that the process works well for consumers and merchants. BNPL does not trump credit cards for convenience and long-term planning, but high consumer take-up indicates that this payment function is a preferred option for many consumers,” wrote Brian Riley, Mercator Advisory Group’s Director of Credit Advisory Service, in a recent PaymentsJournal article on the BNPL frenzy.

Merchants are increasingly recognizing the value that BNPL brings to the table. At the time of the Amex Trendex survey, 14% of merchants reported currently offering a BNPL option. However, another 19% plan to adopt it in the next 12 months and an additional 28% are considering adopting it. Over half of merchants offering or considering offering BNPL see it as a way to attract new customers, increase their overall sales, and provide customers with flexible payment options. 

But some merchants aren’t convinced that it’s the right move. 39% of surveyed merchants say they will not adopt BNPL, with 67% of those naysayers saying they don’t want to encourage consumer debt. High merchant fees, difficult qualification processes, and unfamiliarity with the service are among other reasons merchants are choosing not to offer BNPL.

Despite some merchants’ hesitation, the BNPL space shows no signs of slowing down. “In a few weeks, the global payments industry saw Affirm’s stock catapult with the recent Amazon alignment, Paypal entered the Australian market—the ground zero for BNPL—and Square acquired Afterpay. These actions all follow BNPL developments by Mastercard, Visa, and a wide array of others,” continued Riley.

Now trending: Peer-to-peer payments

P2P payments have also seen continued usage amid the pandemic. Consumers are opting to use popular peer-to-peer services such as Cash App, PayPal, Venmo, and Zelle in large part due to their convenience and flexibility. In fact, 73% of consumers surveyed for Amex Trendex cited convenience as the top reason they choose to pay using P2P services.

Of course, that’s not the only reason consumers choose P2P payments. Over half of consumers cite the speed of the money transfer (54%) and one in three (30%) cite the flexibility of being able to choose where the money is being withdrawn from as top reasons for using P2P payments. 29% of consumers attribute their use of P2P services to the fact that their friends and/or family also use it, compounding its popularity among social circles.

There are several use cases for P2P payments. For example, almost half of consumers (46%) use P2P payments to send money to a family member or friend. Others use them to split a check or leave a tip in a restaurant and pay bills or rent. COVID-19 also influenced how consumers are using P2P.

“The pandemic created more and new scenarios where paying another person quickly, if not instantly, creates real convenience for senders and recipients. Splitting the cost of a pizza was replaced with paying someone back for doing grocery shopping or sending money to help an individual facing financial hardship. Not only are more P2P transactions occurring, there are now more users which begets more opportunities,” Sarah Grotta, Director of Debit & Alternative Products Advisory Service at Mercator Advisory Group, explained in a PaymentsJournal article.

Like BNPL, many merchants recognize the value of offering P2P payment types. In fact, most merchants (71%) offer PayPal as a payment method, and over half (56%) offer other options like Venmo or Zelle.

While not as popular as frontrunners like PayPal, 30% of surveyed customers have used P2P payment features on a social media platform. In this category, Facebook Pay is the most popular. Unsurprisingly, Millennials are paving the way for Facebook Pay adoption; 39% of Millennials reported using Facebook Pay, compared to just 21% of Gen Z and 19% of Gen X. Compared to PayPal, however, merchant adoption of Facebook Pay has been tepid. Just 26% of merchants allow payments via social media, but 18% plan to adopt them in the next year.

Conclusion

These insights from the Amex Trendex – Digital Payments Edition offer a unique look into multiple major digital payment trends from 2020. While BNPL and P2P were major topics of interest, the report also covers how the COVID-triggered migration to e-commerce led to online fraud attacks and consumers’ increasing comfort with card-on-file.

Understanding consumer adoption of digital payment types and what those types of payments are being used for is valuable for merchants. Data insights like these enable merchants to get an inside look at the behavior of both consumers and other merchants, allowing them to fine-tune their digital payments focal points moving forward.

The post Two Key Digital Payments Trends in the Post-COVID World appeared first on PaymentsJournal.

One of the things you hear about in the x-border payments space is the need to improve the speed, transparency, and cost of these transactions, which on the consumer side (P2P remittance, and C2B) has actually gotten better due to some of the customer experience work done by fintechs.  Most of the x-border transaction volume and value, however, is on the B2B side of things, and a huge challenge faced by banks and other service providers in this space are regulatory hurdles around AML.

In this release found at AITHORITY, we see the collaboration between a couple of fintechs to make that challenge easier to handle.  ONEPIP, a Hong Kong-based fintech that specializes in comprehensive solutions for money transfer, currency exchange and FX rate services, is adopting a solution from Napier, a 2015 UK-based regtech startup that develops an intelligent compliance platform for AML and trade compliance. 

‘RegTech company, Napier, provider of advanced anti-financial crime compliance solutions, has announced that cross-border payment specialist ONEPIP will be using its technology as part of ONEPIP’s upgraded anti-money laundering (AML) controls….Napier’s AI-led Transaction Monitoring, Client Activity Review and Risk-Based Scorecard Review will give ONEPIP a systematic, intelligent review of all its transactions and customer profile data to help identify suspicious activity quickly and easily, creating a robust compliance solution.’

So while we cover the challenges in x-border experiences, with >80% of transaction value in B2B uses, and AML/CTF one of the great regulatory hurdles, Those with interest in the space should be aware of the developments in compliance tech.

Dagian Cheong, Head of Risk Management, said “With over 25,000 transactions worth over USD4.5bn in value since 2016, licensed operations in Hong Kong and Singapore, and planned expansion in the region, automated transaction monitoring has become imperative for the management of the risks in our business….“As one of the fastest-growing FinTechs in the region, ONEPIP is on a continual quest to collaborate with best-in-class technology innovators, to integrate with our proprietary FX management platform, to meet the exacting standards of all our stakeholders, which include regulators and partner banks. We are particularly grateful to the Monetary Authority of Singapore for awarding us with the Digital Acceleration Grant which helped fund this project.”…..Robin Lee, Head of APAC at Napier, said: “Financial services organizations continue to face mounting pressures to ensure that their regulatory compliance measures are constantly up to date and robust enough to identify any potential criminal activity, or face huge fines. With Napier’s advanced and intelligent technology, this can move from being a mandatory duty to a competitive edge. ONEPIP’s new solution enhances its regulatory compliance regime to further strengthen its position as the trusted cross-border payment specialist in the region and beyond.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Cross-Border Payments Specialist ONEPIP Gains Competitive Edge With New Compliance Solutions From Napier appeared first on PaymentsJournal.

Early Warning reported second-quarter growth numbers for person-to-person app Zelle, revealing continued upward movement in transaction activity as they add more business from community banks and smaller credit unions. They now have over 1,100 financial institutions live on their network. This growth comes on top of a blockbuster year in 2020 which saw significant pandemic fueled growth. 

The recent growth has caused me to restate my forecast for 2021 as shown below:

The continued rollout of the small business solution will be one to watch.  Recent announcements from PayPal regarding new, higher pricing for Venmo business activity can make Zelle an attractive alternative if competitively priced.

Here’s more from today’s press release on Zelle’s recent growth: 

• Nearly 1700 financial institutions (FIs) signed on to the Zelle Network®, representing 74% (577 million) of all U.S. DDA accounts
• Credit unions and banks under $10 billion in assets are driving growth, representing 40% of FIs in the Zelle Network®
• Small businesses and consumers sent 436 million payments worth $120 billion with Zelle® in Q2 2021

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post P2P App Zelle Adds to Growth from Smaller FIs and Small Business Product appeared first on PaymentsJournal.

Institutions not offering a person-to-person (P2P) app today know that P2P transactions are now mainstream and a growing segment of consumers’ financial activity. But some have stayed away from offering Early Warning’s Zelle due to the implementation and transaction expense, instead having their customers and members use fintech solutions like Square’s Cash App and PayPal’s Venmo. They aren’t crazy about turning over an important transaction like this to a fintech, but the financials are tough for them to ignore.

We are starting to see more solution providers in the market offering an alternative including Payveris that today announced the addition of real time payments to their  P2P solution on their MoveMoney Platform. They offer a solution that can reach all consumers and at a lower cost.  Financial institutions also can brand the P2P white-label service. 

When P2P apps first launched more than 10 years ago, they weren’t adopted as quickly in part because consumers weren’t sure who they could send and receive funds to and from. The common Zelle brand that Early Warning developed was central to P2P’s growth. Now, with most individuals having multiple P2P apps loaded on their mobile phones, the brand might just be less important to consumers. 

You can read Payveris’ press release here, and below is an excerpt:

Payveris, the fastest growing money movement provider in fintech, announced today that its MoveMoney Platform now delivers a real-time P2P solution that rivals Zelle, Venmo, PayPal, and Cash App. The new service enables financial institutions’ customers to instantly send money to anyone with a U.S. bank or credit union account using the recipient’s mobile phone number or email address—no special app required. The platform offers financial institutions a truly frictionless solution that supports their customers’ journeys to financial freedom.

Available via API, SDK widget or SSO integration, Payveris’ real-time P2P service uses the debit card rails

for real-time funding and crediting transactions, enabling Recipients to receive money directly to their

bank or credit union account instantly. Payveris‘ multi-layered approach to fraud management has been

instrumental to helping financial institutions mitigate fraudulent transfers.

Financial institutions can deploy the service as a stand-alone solution, integrate it into a unified money

movement hub experience, or incorporate the service into a bill pay experience as an alternative to

sending checks to consumer and small business customers.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post More P2P Options for Financial Institutions Emerge appeared first on PaymentsJournal.

The digitization of payments has accelerated over the last 16 months, and so has the demise of checks. Organizations that still rely on checks for business processes are now recognizing their inefficient nature and looking for a better way to distribute payments. One of these better options is push-to-card payments.

To learn more about how a partnership between Avidia Bank and KyckGlobal is enabling businesses to make push-to-card payments, PaymentsJournal sat down with Cliff Thompson, SVP of Strategic Partnership at Avidia Bank, Max Grande, VP of Product Management at KyckGlobal, and Raymond Pucci, Director of Merchant Services Advisory Practice at Mercator Advisory Group.

What is KyckGlobal?

Avidia Bank’s partnership with KyckGlobal is enabling it to leverage payments as a point of differentiation and provide a next generation experience to bank customers.

KyckGlobal is a digital payments firm that provides a cloud-based payments platform that allows companies to pay individuals however they want to be paid. KyckGlobal works with banks, networks, and businesses of all types to help them access an array of the world’s most popular payment types. This includes both traditional options such as check, wire, and ACH as well as alternative options including push to card, PayPal, and Venmo.

“Imagine getting a real-time disbursement from an insurance claim, and instead of getting that check in the mail, you’re getting a wallet notification saying you just got paid or you’re getting funds in your bank account immediately. We’re that company that unlocks that payment experience,” explained Grande.

Push payments: No longer just for P2P

Today, push-to-card payments provide a real-time payment of funds option to more than 245 million bank-issued debit cards in the United States.

“Conceptually, [push to card] is really straightforward. The consumer essentially provides their card details—their PAN and expiration date—and funds are moved across the major card brands into the linked bank account rather than the traditional one-to-two days for ACH,” said Grande.

Whether they realize it or not, many consumers have already initiated push payments by pushing a deposit to their bank account instantly from a digital wallet like PayPal or Venmo. “Now picture that same experience from getting funds out of that wallet applied to any business vertical. It’s really game-changing stuff,” added Grande.

Ultimately, the immediacy of funds inherent in push-to-card scenarios can provide value in several use cases beyond P2P transactions. From insurance claim payouts to merchant settlements, government disbursements, and more, push payments make it possible for consumers to have a similar instant payment experience in other aspects of their lives.  

“As more of those peer-to-peer transactions are kind of sweeping the market and individuals are getting consistent and used to that experience, businesses are starting to get asked the question of why can’t [they] move funds just as fast. And that’s really where our partnership with Avidia and what we’re doing in the market comes into play,” said Grande.

Stacking payment capabilities does not have to be a challenge

A major trend in the payments industry today is stacking payment capabilities with a platform coupled with efficient onboarding. In combination, this leads to a potent offering for financial institutions, technology partners, fintechs, and program managers alike.

“Today, instant and/or real-time money movement is most sought after and certainly takes center stage in the platform payments stack. The KyckGlobal – Avidia partnership allows clients ease of entry into near real-time payment via push to card,” noted Thompson.

Thanks to KyckGlobal’s simplified front-end plan, engagement and onboarding process made possible through API connectivity, and robust underwriting, firms can be making near instant payments in a matter of days. “A short application starts with the completion of a service agreement with KyckGlobal and an automatic creation of a new funding reserve account at Avidia Bank,” Thompson added.

FIs looking to succeed need cutting edge technology

The use of technology – specifically within the payments space  is a differentiating factor that banks need to have if they want to remain competitive in today’s market. “At one time, it was only big financial institutions that had resources. And now, technology is available. As we’re talking about the partnership that you have here, there are some new developers that are doing such a great job at making this technology available [for] solutions that everyday financial institution customers are looking for,” said Pucci.

With challenger banks and fintechs taking hold, it is paramount to the success of financial institutions that they explore their roles not only as providers of traditional financial services, but also as technology providers.

“I believe it’s important for financial institutions to understand the gravity of what’s occurring in the tech space today. Technology and payments are colliding with pent-up demand. A responsive, redundant, efficient platform, like the one described here today in our collaboration with KyckGlobal, will prevail to meet that demand,” concluded Thompson.

The post Push-to-Card Payments Push Financial Services Forward appeared first on PaymentsJournal.

P2P apps have had a meteoric rise that hasn’t yet slowed.  The pandemic created more and new scenarios where paying another person quickly if not instantly creates real convenience for senders and recipients.  Splitting the cost of a pizza was replaced with paying someone back for doing grocery shopping or sending money to help an individual facing financial hardship. Not only are more P2P transactions occurring, there are now more users which begets more opportunities. 

As an example, just yesterday I was getting a haircut and the one-location, small business posted a notification requesting all patrons tip their stylist through a P2P app to reduce their merchant processing costs.  My stylist had a Venmo QR code taped to her mirror.  I suspect we will see more and more inventive uses like this.

The Financial Brand had this article reflecting on the growth of P2P:

“I think if you had any financial institutions or consumers sitting on the fence about embracing the technology, that went by the wayside as many found it a necessary component to managing their finances during the pandemic,” says Matt Wilcox, President of Digital Payments and Data Aggregation at Fiserv. The company’s research indicates that nearly four out of five (79%) of consumers reported that they used P2P in some form through their financial institution or through a nonfinancial company in 2020.

Fiserv works closely with Zelle — it has connected over 500 financial institutions to the provider and expects that to rise past 1,000 in 2021 — and he says the channel has seen new types of usage, from tipping service providers to making fantasy football payouts, as consumers grow more used to P2P. In 2020 Fiserv saw Zelle transactions increase by 113% among institutions it processes for, with triple digit growth expected for some time ahead. Zelle on the whole saw a record $307 billion sent via 1.2 billion transactions in 2020.

While the usage figure cited earlier is stunning, Fiserv research suggests that further growth will be assisted by increased marketing by P2P providers and by financial institutions. Fiserv found that while use is high, nearly half of consumers surveyed still don’t know if their financial institution provides P2P via email address or phone number and 20% are certain their bank or credit unions does not offer the capability. Younger consumers are clearer on who provides P2P payment channels that they have used.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post The Pandemic has Been Rocket Fuel for the Growth of P2P Payments appeared first on PaymentsJournal.

FICO announced a new solution in FICO Fraud Manager that utilizes behavioral analysis and other signals to prevent P2P fraud. Fintechs have been doing this for years.

Mastercard acquired NuData, LexiNexis acquired Threatmetrix, while BioCatch and others continue to go it alone.  The Fintechs have been in market for several years and have used that time to hone their machine learning algorithms.

For example, BioCatch claims to detect 5 different unique forms of criminal mule activity that impact accounts. It will be interesting to see if the FICO solution is equal to the Fintech solutions from the perspective of price/performance:

“Alternatively, should a consumer use her bank’s mobile app on her own phone, but sends funds to a new account, the likelihood is 10 times greater that she is falling victim to an APP scam, Zoldi adds. When it comes to consumer’s favorite devices, the Scam Detection Score identifies 24 times more scams than the standard fraud score, FICO says.

What makes APP scams more difficult to detect is that they use social-engineering techniques to trick consumers into sending money from a personal account to an account controlled by the criminal for what consumers believe is a legitimate reason. “This means that the model must look for subtle patterns that point to … what legitimate customers do when being misled by criminals,” Zoldi says. “The typical hallmarks of third-party fraud that look out-of-pattern don’t necessarily exist for APP scams.”

Criminals enacting a push-payment scam may reach out to victims through mobile games, online shopping sites, and social media. Online gaming users, for example, may believe they are paying for a rare item. Or online shoppers may believe they are buying a legitimate product. With social-media scams, criminals have been known to spend months grooming victims through online conversations, developing a relationship with the target before asking for money to deal with a fictional emergency.

“Whatever the platform, victims believe they are receiving a legitimate service, product, or benefit,” Zoldi says.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Big Boy FICO Enters the Fintech Playground: But Do They Know the Rules? appeared first on PaymentsJournal.

This announcement is in business wire and likely not a surprise to most readers given all the cross-border payments activity we have been (and will continue) seeing.  Google Pay has added the Western Union network for its users, starting in the U.S., and able to initially send to India and Singapore. 

The release suggests that full global availability is upcoming.  So this is a clear play for P2P remittance, and perhaps the timing is somewhat attuned to pandemic-related difficulties in India, although there is no direct mention of such.

‘Commencing today, Google Pay users in the U.S. will enjoy a seamless peer-to-peer in-app experience when sending cross-border payments to family and friends through Western Union’s global financial network of bank accounts, wallets and retail locations throughout India and Singapore. Users may fund their transactions using a Google Payⁱ bank account or card….Google Pay users in the U.S. will be able to send money to their family and friends globally by year-end. Upon worldwide activation, they can choose to send funds to billions of bank accounts, millions of wallets and cards, as well as more than half a million retail locations in 200 countries and territories in minutesⁱⁱ. ‘

As far as we can tell, there is no B2B target here, but surely C2B merchant payments are in play to start and we would expect further announcements down the road, given Western Union Business Solutions capabilities.  We’ll keep an eye on that one, but for now, a new and easy experience through a phone app.  Western Union benefits by embedding its capability within a large user base.

Google Pay’s user base includes 150 million people in 40 countries. The company’s redesigned Google Pay app (Android and iOS) gives people a safe, simple and helpful way to pay and manage their finances.

‘ “Cross-border payments are not just a lifeline for loved ones; they form the financial backbone for many economies,” said Josh Woodward, Director of Product Management, Google Pay. “For many people with families abroad, sending money home is something they do as frequently as every month. By teaming up with Western Union, we are providing a way for Google Pay users to send money quickly, safely and reliably from the Google Pay app.”…Swanback adds, “This collaboration demonstrates the demand and accelerated need for our advanced payment capabilities. Our platform services offered through digital partnerships allow us to serve more customers globally and continue to advance Western Union’s growth strategy.”  ‘

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Western Union Launches Cross-Border Payments on Google Pay appeared first on PaymentsJournal.

London, 07th, April 2021: PPS, formerly PrePay Solutions and an Edenred company, today announces that it has been selected to be the partner to pockid, the first German Neobank for Generation Z (15–24-year-olds). The service provides young people with a new way to handle their money through an easy-to-use iOS and Android application, with a Mastercard® debit card for spending both online and offline.

pockid is set to launch in April 2021 in Germany, and with the help of PPS will be rolled out into other European markets in the coming years. PPS will support pockid with several key functions, including its e-money licensing with passporting capability into Germany and other EEA (European Economic Area) countries, the ability to make and process payments including card transactions and p2p, support for Google Pay and Apple Pay, and the option for saving wallets, all with an associated Mastercard® debit card.

pockid required a scalable solution that could easily be adapted into multiple languages and adjusted in line with local regulations, as well as implemented with alternative payment methods which are a great form of secured and contactless payments – especially welcomed during the Covid-19 crisis.  It is for this reason that pockid chose to partner with PPS as it met all these requirements while maintaining a high standard for its technology.

In Germany, a majority of generation Z have a monthly income, but lack the ability to spend it online. It is this issue that drove pockid to develop its app for the younger generation, supplying them with an avenue for spending their high rate of disposable income.

Parents and legal guardians of pockid’s users will be given greater visibility to monitor their children’s spending habits and ensure the security of their children’s finances through a web application exclusive to them. The service also comes with a pocket money assistance feature giving parents the ability to transfer money directly into their children’s accounts through direct debit.

Jes Hennig, Co-Founder & CEO, pockid, commented: “At pockid, our goal is to create an experience that meets the daily needs of Generation Z. Our research earlier this year with Mastercard highlighted that a third of German sixteen- to eighteen-year-olds are not equipped and heavily dependent on their parents when it comes to access to financial services. And for those who are banked, they are inexperienced in what financial services can offer and are pre-dominantly using outdated services that may even lack the ability to make online payments.

“With so many young people in Germany receiving a monthly income, we need to provide a service to help them manage their money and spend responsibly. We’re impressed with the PPS team so far, who have an innovative mindset and have enabled us to provide the products we need for our customers to meet our short-term and long-term expansion plans.”

Ray Brash, CEO of PPS, added: “We’re extremely proud to power a real first for the German market in the form of pockid. Educating the younger generations on financial services is a global issue and while the culture around money management in Germany makes the country a perfect launchpad for pockid, the benefits its services bring will support teenagers and young adults the world over. Following its successful launch, we will be placing our full attention on helping to scale pockid in other European countries, with a goal to go global.”

pockid includes both a virtual and physical card, with options for the latter including a standard plastic card or an environmentally friendly wooden card, courtesy of exceet Card Group, an expert in the creation of environment-friendly payments cards. The Austrian-based card manufacturer offers its customers sustainable products along the entire value chain.

exceet will also continue its support of PPS in the company’s own mission to be an integral part of the growth of green finance throughout the year and beyond.

To find out more about PPS visit: https://www.pps.edenred.com/

To find out more about pockid visit: https://www.pockid.money/

The post PPS Set to Power pockid, Germany’s First Gen Z Fintech appeared first on PaymentsJournal.

Readers of these pages and the x-border payments topic may recall a recent posting here that discusses blockchain in the space, including the company in the subject posting today at KrAsia.  It seems that Ripple is having some success in the Asia Pacific region with remittances using their blockchain network and XRP cryptocurrency.  

Therefore they went ahead and agreed to acquire a Malaysian company named Tranglo that specializes in cross-border payments.  Readers may also know that in the U.S. Ripple has some challenges with the SEC regarding the definition of XRP as a security versus a currency.

‘Blockchain payments firm Ripple, which is known for helping develop digital currency XRP, has acquired a 40% stake in Malaysian cross-border payment startup Tranglo to gear up for its expansion in Southeast Asia, the firm announced on its website on March 30. The investment took place even as Ripple has an ongoing legal fight with the Securities and Exchange Commission (SEC) in the United States….Although it is unclear whether the acquisition is going to be realized in cash, equity, or via cryptocurrency, the partnership allows Ripple to capture burgeoning demand of cross-border remittance in the region and expand the reach of its On-Demand Liquidity (ODL) product, which uses XRP as a medium of exchange to facilitate cross-border money transfers.’

We recently also wrote member research on the B2B x-border space, but this particular acquisition is more about expanding access to the consumer cross-border landscape across Asia, where Ripple seems to be able to expand despite U.S. challenges.  

The B2B challenge for decentralized cryptos with highly volatile floating FX is that corporates and banks shy away, given the regulatory scrutiny and risks.  That is why stable coins (and now CBDCs) are gaining adoption in blockchain scenarios.  It does not seem to be a hindrance in APac for these B2C or P2P transactions however. 

‘With an extensive payment network in more than 100 countries and offices in Singapore, Jakarta, Dubai, and London, Tranglo’s steady reach will add fuel to Ripple’s ambitions in the region. The blockchain payment firm’s transactions in Southeast Asia increased tenfold in 2020….Tranglo, which was founded in 2008, also secured a partnership last year with Alipay and WeChat Pay’s Hong Kong service, enabling users to transfer money back to Indonesia and the Philippines. As of September 2020, Tranglo has processed USD 6.91 billion worldwide, according to the company’s website….“This [partnership with Tranglo] allows Ripple to strengthen its foothold in the cross-border payments industry in Asia, where there are many countries that suffer from a lack of liquidity and very large spreads in their respective currency markets,” Popli said.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Unimpeded by SEC Lawsuit, Ripple Is Set to Supercharge Southeast Asia’s Cross-Border Remittances appeared first on PaymentsJournal.

In an announcement from Visa which we picked up at Finextra, the payments company has launched an expanded version of Visa Direct platform that allows for additional use cases, including x-border disbursements. 

We recently covered the B2B faster payments space for the U.S. market in member research and mentioned Visa Direct as one of the growing alternatives for B2B cases, and in the release specified business–to-small business as one of the target constituencies for using the service.

‘The Visa Direct Payouts APIs are designed to reduce the complexities often associated with managing and sending money across multiple networks and intermediaries worldwide….Users can move money globally through a single connection to VisaNet, enabling financial institutions, fintechs, remittance providers and corporate banks to capture new payment flows, says Visa….The system supports real-time domestic and cross-border person-to-person, business-to-small business and business-to-consumer use cases, such as insurance disbursements, marketplace seller payouts, providing workers faster access to their earnings, as well as remittances.’

We have not received a detailed briefly on the platform enhancements but it seems likely that it involves further integration with the Earthport capabilities, which Visa acquired back in 2019.  Since Visa’s B2B Connect platform is more targeted for high value B2B, we expect that the new Visa Direct B2B cases are more high velocity and low value, which is more what payouts and remittances are in the first place.

‘Bill Sheley, SVP, global head, Visa Direct, says: “As digital commerce accelerates, Visa is innovating to give financial institutions, governments, individuals and businesses new ways to pay and get paid beyond the card….”The launch of Visa Direct Payouts marks an important milestone in Visa’s expansion of its account-to-account capabilities to now reach an additional 2 billion bank accounts around the world.”  ‘

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Visa Expands Global Money Movement beyond the Card appeared first on PaymentsJournal.

The Australian market is the place to watch if you follow Buy Now Pay Later (BNPL) lending.  With 25.4 million citizens, Australia is smaller than Canada (37.6 million) and California (39.5 million), but the country was at the epicenter as BNPL took hold.  Indeed, Klarna originated in the Nordic countries, but Aussies quickly formed Afterpay, Brighte, Humm, Klarna, Latitude, Openpay, Payright, and Zip.

Australians carry more debt per household than the United States.  In July 2020.  According to Trade Economics, in the United States, household debt as a percentage of Gross Domestic Product was 78%, compared to a whopping 122.6% in Australia. This disparity shows that Australians may like consumer credit options even more than Americans.

Today’s read comes from the Australian News Channel, which publishes Channel News.  The article covers PayPal’s efforts in the market and indicates that despite BNPL’s rapid and seemingly pervasive uptake, BNPL has not displaced Paypal.

• PayPal is still the number one online shopping payment method in Australia, despite the Buy Now, Pay Later industry raking in a lot of the market share during 2020.
• According to data from BigCommerce, PayPal has already accounted for 41 percent of all transactions in 2021 – up from 40 percent during the whole of 2020.
• Meanwhile, credit cards have accounted for 28 percent of transactions,
  • debit card use is at 19 percent
  • BNPL products such as Afterpay and Zip have accounted for 13 percent of online spending so far in 2021, down from 14 percent.

Now, consider PayPal’s recent announcement to enter the BNPL market in Australia, as IT News Australia reported on March 10.

• The offering will allow consumers to split purchases valued between $50 and $1500 across four equal repayments every fortnight.
• General consumers will see the new ‘Pay in 4’ option at checkout or in their digital wallet, while merchants can integrate the new offering as a payment option on their website.   
• Merchants will also show each installment’s monetary value through a messaging feature, letting consumers know how much to expect each repayment to be.

PayPal’s option looks like it may be more efficient.  BNPL merchant acceptance cost runs between 4% and 6%.  In Australia, credit card interchange is below 1% for credit and half that for debit, according to the Reserve Bank of Australia.  (for information on credit card interchange versus BNPL fees, see here, and to understand Visa’s complete set of posted rates in AU, see here.)

BNPL rates for PayPal in AU look like they will undercut the BNPL market with “2.6 percent plus 30 cents for domestic transactions in Australia.” The transaction is “lower than Afterpay’s fee of around 4 percent plus 30 cents, which may provide PayPal an edge.”

The fundamental difference between PayPal and the cluster of BNPL is PayPal’s scope and breadth.  PayPal’s 4Q20 results indicate 377 million active accounts, with almost $1 trillion in payment volume worldwide.  Most BNPL lenders that Mercator Advisory Group reviewed have yet to show a profit.

In field testing, BNPL, my transaction with PayPal was processed with the speed of a credit card transaction: quick, friction-free, and straightforward.

Here is the big takeaway.  PayPal can overtake the BNPL model.  With offerings in more than 200 countries and regions, PayPal is everywhere. It has the staying power. It has the drive.  And unlike many BNPL lenders, who focus on a single payment stream, PayPal’s transaction offerings, finance options, and presence are diverse.

The firm can react well to rising interest rates, which is a flaw in the current BNPL process.  Stay tuned, and expect the disrupters to disrupt the disrupters.

Overview Provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

The post In Australia, BNPL is Big, but PayPal is Bigger appeared first on PaymentsJournal.

The Federal Reserve Bank of Atlanta published an interesting working paper that analyzes data regarding person-to-person (P2P) payments.  The analysis is based upon data from the 2015 to 2019 Survey of Consumer Payment Choice (SCPC) and Diary of Consumer Payment Choice (DCPC), which is to say pre-pandemic. 

While the industry has been commenting on the enormous growth that P2P apps have recorded in the last few years, this report reminds us that those volumes are still a rather small portion of the overall P2P money exchange that includes a lot of cash and check, underscoring the on-going need to support these payment types and also the growth opportunity still available for digital solutions.  Here are a few interesting snippets from the report:

• Despite the availability of electronic options for p2p payments over the past two decades,

paper payment methods continue to dominate for p2p payments. From 2015 to 2019, the vast majority of U.S. consumers used paper methods when conducting p2p transactions. Approximately two-thirds of p2p transactions were settled with cash in 2019.

• Our empirical analysis uses mixed multinomial logit and machine learning methods to analyze

trends in the p2p market. The mixed logit find that among the three payment methods listed (cash, check, and electronic technologies), the most significant factor is the value of the transaction. We find that a $40 increase in the transaction value from $10 to $50 would, on average, result in a 20 percentage point decrease in the probability of using cash.

• … we find that approximately 93 percent of consumers rank electronic technologies second. Our results are consistent with consumers preferring cash for low-value p2p transactions and substituting towards electronic technologies for high-value transactions. Given the large percentage of consumers who rank electronic technologies second, our results are suggestive that p2p electronic technologies could be at their inflection point.

At the risk of sounding like a complete payments wonk, it would be fascinating to see a similar analysis with updated data from 2020.  

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Our Favorite Payment Type for P2P Transactions; Cash appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint:  2020 North American PaymentsInsights: Debit – Continued Change

Peer to Peer Fraud Takes Aim at Consumers Earning $75K to $100K

• The incidence of P2P fraud appears to be shifting from the highest earners to those in the $75k to $100k income bracket. 
• The incidence of paying for something that wasn’t delivered stayed steady for highest earners, but rose from 21% in 2019 to 27% in 2020 for that $75k to $100k bracket. 
• “Lost money” stayed nearly the same for high earners (31% to 20%) whereas $75k to $100k shot up from 23% to 33%. 
• The same trend of stable fraud levels for highest earners and increased fraud for that middle-income bracket is true for fraudulent charges and compromised bank accounts.
• As the number of P2P services used increases, so does the likelihood of experiencing fraud.  
• Those using 9+ P2P services are almost twice as likely to experience fraud versus those who use 3 or fewer.

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post Peer to Peer Fraud Takes Aim at Consumers Earning $75K to $100K appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Blog – 2020 North American PaymentsInsights: Debit – Continued Change

Resistance to Peer to Peer Payments is Waning:

• Resistance to P2P services is waning, as many of the reasons for not using these services appear to be losing popularity.
• The largest overall reason in 2018, “I don’t have a reason to use P2P”, has declined from 47% to 36% in 2020.
• In 2019, 42% of consumers “prefer to use cash” than P2P services. Not surprisingly in a pandemic environment, that sentiment dipped to 30% in 2020.
• From 2018 to 2020, 8% of consumers reported they “don’t know how to use these services.”
• P2P services are increasingly being used to share costs with others, pay bills and pay for things in-stores. 
• In 2020, 23% of consumers used P2P to split a bill, up from 17% in 2018 and 2019.
• For the last 3 years, one in five P2P consumers used the service to buy a gift. 

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post Resistance to Peer to Peer Payments is Waning: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Blog – 2020 North American PaymentsInsights: Debit – Continued Change

P2P Payment Fraud is Declining, Minus these Exceptions 

• Fewer people are experiencing P2P fraud, but select types of fraud are on the rise.
• The decrease in fraud overall may point to a concentration of fraud among a certain population segment.
• The largest increase in P2P fraud came from “lost money”, which was reported by 12% of P2P users in 2018 and 23% in 2020.
• The percentage of P2P users who “received a fraudulent charge” also rose dramatically from 2018 (11%) to 2020 (19%).
• P2P users who “paid for something that wasn’t delivered” rose from 14% to 21% of users between 2018 and 2020.
• Overall net fraud decreased from 31% of P2P users experiencing fraud in 2018 to 25% in 2020.  

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post P2P Payment Fraud is Declining Overall, But Some Types Are On the Rise: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Blog – 2020 North American PaymentsInsights: Debit – Continued Change

Peer to Peer Payment Apps are Diversifying:

• The proportion of consumers using more than one P2P payments app NOT provided by a financial institution is rising quickly.
• In 2018, half of consumers had not used a non-financial institution payments app; by 2020, this was down to 36%.  
• The percentage of consumers who use only one non-bank P2P app has remained steady at 22%.
• However, the number of consumers who use up to three non-bank P2P payments apps grew from 7% in 2018 to 11% in 2020.
• The number of bank-owned P2P payments apps used by consumers is steadily rising as well: up to 2.8 apps per consumer in 2020 from 2.6 in 2018.
• 7% of consumers used five or more peer to peer payments apps in 2020.

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post Peer to Peer Payment Apps are Diversifying: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Blog – 2020 North American PaymentsInsights: Debit – Continued Change

How Consumers are Using P2P Payment Apps:

• Less than one half of P2P users prefer to receive funds via P2P.
• Slightly more (32%) of P2P users prefer to receive cash vs. pay in cash (28%).
• 19% of P2P users have no preference for how they receive money.
• Nearly one in five P2P users regularly use four or more P2P apps from their bank or credit union.
• 25% of P2P users use only one payment app.
• In 2018, 45% of consumers used no payment apps vs. 34% in 2020.

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post How Consumers are Using P2P Payment Apps: appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Blog – 2020 North American PaymentsInsights: Debit – Continued Change

P2P Payment Apps are Seeing Gains in Consumer Adoption: 

• While PayPal is clearly the market leading P2P service, many others are gaining momentum.
• 54% of consumers have used PayPal within the last year, up from 47% in 2017.
• Venmo is something of a distant second with 14% of consumers having used the payment service in 2020.
•  Zelle, third most popular, has gained adoption with great speed, rising from 1% consumer usage in 2017 to 13% in 2020.
• Google Pay saw similarly increased adoption as Zelle, but to a lesser extent, with 11% of consumers using it in 2020.
• Facebook Messenger was one of the only P2P services to see declining adoption, from 2019’s 9% in 2019 to 7% in 2020. 

About Report

Mercator Advisory Group’s most recent consumer survey report, 2020 North American PaymentsInsights: Debit – Continued Change, from the bi-annual North American PaymentsInsights series, takes an in-depth look at U.S. consumers’ current attitudes and behaviors with regard to debit cards and P2P payments.

While the data from this survey indicate a decrease in the number of debit users, actual debit card volume is increasing in the pandemic era.

Nearly one-half of the consumers surveyed report they currently receive rewards on their debit cards. Many consumers who receive debit card rewards say it motivates them to spend more on these cards. However, while the primary rewards are cash back and/or points, the proportion of customers receiving these two rewards appears to be decreasing when compared with last year.

Debit card fraud is on the rise with one-quarter of debit card owners reporting fraud on their debit card. While this is on par with last year, it is much higher than the 17% reported in 2018.

The use of P2P payment apps continues to gain in popularity. In 2017, 57% of American adults reported using a P2P service. That has increased to 70% in 2020. The market is currently dominated by PayPal, but other P2P services, Venmo, Zelle, Google Pay and Square Cash, have all roughly doubled in reported usage since 2017.

This year, the average frequency of use of P2P services has decreased from 9.0 in 2019 to 8.0 transactions annually. This decline has likely been a result of the pandemic, as fewer people are socializing and thus have fewer opportunities to use P2P payments.

This report explores how technology and fraud impact consumers lives and, in particular, the way they shop and pay for things. This includes detail on not only what they do, but also how they feel about these two important consumer issues.

“This report reveals how consumers use of debit cards and P2P payments have changed over the past year. It goes without saying that they pandemic has materially changed consumer payment behavior, but this report explores changes that are pandemic related, as well as those shifts in behavior that started before the pandemic,” stated the author of the report, Peter Reville, director of Primary Research Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

The post P2P Payment Apps are Seeing Gains in Consumer Adoption: appeared first on PaymentsJournal.

Last July, we shared the news of a new tool piloting on Venmo that allowed sole proprietors and casual sellers to sign up for a business profile on Venmo to accept payments for goods and services. 

Today, we are excited to share that business profiles are now officially available for all small businesses, including sole proprietors and casual sellers, to create a profile directly from the Venmo app. Businesses can now get discovered, organize their business transactions and easily accept payments from customers touch free, all while leveraging the same social experience nearly 70 million Venmo customers enjoy when using the app with friends and family today. Creating a business profile also allows you to keep your business transactions separate from your personal ones, as you can seamlessly switch between profiles in the app, all with the same login. 

More than 150,000 businesses have already signed up for a profile to help grow their business ranging from professional services, artists, real estate services, personal trainers, beauty shops and more. 

To further facilitate payments and support small businesses, Venmo is waiving seller transaction fees until April 1, 2021.*  

Sign up for a business profile by tapping your profile picture in the app or clicking on the menu icon. You can also find more information about how a business profile can help you grow your business here or by following Venmo on Instagram or Twitter for updates. If you already have a business profile and have questions, we encourage you to visit the Help Center. 

* After April 1, 2021, business profiles will be charged 1.9% + $0.10 per transaction they receive. Fees subject to change. Other fees may apply. 

The post Help Grow Your Small Business with Venmo: Business Profiles Are Officially Available for All Sellers appeared first on PaymentsJournal.

Early Warning System’s Zelle money movement app is now a true real-time payments solution.  Zelle has always provided near instant transactions to consumers and businesses using the app, but now they have completed the integration of their settlement process to The Clearing House RTP network. 

This means that money movement for banks and credit unions can also be instant, as long as the financial institution is integrated with RTP. (For most financial institutions settlement typically occurs through ACH). By synchronizing the settlement process, the settlement risk is nearly eliminated. Bank of America and PNC Bank are two banks that have completed this integration as announced in Early Warning’s press release: 

Demand for faster payments has never been higher, and today’s integration milestone eliminates lengthy and costly legacy processes that have long been barriers to many real-time payment settlements between financial institutions,” said Lou Anne Alexander, Chief Product Officer, Early Warning Services. “Our combined foundation will provide all financial institutions an easy solution for new and emerging business use cases, including bill pay.”

Bank of America and PNC Bank are the first to send Zelle payments over the RTP network, providing consumers and businesses a fully-digital payment experience with improved efficiency by leveraging the emerging global ISO 20022 message standard. By sending Zelle payments over the RTP network, financial institutions can enable instant settlement and simpler back-office processing which improves efficiency and reduces costs.

The addition of ISO 20022 messaging with Zelle is interesting.  The adoption of this standard was needed for the integration with RTP, but this also opens up opportunities to include more data with the payment which can be very valuable in some use cases, particularly for the build out of business solutions.

In a conversation with Chris Ward, executive vice president and head of product & operations, PNC Treasury Management, this is certainly their intent.  They are already developing a request-for-pay solution that makes bill pay transactions available in real-time.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Zelle Announces Real-time Settlement with Bank of America and PNC appeared first on PaymentsJournal.

It is hard to argue with the fact that people love BNPL lending.  It is fast, approval rates are nearly 100%, and who wouldn’t want to treat themselves to a $150 purchase on four easy payments?  But lenders, consumers, and investors need to wonder if the process is all a castle built on sand.

The popularization of Buy Now Pay Later lending comes at a unique time.  Retailers stress the economy as sales plummet.  Consumers contend with high unemployment, face masks, and an unsteady economy.  Everyone is looking for a way to hunker down and try to keep life as normal as possible

With the holidays behind us and e-commerce gaining scale, we see BNPL as a new-fangled lending replacement and achieving scale as IPOs bring in billions.  The industry calls it “new,” but companies like GE Finance (now Synchrony) and Household Finance (Now Capital One) built their empires on a similar merchant-centric model. However, both companies kept a laser-focus on credit quality.

What comes to mind is the short-lived existence of peer-to-peer (P2P) lending, once the darling of Wall Street, and now a lousy investor memory. Remember Lending Club? 

• Stock surges 56% on opening day, newly values the company at $8.5B
• The S-1 states that Lending Club sees itself as the next fixture of this sharing economy.
• Big banks operate through thousands of branches nationwide, branches that remain open throughout the day even if nobody is visiting them.
• But peer to peer lending websites have no branches, vaults, or tellers.

If you were one of the unlucky ones that bought at the peak price of $128.70 (December 26, 2014), you might feel differently than the trader who buys the stock on February 16, 2021, at $12.65.  And, if you follow the company, you’d know they are trying to upend the business model they created, according to Business Journals.

• LendingClub issued a death certificate on its peer-to-peer lending business, telling the SEC that it plans to shut down that operation at year-end. 
• So-called peer-to-peer lending has been on life support for years. When family offices and later hedge funds and other institutional investors jumped into the business of supplying the money to finance loans on LendingClub’s platform, the company said it was a lending marketplace, not a peer-to-peer lender. After all, few people borrowing money on LendingClub consider billionaires to be their peers.

Or, you may have favored Prosper Marketplace, which did not prosper.  It was a good idea at the time. However, SEC reports indicated a 22.45% charge-off rate, enough to send a risk manager into retirement.

Then, we have Social Finance, better known as SoFi.  SP Global reported: “By April, Citigroup Inc. was having trouble marketing a new securitization of loans from personal-focused lender Prosper Marketplace Inc., leading the two firms to end their partnership. Without this important source of capital, Prosper saw originations fall 55.5% during the second quarter of 2016.”

Now, I am not a skeptic, in fact, it is my job to understand new lending forms, and I will often borrow to test a new product, to understand the business model better, and feel the user experience, as discussed in BNPL Borrowing: Confessions of a Credit Card Manager.  But some sirens are calling that credit managers must consider before they start changing their well-established credit models or get into acquisition modes with ridiculously priced offers.

• In Australia, BNPL Lender Zip  received a “please explain notice” (see here) from the Australian Stock Exchange to explain sudden surges in stock valuation, as Business Insider stated to “ account for the company’s market cap jumping $1 billion in the space of a few hours.”

As good as the sales numbers look, the inverse is true of credit quality, according to The Drum.

• A GlobalData survey in November found that 52% of BNPL shoppers had at some point been unable to make a payment through a credit plan they’d used.
• A UBS survey conducted in Australia last September found that the proportion of BNPL users on the federal government’s stimulus packages (JobKeeper and JobSeeker) was substantially above that of non-users and that 60% of the respondents on JobKeeper believed they would have defaulted on their BNPL payments without government subsidies. 
• Credit quality is under review by regulators in the largest BNPL markets.

BNPL has interesting aspects, such as placing the merchant in the center of the financing relationship and the benefits of digital lending.  At the same time, you have to wonder if growth is too fast to be sustainable or overly optimistic rather than being realistic.  And that is something we saw with P2P lending.  Short-lived, lots of losses, and limited long-term value to consumers, financial institutions, and investors.

The calculus of lending is simple.  Lenders gain from lending money at prices greater than the funding cost.  Subtract operating costs, credit risk, and marketing expenses.  When this gets out of whack, you must consider safety and soundness, for all players involved.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

The post BNPL Buzzkill: Memories of Peer-to-Peer Lending appeared first on PaymentsJournal.

Combining Fusion Digital Banking and real-time payment services from Allied Payment Network, Baptist Health FCU will deliver an enhanced experience while reducing costs

Lake Mary, FL, US – February 16, 2021 – Finastra today announced that Baptist Health Federal Credit Union – a credit union serving Baptist Health of Arkansas, their affiliates, and other health care related groups and organizations – has selected Fusion Digital Banking, to deliver a modern, digital banking experience to its members. In addition to transitioning its entire digital banking to Finastra for a best-in-class, seamless digital experience, the credit union will use Allied Bill Payment from Allied Payment Network for fully-integrated, real-time person-to-person payments and account-to-account transfers.

“Robust digital banking capabilities are no longer just a means to appeal to a young and digitally-savvy member base, they are a must-have for serving our entire member community with the same level of service they can get in a physical branch,” said Mike Gorman, CEO, Baptist Health Federal Credit Union. “By being affiliated with Arkansas’s largest health system, as well as its nursing college, our digital channels will enable us to best serve our members, even as they launch careers that take them all over the country. And now, in the age of COVID-19, user-friendly access to a complete suite of banking services is more critical than ever before.”

Baptist Health FCU is not only improving its member experience, but will be able to do so more cost-effectively than with its current technology, delivering greater value to its members, which is vital to a credit union’s mission. Fusion Digital Banking will enable the credit union to reduce its physical costs and reach more members without having to add to its physical presence.

“Baptist Health Federal Credit Union is committed to providing its members with the best experience and level of service available,” said Chris Zingo, SVP and GM of Americas Field Operations, Finastra. “Working with Finastra, and leveraging its fintech marketplace, FusionFabric.cloud, the credit union has access to a suite of solutions that deliver on the commitment to their members with improved efficiencies and reduced costs.”

The post Baptist Health Federal Credit Union to Deliver a Robust Digital Banking Experience with Finastra appeared first on PaymentsJournal.

The payment liability shift at the pump is fast approaching with an April 2021 target date. The transition to EMV terminals will address significant fraud issues that occur at gas stations.

Now ACI Worldwide and Gilbarco Veeder-Root are partnering on an enhanced security solution that will not only benefit retail fuel dealers, but also C-stores that are commonly located at the same location. Many gas retailers may not meet the April EMV conversation date, and will find themselves on the hook for fraudulent payment transactions.

The following excerpt from a StreetInsider.com article reports more on the topic:

ACI Worldwide, a leading global provider of real-time digital payment software and solutions, and Gilbarco Veeder-Root, the worldwide leader for retail and commercial fueling operations, announced today that they are collaborating to jointly certify the ACI point-to-point encryption (P2PE) data security offering—enabling merchants to protect millions of consumers who use debit or credit cards at their fuel pumps. The technology will also allow merchants to avoid millions of dollars in losses resulting from data breaches and fraud.

 “As the first manufacturer to bring an outdoor EMV solution to market, we are now looking beyond the concerns of magstripes and skimming to a new threat attacking businesses in new ways,” said Dan Witkemper, director of North America Payment Marketing, Gilbarco. “ACI not only has an industry-leading P2PE solution but decades of experience serving the fuel and convenience industry, and we are excited to work with them to jointly provide this new security offering. Together, we will provide the industry with unmatched data security, preventing data breaches as we approach the EMV liability shift.”

“Fuel and convenience store retailers are dealing with growing payment complexities as well as growing fraud and data breaches—both at the pump and in-store—making it more challenging to keep sensitive cardholder data safe,” said Debbie Guerra, executive vice president, ACI Worldwide. “EMV compliance is one layer of security, but P2PE increases protection levels; through our strategic partnership with Gilbarco, we’re delivering a joint secure payments platform with unified and agnostic P2PE capabilities that solves these challenges and further supports readiness for this year’s EMV liability shift.”

Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group

The post ACI Worldwide and Gilbarco Fuel Enhanced Security At The Pump appeared first on PaymentsJournal.

Although Covid caused many restaurants to struggle, some restaurants can use this hardship as a means to adjust their long-term strategy to better cater to consumer’s needs. To evaluate where restaurant strategies are pivoting, the Restaurant Franchise Group at TD Bank conducted a study of 250 restaurants. First, it is no surprise consumers overwhelmingly desire a contactless experience. Restaurants adapted their long-term strategy accordingly by providing mobile order along with off-site delivery.

In turn, restaurants must also begin to plan how they will account for third party delivery fees, employee bases, and overall lease profile. Next, preferred payment methods have changed. Many consumers now value quick, easy, and contactless payments. Restaurants responded by implementing non-traditional payments, such as mobile pay, cloud-based POS systems, and P2P apps, as an available payment method. Finally, Restaurants are rethinking their real estate.

Nearly half reported that they plan to reduce or have already reduced the number or size of their franchise locations. As more and more consumers are preferring curb-side pick-up or delivery over dine-in, restaurants are wise to facilitate these capabilities. With vaccine rollout on the horizon, restaurants will hopefully see both a return on their investments as well as a slight return to normalcy.

Attached below is an excerpt from the QSR Article where you can find more data and insights:

The restaurant industry has been hard-hit by COVID-19. According to the National Restaurant Association’s September 2020 report, one in six restaurants closed permanently or long-term as COVID-19 restrictions evolved. These restrictions, which initially resulted in temporary closures, later allowed for outdoor dining and indoor dining at limited capacities. Restaurants will likely continue to struggle throughout the colder winter months as we see an uptick in COVID-19 cases nationwide.

However, as we have seen throughout the pandemic, restaurant owners and operators are creative. They will continue to adapt to cater to consumer preferences and rethink their operational models to enhance consumer confidence. If restaurants pursue this positive, flexible mindset, they can use this time as an opportunity to re-evaluate their operational model and determine how they can adjust their long-term business strategy.

Overview by James O’Brien, Research Analyst at Mercator Advisory Group

The post How Restaurants Adapt to Changing Consumer Tastes appeared first on PaymentsJournal.

This posting in Cision PR Newswire presents further evidence that cryptos (at least some of them) are moving towards the mainstream in expanding payments use cases.  More common in C2B and P2P scenarios, this particular use is B2B as Corporate Intelligence Services LLC (C.I.S) is announcing acceptance of bitcoin as a settlement currency in its commercial debt collection division. We recently released a member viewpoint on the subject of cryptos and the expanding methods of buying and using them.

‘Roger Barter, co-owner of C.I.S. says, “Bitcoin has become more and more accepted as a form of payment. Bitcoin has several advantages over checks and credit cards. Transactions are instantly verifiable and are peer-to-peer without a 3^rd party facilitator. P2P transactions have significantly lower transaction fees. Additionally, unlike merchant credit cards, Bitcoin payments are peer-to-peer and there is no 3^rd party that can reverse the transaction, or give the payment back to the customer or debtor. In the world of high-balance collections, this is a game changer.” ‘

Interesting about the emphasis on risk versus checks and credit cards given the absence of 3^rd parties.  Obviously there has to be some careful wording in these debt payment agreements, given the valuation instability of cryptos, but we would expect that C.I.S. has relatively immediate exchange agreements in place with the Coinbases and Krakens of the world.

It is also not clear how often a bitcoin might be used to cover a debt, so likely these are used as a last ditch method in privately held situations where crypto assets are a fallback. 

‘In its eleventh year, Corporate Intelligence Services actively pursues leveraging the most cutting-edge technologies to offer their clientele better service, and this is why they believed it was time to accept and embrace Bitcoin as a payment mechanism.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Corporate Intelligence Services Now Accepts Bitcoin as Payment for B2B Debt Services appeared first on PaymentsJournal.

Early Warning’s Zelle reported their 2020 results for the P2P app. Growth continued at a sharp pace, closing out 2020 having processed $307 billion in value (up 58%) and 1.2 transactions (up 62%). Here’s a graph of Zelle’s growth since launching in 2016:

If we consider the timeframe from 2017 when Zelle really started taking off to 2020, we find the network has achieved a CAGR of 60%.  Now the next trick will be to continue that level of growth.

In a conversation with Early Warning’s CEO, Al Ko, a portion of the go-forward growth will come from extending the use case for Zelle to include small business transactions.  Small business, often service providers like contractors, can get paid by consumers through Zelle.  More financial institutions are rolling this solution out as a part of their faster/real-time payments strategy. 

For the moment at least, financial institutions are charging small transaction fees to businesses to use this service to get paid instantly.  The number of financial institutions rolling out this service for small businesses has expanded to 11. Here’s what the press release had to say on the topic:

Today, more than 80% of consumers either use or plan to use P2P services – and nearly 1/5 (19%) of consumers began or planned to use P2P during the pandemic, according to research by Zelle. These same consumers and more can now use Zelle to send money to eligible small businesses, with 11 financial institutions—Bank of America, Bank of the West, Chase, Citi, FirstBank, Frost, Investors Bank, Morgan Stanley, Truist, U.S. Bank, and Wells Fargo—having launched Zelle for small businesses in 2020. Corporations are also turning to Zelle to meet consumer demands. In 2020, Disbursements with Zelle achieved a 41% increase year-over-year as corporations disbursed funds to individuals electronically rather than checks.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Zelle P2P Appears Unstoppable appeared first on PaymentsJournal.

This post appears in a news section of Nasdaq and is contributed by a member of The Motley Fool, an investment advisory of sorts.  The piece is commentary about the recent Visa acquisition of YellowPepper, the Miami-based fintech that specializes in mobile banking and payments application for the LAC region. 

The acquisition was actually announced in October and closed about a month later. There are no terms mentioned (nor were they in the original announcements) but one source had YellowPepper’s valuation at between $100-500 million as of late 2018.

As readers paying attention to the payments industry (and surely members of CEP) will know, the major cards networks have been expanding their roles into the broader payments space (most notably in B2B uses) now for several years through strategic acquisitions, partnerships, product development, value added services and positioning as a fintech. Their primary distribution channel remains banks but given the ‘network of networks’ goal, partnerships with other fintechs is core to the effort as well. So this move fits directly into that strategy.

‘In November 2020, Visa completed its acquisition of YellowPepper, a fintech company that enables real-time payments between card, account, and blockchain networks through a set of application programming interfaces (APIs). In other words, the company provides software that makes it easy for clients to send and receive various types of payments. YellowPepper CEO Serge Elkiner has explained the company in this way: “We’re a fintech helping banks keep an edge against big tech firms.” ‘

The author goes into some of the overall strategy and recent connective moves, such as the acquisition of Earthport in 2019. Two of the Visa products touted are Visa Direct, mostly a P2P and B2C play but applicable for small business uses cases as well, and Visa B2B Connect, a pure cross-border business payments play. Look for more of this going forward. Readers should browse the article.

‘Visa’s CEO also said the acquisition would allow for easier integration with Visa Direct and Visa B2B Connect. If that pans out, Visa could more aggressively target opportunities in B2B payments, disbursements (business- or government-to-consumer), and P2P transfers in Latin America — an $8 trillion market opportunity, according to management. In 2020, Visa Direct facilitated 3.5 billion transactions around the world, but this acquisition could drive that figure upwards in the years ahead. Likewise, Visa B2B Connect currently reaches 80 markets globally, but YellowPepper’s platform could help the product gain traction in new markets.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Why Visa Acquired YellowPepper appeared first on PaymentsJournal.

PayPal’s Venmo recently conducted a survey of over 2,000 of its users and found that many of its app devotees that use Venmo for person-to-person (P2P) transactions trust the app for purchases with merchants. And that’s good news for Venmo as they look for sources of revenue.

Venmo P2P transactions only generate fees from customers when they pay for an instant transaction, so in total are not profitable. By adding the option to pay with Venmo, they can now collect fees from merchants for transaction processing services.

Venmo discussed some of its findings in a blog:

Several years ago, we extended its use to our merchant community, offering them the ability to add Venmo at checkout to create a quick, simple and seamless experience. In this time, the community has grown to more than 65 million people who are looking to make Venmo a greater part of their everyday spending. For merchants who are interested in connecting with Venmo’s highly social and engaged audience, and find a way to rise above the competition, the time has never been better based on demand, market conditions and people’s interest in transacting with Venmo.

According to a new study of Venmo customers, nearly half (47%) of customers are interested in using Venmo as a payment method when checking out with merchants, ranging from merchants in everyday spend categories like groceries to those offering clothing, shoes and fashion apparel. The data shows that 89% of customers prefer to pay with Venmo because they trust the brand, it’s easy to use and because it allows them to split transactions.

Venmo has been progressively adding more and more services to its brand including credit card and check cashing options. Looks like Venmo has its sights set on becoming a neo bank.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Venmo Users Moves Beyond Person-to-Person Transfers appeared first on PaymentsJournal.

Fiserv announced that they have completed their 500^th financial institution implementation to the Zelle network. Here’s some background on that milestone:

Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions, announced today that Alabama-based CB&S Bank has become the 500th financial institution to go live on the Zelle Network® via Fiserv.

As the list of banks and credit unions enabling person-to-person (P2P) payment capabilities with Turnkey Service for Zelle continues to grow, those financial institutions are also finding a path to real-time payments processing, one of the fastest-moving developments in the financial industry.

“We’ve put a lot of work into helping financial institutions get ahead of the proliferation of real-time payments,” said Matthew Wilcox, president, Digital Payments and Data Aggregation at Fiserv. “Our NOW® gateway, the connection point for real-time delivery, comes with every Zelle installation. It provides the foundation for real-time money movement and enables a number of other Fiserv payment applications including TransferNow®, our account-to-account (A2A) solution.”

In early November, Early Warning, the operator of the Zelle network, announced that they had over 730 live banks and credit unions on their platform, meaning that most are using Fiserv to complete their integrations.   

One of the metrics I track is the growth of reported commitments and implementations to Zelle. I think it may be an indication of how other faster and real time networks may be adopted in the U.S.  Here’s a graph that tracks that progression:

Overview by Sarah Grotta, Director, Merchant Services at Mercator Advisory Group

The post Fiserv Enables Nearly 70% of Zelle Implementations appeared first on PaymentsJournal.

This write up is in Payments Source and provides an update on the Mastercard Track BPS, which we have discussed before here on these pages.

What started out as an initial product announcement in late 2018 about a B2B network for information sharing has become a series of releases around incremental features. In this case, Mastercard is touting the eventual arrival of account-to-account payments, including real-time.

‘It will take years to fully complete the project, but Mastercard on Monday announced the availability of real-time account-to-account corporate payments for U.S. firms through its Mastercard Track Business Payment Service (BPS), with plans to add cross-border payments next year…Account-to-account B2B payments will be available in all global regions through the service by the end of next year, leveraging The Clearing House’s Real Time Payments, ACH and infrastructure Mastercard acquired from European providers including VocaLink and Nets, Mastercard said.’

Readers may have seen the recent announcement that Vocalink will be leading the way in building out Canada’s RTR by 2022.  So as we have all heard by now the pandemic has accelerated the adoption of payments automation, most particularly in the U.S. where until recently checks had remained as a majority of B2B payments. 

Mastercard product distribution is through banks and other 3^rd party partners who service the global payments space. So we will see how the growth develops as we move away from the pandemic (one hopes) in 2021.

‘The growing popularity of RTP for B2B payments is also working to accelerate development of Mastercard Track BPS, he said. “RTP is a relatively recent innovation, and the timing has worked out well all around so now suppliers to say what kind of payments they want to take and when to accept them, which buyers can discover through an API,” Anderson said….“We’ve created an open-loop system that’s analogous to how we operate as a card network — but instead of just connecting banks and card users, we’re enabling corporations, banks and fintechs to pick any payment rail through our platform,” he said.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post How the Pandemic Sped Mastercard’s Creation of p2p Features for B2B Payments appeared first on PaymentsJournal.

Early Warning Services reported third quarter results setting new records for processed transactions and showing a continued reliance on Zelle, the digital person-to-person (P2P) payment app. Consumers adopted P2P aps in droves, (also including Venmo, Square Cash, and others) as they found the ability to pay others electronically more important as the global pandemic shifted payment habits. 

The continued growth suggests that as shopping habits find their new “normal”, P2P apps will continue to thrive. Here’s a graphic representation of Zelle’s growth trajectory:

In addition to the P2P activity, Zelle is starting to be used for small business transactions too. Here’s what the company’s press release had to say about that point:

We continue to grow our network, welcoming financial institutions of all sizes. Today, more than 1,000 banks and credits unions are currently contracted to participate on the Zelle Network, including 731 that are live today and processing transactions,” said Al Ko, CEO of Early Warning Services, LLC. “Zelle is available to more than 140 million consumers in their mobile banking apps or in the Zelle app, and is used for the most important life essentials such as sending contactless payments to local businesses and money to friends and family in need.”

The Zelle Network also saw more than $4.5 billion sent to small businesses and nearly half a billion dollars sent by companies to consumers via the Disbursements with Zelle service.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Zelle Reports a New Payment Transaction Milestone appeared first on PaymentsJournal.

The New York Times published an in-depth article on fraud issues that consumers using Square’s Cash App and PayPal’s Venmo are enduring. Scammers are targeting these users and tricking them out of significant amounts of money, despite the fact that users need to acknowledge and authorize each transaction.  The tactics that criminals use are getting increasingly sophisticated, as highlighted in one tale of woe:

Charee Mobley, who teaches middle school in Fort Worth, Texas, had just $166 to get herself and her 17-year-old daughter through the last two weeks of August.

But that money disappeared when Ms. Mobley, 37, ran into an issue with Square’s Cash App, an instant payments app that she was using in the coronavirus pandemic to pay her bills and do her banking.

After seeing an errant online shopping charge on her Cash App, Ms. Mobley called what she thought was a help line for it. But the line had been set up by someone who asked her to download some software, which then took control of the app and drained her account.

“I didn’t have gas money and I couldn’t pay my daughter’s senior dues,” Ms. Mobley said. “We basically just had to stick it out until I got paid the following week.”

The use of P2P apps has increased this year due to consumers’ changing payment needs during the pandemic and the fraud has followed. While none of the P2P apps disclose fraud rates, this article reports that the losses are three to four times greater than typical debit and credit card fraud losses. Early Warning Service’s Zelle P2P product offered by banks and credit unions has historically held losses to less than that of typical debit card portfolios. Although no solution is immune from fraud losses, the more robust authentication measures and attention to potential scams is serving Zelle customers well. 

The P2P market is at an important point in its product maturity where fraud needs to be managed and the response to consumers’ losses dealt with on a fair and equal basis—or else the industry is going to see a decline in growth and an increase in regulatory oversight.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Fintechs Need to Learn From Banks and Credit Unions about Protecting Consumers from P2P Fraud appeared first on PaymentsJournal.

The world of credit cards certainly felt the impact of COVID-19. However, there is no shortage of innovation at Synchrony. In recent months, we’ve seen applications shift away from paper in a patent-pending process called Direct to Device, where merchants can send a credit application through email or QR code. Verizon’s co-brand was undoubtedly a win, but one of my personal favorites is the secured private label credit card with Amazon. 

Another breakthrough was SyPI, the Synchrony Plug-In, which, with a 5-minute setup, allows shoppers to “apply for credit, check their balance, purchase activity, and credit.” SyPI also enables voice payments with Alexa and reduces credit application times with the “dApply” process.  Many of the function’s interface with “Sydney,” Synchrony’s version of Siri, Alexa, or “Hey, Google.”

The latest innovation centers on Synchrony’s relationship with Venmo, a PayPal business. I am a big fan of PayPal and regularly use the account I set up more than 20 years ago to insulate my checking account from online merchants. If my household purchase is not through Amazon, it is likely to be found on PayPal.

With 200 million global customers, PayPal is no slouch when it comes to payments innovation, so today’s announcement is particularly impressive.

• Venmo today introduced its first-ever Venmo Credit Card, issued by Synchrony (NYSE: SYF) and powered by the Visa network, which gives customers automatic cash back on every eligible purchase, a personalized rewards experience, and the ability to manage the card directly in the Venmo app.
• The card unlocks new ways for Venmo’s community of more than 60 million customers to shop, share or split purchases, and earn cashback.
• The reward structure is good, and by using the highest spend categories, the cardholder does not need to redirect their spending based on quarterly rolling merchant categories. Customers earn cashback in eight different spending categories: Grocery, Bills & Utilities, Health & Beauty, Gas, Entertainment, Dining & Nightlife, Transportation, and Travel. 
• Earning up to 3% cashback* on their top spend category, up to 2% back on the second-highest, and up to 1% back on all other purchases.

The contactless card is on par with industry standards, but a novel feature takes advantage of QR code technology:

“…each card is printed with a customer’s unique QR code on the front…The QR code can be scanned via a mobile phone camera to activate the card, or in the Venmo app by friends to send a payment or split purchases.”

This takes advantage of one of Venmo’s traditional sweet spots, splitting payments between friends.

Beyond the announcement, there are two important takeaways. The first is that Synchrony increased its bench strength with the general-purpose credit card.  Between Verizon and PayPal, the partnerships penetrate a large share of U.S. households, especially when you consider Synchrony’s core base of 76 million active accounts. The next is a flair of continuous innovation at Synchrony. We are not observing a repackaging of old technology with a new name; these are real, usable innovations.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

The post Venmo Synchs With Synchrony appeared first on PaymentsJournal.

Canadian fintech Mogo is going to get into the Person-to-Person (P2P) business to compete with what it feels is a less than ideal offering through payment network, Interac, and U.S. providers like Venmo and Square Cash. The product is expected to launch in 2021.

I am not sure why Mogo wants to announce a product so far in advance of its implementation. It can’t be that the company is waiting for new features from Canada’s national real-time network, Real Time Rails (RTR). That solution isn’t expected to be launched until 2022. 

Mogo is something of a neo bank that offers account, budgeting, and spending capabilities through a prepaid card. The company also offer personal loans and mortgages. It also has a company focus on the environment and reducing its users’ carbon footprint.

Here’s what Finextra had to say about Mogo’s product announcement:

Mogo Inc. (TSX:MOGO) (NASDAQ:MOGO) (“Mogo” or “the Company”), one of Canada’s leading financial technology companies, today announced plans to launch a mobile peer-to-peer (P2P) payment solution that will enable users to quickly and easily make and share payments with friends and family through Mogo’s mobile app. The Company expects to launch the solution in Q1 2021.

“As more Canadians embrace the convenience of a cashless life, we expect to see growing demand for mobile, next-generation payment solutions that let users send and receive money instantaneously from their smartphone,” said David Feller, Mogo’s Founder & CEO. “The primary method in Canada today – bank-to-bank transfers using Interac – does not offer the digital user experience consumers now expect as evidenced by the rising popularity of Square’s Cash App, PayPal’s Venmo app and others in the U.S. market. Peer-to-peer payment is a natural extension of our digital platform and will complement and seamlessly integrate with our other products such as MogoSpend, giving our more than 1 million Mogo members even more utility and value.”

Today, Canadians rely primarily on Interac e-transfers for peer-to-peer payments1. In 2019, there were more than 486 million of these transactions totaling $169 billion2. As more aspects of our lives go digital, these numbers will continue to grow and form a larger part of the almost $10 trillion payments landscape in Canada.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Mogo Announces a P2P Solution, but You Are Going to Have to Wait appeared first on PaymentsJournal.

Increased security and simplicity granted a high demand for P2P payments. With the rapid development of e-commerce and online services, P2P payment app development is a profitable idea. In this post, you’ll figure out the main steps of P2P payment app development, security issues, and basic features that should be developed primarily.

Why should you build a P2P payment app?

There are several types of payment apps, and each of them is good for different purposes. Let’s single out each type.

• Banking services. Some banks offer P2P apps that make payments faster and easier. However, merchants that use P2P services should have PoS terminals that accept these payments. 
• Discrete Services. This type of service can keep users’ funds on their accounts if they don’t want to withdraw the money right away. PayPal and Venmo are the most outstanding examples of discrete P2P services. They allow users to make payments via Visa and MasterCard.
• Mobile OS Systems. Google Pay and Apple Pay are P2P payment services that allow users to send money to other users with the same operating system. Besides, this software allows users to pay via NFC in shops equipped with up-to-date PoS terminals.

Primary features for P2P payment app

To satisfy user needs, your payment system should have some basic P2P payment features. Let’s take a closer look at each of them.

Digital wallet

Here, users will keep their money, add credit card data, monitor previous transactions, and more. It’s the main feature that involves all other features listed below. 

Performing transactions

Users should be able to transfer money from their wallet to another. In case you’re going to work with business, you can add a request feature. Thus, a user will be able to request a payment from another party and wait for it to be approved. 

Send invoices 

Make sure that users are able to make an in-app scan of the invoice and send it to other users. Later on, you can develop a feature that generates invoices and submits them.

Push notifications

Push notifications keep users updated about the transactions and remind them of dates to pay bills. You can also use notification for marketing purposes, like offering a discount. 

Bank account transfers

Users should be able to send their money to their bank accounts or credit cards with the P2P system. 

Chat 

A chat may come in handy to clarify payment details with a receiver. Besides, in case of technical issues, customers will contact technical support via the text chat. 

Admin Panel

With the management panel’s help, admins will track payments, reclaim unsuccessful transactions, manage users, and more.

Essential steps in P2P app development

As we’re clear with basic features, it’s time to find out what are the main steps in P2P app development. 

Decide on the payment app type

First things first, choose a type of your P2P payment system. Choose between banking and discreet services according to your business needs. 

Decide on a platform

If you’re on a budget, it’s better to start with a single platform. Conduct market research to find out what platform suits you the most. Then, when your app brings profit, you can aim at another platform. 

Come up with a feature list

Apart from features from the previous section, your app should have something that will make it stand out among the rivals. Come up with unique functionality that no other app can offer. 

Take care of security issues

This step is crucial because you’re dealing with your customers’ payment details. Thus, your app should be reliable and well-protected. 

To ensure privacy and keep away intruders from user accounts, you have to add security features. Fingerprints, face recognition, and other security technologies can be applied to improve safety. On top of that, develop a two-step verification. Send a message to the user’s phone or email to verify their identity.

To avoid large fines and provide top-notch security, your app should be PCI DSS compliant. It has 12 strict requirements that describe different aspects of payment software protection. 

UI/UX Design 

As with any software, the P2P payment app should have an attractive and intuitive user interface. Don’t make your users waste time figuring out how things work. Simplify interactions with the app and make the design minimalistic. But remember that a practical and good-looking design will significantly increase app development cost.

Quality assessment 

Make sure to hire experienced QA engineers, because bugs and vulnerabilities aren’t acceptable in P2P payment apps. It’s a great idea to conduct alpha and beta testing of your app. Gather a group of enthusiasts that will test your software at initial stages and report about every detected bug.

Wrapping up

To sum up, P2P payment apps are gaining momentum and have a promising future. With a well-built software and proper means of marketing, you can win over a large audience and gain large revenue. However, to comply with all security regulations and deliver superior performance, you have to find an experienced team of developers.   

The post Peer-to-Peer Payment Software Development: Revealing all Steps and Pitfalls appeared first on PaymentsJournal.

One of the most buzzed-about trends in the payments industry is the rise of real-time and faster payment options. In recent years, more and more consumers and businesses have used novel payment methods to send and receive money faster than traditional payment options have allowed. Interest in real-time and faster payments grew further when the Federal Reserve announced last summer that it was developing FedNow, a real-time payment rail to provide an alternative to The Clearing House’s (TCH) RTP rail.

Despite all the news about faster and real-time payment methods, there is a lot of confusion on the topic. While many use the terms interchangeably, there are different payment types across the spectrum. Moreover, many people are unsure of how common faster and real-time payments are, or even what the use cases consist of. Finally, banks and other financial institutions are often unsure of how to approach using these emerging solutions.

To help the public better understand faster and real-time payments, PaymentsJournal sat down for a discussion with Sarah Grotta and Steve Murphy, two experts from Mercator Advisory Group. Grotta is the director of Mercator’s Debit and Alternative Products Advisory Service and Murphy is the director of Mercator’s Commercial and Enterprise Payments Advisory Service.

During the conversation, Grotta and Murphy discussed the difference between faster and real-time payments, the state of real-time payments in the U.S. by use case, and how banks should be approaching these payment methods.

Confusion in the market and the need for clarification: Faster payments vs. real-time payments

“Many in the industry will use the terms faster and real-time fairly interchangeably, and certainly I’m guilty of that,” said Grotta. “But I think that really just points to a bit of the confusion in the market and the need for clarification.”

Put simply, real-time payments are not the same as faster payments, but they are similar. According to Grotta, the best definition of faster payments is laid out by the Federal Reserve’s Faster Payments Task Force.

According to the task force’s definition, a faster payment solution is “a ubiquitous, safe, faster electronic solution for making a broad variety of business and personal payments, supported by a flexible and cost-effective means for payment clearing and settlement groups to settle their positions rapidly and with finality.”

In other words, a faster payment is a payment method that posts and settles payments faster than traditional payment rails. Examples of faster payment solutions include Nacha’s Same Day ACH, Zelle, and debit push payments. “They’re all fast, but they don’t necessarily settle in real-time,” explained Grotta.

In contrast, real-time payment solutions do settle in real time; payments are initiated and settled almost instantaneously. A prominent example of a real-time rail is The Clearing House’s RTP Network. The Federal Reserve’s FedNow will also be a real-time solution.

To summarize, while real-time payments are a form of faster payments, not all faster payments are real-time.

Over half of U.S. bank accounts are connected are accessible via real-time rails

Even with the confusion around terms, real-time and faster payment methods are rather common. Murphy explained that the latest information from TCH indicated that 28 banks are directly participating in the RTP network.

“What that means is that they are connected to the network and can at least receive real-time payments,” said Murphy. He also noted that there are 19 third party service providers (TPSPs) that are connected to RTP and are capable of providing some level of service to depository institutions. An additional 13 banks are accessing RTP through these TPSPs.

While these numbers may seem low, the amount of bank accounts involved is quite large. By the end of 2019, the RTP Network was reaching nearly 50% of all U.S. bank accounts, according to TCH. The organization predicted that by the end of 2020, almost all bank accounts would be connected.

However, Murphy reasoned that this goal may not be attainable due to COVID-related slowdowns. He estimated that only about 65% of bank accounts are capable of being accessed through RTP at this time. 

The many use cases of real-time and faster payments

The most common use case for faster payments is P2P transactions. Platforms such as Zelle and Venmo have been immensely popular among consumers looking to quickly send and receive money. In fact, P2P transactions had been growing around 50% year-over-year prior to the pandemic, said Grotta. Now with COVID-19 disrupting traditional ways of life, P2P volumes will likely rise further.

P2P payments are also becoming real-time as well. Grotta explained how Zelle has integrated with TCH’s RTP, meaning that financial institutions that have integrated into RTP can receive and settle Zelle P2P transactions in real time.

Another use case is in business-to-consumer (B2C) transactions. The most common B2C faster payment use case is insurance payments. Grotta also highlighted a growing number of rebates and refunds being made along faster or real-time rails, in addition to payroll solutions, especially for gig workers. Consumer-to-business (C2B) transactions along real-time or faster rails are much less common but on the rise nonetheless.

Similarly, business-to-business payments along real-time or faster rails is relatively uncommon. Back in March, Murphy and Grotta published a report detailing the different RTP use cases in the B2B space based on extensive interviews with product managers at various banks. They found that the use cases were limited, although some companies were using these rails to fund payroll accounts and make last-minute invoice payments.

Update on FedNow

The Federal Reserve recently provided an update on FedNow that offered more details about the proposed real-time rail. Grotta noted that based on this announcement and her own research on the topic, it appears as though FedNow will offer the same capabilities as TCH’s RTP network.

This is important because ideally, FedNow should be interoperable with RTP. While there are no plans to make them interoperable initially, Grotta is hopeful that the similarities between the two rails will make interoperability easier to achieve in the future.

When it first debuts, FedNow will offer features including simple fraud management tools and some liquidity management capabilities. The initial launch will not include a directory, though Grotta noted it could be added in the future as The Federal Reserve updates and expands FedNow.

FedNow is still on track to go live in 2023 or 2024.

Banks should start exploring faster and real-time payments now

“Many FIs are still really unclear as to what the various faster payment systems do,” pointed out Murphy. Many do not even know what the RTP rail entails. Therefore, “the first thing to do is make sure that you know what the RTP messages are and what capabilities the network provides; what can that bring to your institution on behalf of clients?” he continued.

Because faster and real-time rails are so new, it can be hard to determine the level of interest among customers. Grotta recommended that banks look at how many of their accounts are receiving payments from these payment methods to determine interest levels. For example, an uptick in Same-Day ACH transactions could be an indicator that a bank’s customers are interested in faster payment capabilities.

Then banks should consider how demand will change in the coming years as more fintechs and competitor banks offer real-time payment capabilities. If a bank decides to wait, it may miss out. As a result, Murphy recommended that banks try to stay up with the curve rather than fall behind.

Those interested in learning more about faster and real-time payments should register for Mercator Advisory Group’s upcoming webinar on the topic. You can register by filling out the form below.

The post The Distinctions Between Faster Payments and Real-Time Payments appeared first on PaymentsJournal.

CO-OP Financial Services recently announced a partnership with Zelle® that will enable CO-OP to offer person-to-person (P2P) payment capabilities to credit unions within its ecosystem. Credit unions with CO-OP account-based technology and the ability to offer Zelle in their mobile banking solutions will be able to take advantage of this partnership.

CO-OP Chief Product Officer Bruce Dragt commented on the announcement, explaining that:

“One of the biggest benefits of Zelle to a credit union is the potential it offers to support members as they increasingly rely on P2P payment technology to complete a variety of daily financial tasks. Zelle offers the day-to-day features members need and prefer to send and receive money, including fast funds availability.”

Even before the COVID-19 pandemic began, P2P payments were a core component of the U.S. payments ecosphere. Based on a survey of over 3,000 U.S. adults in June 2019, Mercator Advisory Group previously identified that “person-to-person payment services are continuing to grow as people and businesses find more use for it.”

Since then, COVID-19 has triggered the emergence of use cases related to health concerns, curtailed in-person transactions, and consumers’ hesitance to use cash. Consequently, credit unions are increasingly recognizing the importance of offering P2P services to their customers.

Zelle P2P activity volume was way up in the first half of 2020 as consumers found a greater need to pay others electronically during COVID-19 related lockdowns and social distancing. In a recent PaymentsJournal article, Mercator Advisory Group’s Director of Debit and Alternative Products Advisory Service, Sarah Grotta, explained that a rising number of financial institutions are accordingly taking steps to convert their existing user portfolios to the Zelle network:

“A recently released financial survey of financial institutions from the Federal Reserve Bank of Boston: Financial Institutions across the U.S. Participate in the Mobile Landscape Transformation, indicates that 48% of institutions surveyed plan to implement Zelle.”

The post CO-OP’s Credit Union Members Can Now Enable P2P Services Thanks to New Zelle® Partnership appeared first on PaymentsJournal.

Early Warning announced results of Zelle person-to-person activity for the first half of 2020.  As has been suspected, volume was up, way up, during the pandemic as consumers found greater need to pay others electronically as they interacted less in-person during lock downs and periods of curtailed activities. Here’s a graph of that past few years’ Zelle growth, comparing the first half of the year for 2018 through 2020:

As the press release outlines, the use cases have shifted:

Physical distancing requirements continue to drive strong adoption of Zelle, with enrollment growing 17% over the prior year. Active sender usage – those who have sent a payment in the past 90 days – increased by 43% year-over-year. Average transactions sent per user increased 10% year-over-year, with many consumers using Zelle to pay back neighbors for groceries or to send money to friends and family. Network-wide payment transaction values increased by 60% year-over-year, while payment transaction volume increased by 63%.

 “Zelle has become an everyday essential for consumers who need to send and receive money fast,” said Lou Anne Alexander, Chief Product Officer at Early Warning. “Consumers across all generations have embraced Zelle during these challenging times as a contact-free way to safely exchange funds.”

While Zelle and other P2P apps continue to grow through new consumer adoption, and a greater use among existing users, Zelle will also grow as more financial institutions convert their existing portfolios of users to the Zelle network. A recently released survey of financial institutions from the Federal Reserve Bank of Boston: Financial Institutions across the U.S. Participate in the Mobile Landscape Transformation, indicates that 48% of institutions surveyed plan to implement Zelle.  While these institutions are smaller in size, they will collectively contribute to future growth.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Numbers to Support the Suspicions: Zelle Reports Strong Growth for the First Half of 2020 appeared first on PaymentsJournal.

All signs are pointing to the launch of a new Quick Response (QR) payment option from Apple, joining the likes of PayPal and other payment industry participants. DigitalTransactions, citing the 9 to 5 Mac blog, noted there is evidence in upcoming iOS 14 of QR code capabilities within Apple’s wallet feature:

“References found in the iOS 14 code reveal that Apple is working on a new method for letting users make payments with Apple Pay by scanning a QR code or traditional barcode with the iPhone camera,” the post says. “We’ve managed to access this feature hidden in iOS 14 beta 2, and although it still doesn’t work, we can clearly see an image showing how it will work. Users will point the iPhone camera at a QR code or traditional barcode to pay bills and other things with a card registered with Apple Pay.”

9 to 5 Mac also said the opposite also could work, “with users holding the iPhone in front of a scanner with a QR code generated by the Wallet app.”

QR code use for payments is wildly popular in Asia, with China being a notable example. These codes have been favored because of the very low barriers of entry for merchants to install this form of payment acceptance. The technical requirements and the cost is virtually nil for interested merchants. In countries where the infrastructure to accept NFC card payments is spotty or nonexistent, this makes digital payment acceptance possible.

Perhaps there is a play for other geographies where cards are the entrenched form of payment, but where a new, easy to implement, contact-free option like that of a QR code payment interaction may be valued as the global pandemic continues to rage.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Apple Gets into the QR Payments Game appeared first on PaymentsJournal.

Square’s Cash App and PayPal’s Venmo solutions are seeing fantastic growth recently, as social distancing has consumers looking for more electronic means of exchanging money. These apps were also able to get in on the Economic Impact Payments (EIP) by having their users provide their account information through the IRS portal, as did many other prepaid account holders. 

As MarketWatch noted, Square reported a health new balance of Cash App deposits:

Square disclosed on its latest earnings call that direct deposit volumes on its service grew by three times in April as customers moved to store more than $1.3 billion in aggregate balances on the Cash app during the month. 

What started as simple person-to-person (P2P) funds exchange apps are now morphing into full-fledged bank accounts. These solutions store balances, offer card and mobile payments, and are moving into savings options. I agree with the article; if these apps can convince users to have their payroll deposited to their Venmo or Cash App account and can also get users to try their bill pay services, then they will really lock in their customers. 

Who needs to be concerned about this? Traditional banks may need to be concerned in the long term if Cash App and Venmo can hold on to their younger clientele.  Near term, Neo or challenger banks need to watch out. And of course, competition between the two fintechs is likely to be fierce. (Let’s not forget that Square has made their intentions known by pursuing a bank charter!)

The Holy Grail for PayPal, Venmo, and the Cash App is convincing users to set up direct deposits of their regular paychecks through these services, but that appears to be a tougher sell than it was for the one-time stimulus payments, said Lisa Ellis, a payments analyst at MoffettNathanson.

“Wherever your paycheck is going, that’s your home base, and banks typically own that,” Ellis told MarketWatch. She said that while some users who tried Venmo or the Cash App for the first time to access their stimulus payments may stick around and try out other features, it’s still an “open question” whether these users will deem the user experience to be so much better that it becomes worthwhile to set up direct deposits of their real paychecks.

Square Chief Financial Officer Amrita Ahuja said on the last earnings call that direct-deposit customers “have generated revenue, which is multiples higher compared to customers who only use peer-to-peer.” They typically carry higher balances and engage with more of the company’s services.

Amassing regular direct-deposit customers could hinge on feature improvements. PayPal, for example, is making a large push into bill payments through a partnership with Paymentus, which aims to help customers more easily manage recurring bills. A better bill-pay experience could prompt more to ship their payments straight to PayPal or Venmo, Ellis said, since many people go to handle their bills shortly after getting paid.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Cash App and Venmo See Growth Spike as they Move Closer to Traditional Banking appeared first on PaymentsJournal.

Square’s Cash App, a mobile P2P and payments app has been growing very nicely in the U.S. At least that is what Square’s press releases want us to believe. The company doesn’t release volumes or growth numbers, but given the growth of the market and other competing solutions that do release volume figures, it’s easy to believe that Square is doing very well. 

And now, with yesterday’s announcement like the one in TechCrunch, Square is ready to take the show on the road with the acquisition of European app Verse, an app that appears to have very similar features to Cash App in the U.S. Verse users can:

• Send and request funds from other consumers instantly
• Deposit money to a banking account in two days
• Split bills and share expenses
• Use an attached payment card to make purchases

Verse works in 16 countries in Europe and as such, also has foreign exchange capabilities provided by Visa. Here’s what TechCrunch had to say:

There are many similarities between Cash App and Verse. Verse’s main feature is that it lets you send and receive money from a mobile app. Users don’t pay any fees and transfers occur in just a few seconds.

Verse users sign up with their phone numbers, which means that you can send money to other users as long as you have their phone numbers in your address book. If you don’t have enough money on your Verse account, the app can charge your debit card directly. And if you want to withdraw money from your Verse account, you can transfer your balance to your bank account.

You can also track group expenses from the app (like Splitwise), create money pots and organize events with a basic ticketing feature.

More recently, Verse launched a Visa debit card in Spain, which lets you spend money on your Verse account directly. You don’t pay any foreign exchange fees and you get two free ATM withdrawals per month. Verse uses Visa’s exchange rate

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Square Buys European P2P App Verse appeared first on PaymentsJournal.

In case you just woke up from a decades-long sleep, most of the economy now relies on moving money electronically. I guess someone had to tell Congress.

Last week Jodie Kelly from the Electronic Transaction Association testified before the House Financial Services Task Force on Financial Technology to tell our elected officials how electronic transactions were used to deliver billions of dollars to consumers and businesses affected by the COVID-19 pandemic.

According to an article in FindBiometrics, ETA CEO Testifies On Benefits of Modern Payments Tech During COVID-19, Kelly told the task force about the benefits provided by the association members:

The government has used a number of different forms of digital payments thus far to distribute money to people across the country. So far over $9 billion in Economic Impact Payments (EIP) have been delivered to 5.7 million Americans by reloadable prepaid cards, which can be transferred to a bank account and used online, and are accepted anywhere VISA is accepted.

These prepaid cards are a particularly useful way to receive assistance payments for those without a bank account, a segment of the population that is also often the most vulnerable.Digital payments products are being deployed today to assist with the delivery of the (as of June 6) $266.8 billion in EIP and $511 billion in PPP, along with the $260 billion in unemployment insurance allocated under the CARES Act.

She went on to talk about the money that was electronically transmitted to consumers through P2P services like Pay Pal and Venmo (same company). She also added that much of the PPP loans were delivered to small businesses electronically.

Almost as an aside, the article goes on to mention that Visa had reported a 150% increase in contactless payments. Wow, 150% is a huge increase. Unfortunately, there was a not a lot of data to back up that huge increase and it led me to ask myself several questions:

• Is that increase U.S. only?
• Does it include mobile wallets or simply contactless card? My EIP card doesn’t appear to be contactless enabled, by the way.
• How much of that increase is from new users versus existing users using contactless more frequently?
• What is the level of repeat usage?

Maybe it’s just me. In all honesty, the House Financial Services Task Force on Financial Technology probably doesn’t even care about this stuff and it’s probably not the right forum for this type of information anyway.

[Sigh]

Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group

The post Hey Congress, Electronic Payments are a Big Thing. appeared first on PaymentsJournal.

The past few years have seen substantial growth in the peer to peer (P2P) payments market, with payment apps replacing cash and checks. Friends and family members who want to split the cost of a ride share, dinner, rent, or utilities are enjoying the convenience and speed of these mobile apps.

To discuss the growth of P2P payments and real-time payments strategy for financial institutions, PaymentsJournal sat down with Derek Swords, Vice President, Product Management at  Fiserv and Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Recent Growth in the P2P Marketplace

“There’s been some really pretty amazing growth in the P2P space, something that I don’t think we’ve seen [since] the beginnings of debit cards,” reports Grotta. The graph below reflects the rapid growth of Venmo and Zelle, the largest two P2P apps, over the past three to five years.“This tells me that P2P is really solving payment issues for its users, and it’s offering an incrementally better option over alternative forms of payment,” observed Grotta.

Accompanying this growth in P2P payments has been considerable growth in the number of financial institutions that are integrated with Zelle or have announced planned partnerships.  While recent years have seen dramatic growth, transaction growth is expected to continue at a slower pace as most of the largest financial institutions are already on board and new integrations are in the mid and smaller sized financial institutions.

Recent bank branch closures and pandemic related concerns over the use of cash have accelerated the growth in P2P payments. “First time users and new app downloads have really increased in the last couple of months,” noted Grotta. The expectation is that once these new users become comfortable with the technology, many will continue to use P2P payments permanently.

Driving Forces Behind Mobile P2P Payment Adoption

As Swords outlined, a number of factors have contributed to the wide scale adoption of P2P payments over the past several years.

• Growth in mobile: Consumers are becoming increasingly comfortable making mobile payments.
• Speed: The majority of consumers want and expect to send and receive money in real time.
• Cross generational appeal: P2P use is expanding beyond the younger, more tech savvy early adopters across every generation from teens to seniors.
• Marketing: National marketing by P2P networks, as well as participating institutions, contributes to brand recognition.

Real-Time Payments (RTP) are a Must for Financial Institutions

In an increasingly fast paced digital world, consumers have come to expect instant gratification when sending or receiving money. Using a mobile app to pay people in real time meets those expectations.

Financial institutions recognize the need to compete on customer experience with both banks and nonbanking entities. This means they must constantly evolve in response to the changing needs and expectations of their customers. If their needs are not met, customers will take their business elsewhere. Banks that fail to address real-time payments are at a disadvantage as faster payments are becoming essential to provide a top notch customer experience. “From a long term play, it’s really important for institutions to start to put their toe in the water on real-time payments,” stated Swords.

Real-time payment capabilities will help enhance the customer experience, reduce attrition rates, and even contribute to monetizing customer engagement. “By offering a high value ability to send money, it makes customers come back again and again to the website, to the mobile app, and as a part of that, financial institutions can cross sell,” explained Swords.

In addition, financial institutions benefit from cost reductions by replacing more expensive cash and paper checks transactions with P2P payments.

Finding the Right Partner

A leading global provider of payments and financial services technology, Fiserv has a long history in the P2P market. It partners with thousands of clients in the P2P space, and is continuing to expand its reach, as demonstrated by its recent partnership with Redstone Federal Credit Union. Partners benefit from Fiserv industry experience and fraud prevention tools made available to them.

Fiserv makes it easy for clients to onboard and participate in the real-time payments market by helping them  connect to, and take advantage of, the Zelle network. By partnering with Fiserv, clients get the benefit of being part of both the Fiserv and Zelle networks.

With 743 million transactions totaling $187 billion processed in the 2019 alone, Zelle is an industry leader that partners with a large number of banks, credit unions, and other financial institutions. Zelle transfers money directly into and out of bank accounts in real time, without the use of third-party apps. Users can access funds immediately. The settlement between financial institutions is processed using an ACH each night, but there is no credit risk for the participating institutions because the network verifies that the funds are there and secured at the time of the transaction.

Furthermore, Zelle is offered through the same banks where customers are already conducting their financial business. Swords suggests, “Consumers perceive these transactions to be safer than going through a nonbank app. When it comes to financial transactions, safety is a concern and a factor in choosing to go through trusted financial institutions.”

The Takeaway

The growth of P2P payments over the past 3 to 5 years has been extraordinary. To meet consumer demand and expectations, financial Institutions must offer P2P payments. Fiserv provides a fast, safe, and easy way to transfer funds between accounts in real time using the Turnkey Service for Zelle.

When financial institutions partner with Fiserv, they are connected with, “the NOW network that we support,” noted Swords, “which allows them to, in the future, build on that investment and offer new use cases for real-time payments. Whether that’s account to account transfers or potentially bill payments or disbursements, it opens the door to a lot of other possibilities. It’s an investment in customer experience for a particular product, but also more broadly, a capability.”

The post The Role of Financial Institutions in Real-Time Payments appeared first on PaymentsJournal.

P2P apps remind users that they should only transact with people they know, but of course users will transact with strangers and sometimes get ripped off.  As highlighted on Bobsulivan.net, Venmo has quietly rolled out a program where for a fee of 3% of the purchase amount, Venmo will step in and help to negotiate situations where purchases made over its network that go sour, like non receipt of goods, damaged goods, or goods that are materially different from what the purchaser ordered.  

All the gory details can be found on the Venmo site here.

Here’s the quick overview:

Sometimes purchases don’t go as expected. When you opt in to Refund Support for eligible purchases, we can help. Let us know within 30 days after your payment and we’ll work directly with the seller to get your money back for eligible items. 

Examples of items that may be covered: You bought dress shoes, but ended up getting sneakers; you bought an authentic handbag, but got a knock-off; you paid for a massage, but the masseuse didn’t show up.

You’re covered if:

Your order was a lot different than it was described

You never received the item or service

You received the wrong item

The item got banged up during shipping

The item was missing parts and won’t work

The service wasn’t as described

This doesn’t cover unauthorized transactions, which are already covered by Reg E.  This service appears to emulate the card networks’ chargeback process.  I think it’s interesting that in this model, it’s the seller who is in the wrong, yet it’s the buyer who ends up paying.  That 3% is kept by Venmo, regardless of the outcome of a transaction covered by the program.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Would You Pay 3% for Purchase Protection? appeared first on PaymentsJournal.

The featured article appears in PaymentsSource and discusses one of the realities of recent life created by the pandemic, and that is the daily adaptations required in order to do some relatively mundane things, like shopping for food.  One of two UK-based startups mentioned is called Ordo, which has a billing app, and the other is Yapily, which facilitate’s faster payments.  Ordo is launching something called ‘Neighbor2Neighbor’, which allows a relative, friend, neighbor or other to send a ‘request to pay’ to someone else for whom they helped out by shopping for stuff.  Sort of a non-profit Instacart type of thing we suppose. 

‘For the duration of the U.K.’s social distancing and self-isolation period, people can send up to 50 Ordo Neighbour2Neighbour P2P smart requests free of charge per month. The service is also marketed to essential workers such as nurses who lack time for shopping…”While there’s a big effort in local communities to get their shopping for them, paying helpers back isn’t easy,” Tillotson said. “There’s a reluctance to hand over cash — and checks, in hygiene terms, aren’t safer than cash. Also, giving someone your card and your PIN so they can buy food for you is highly inadvisable.” ‘

The Yapily app comes in via APIs with Ordo and the bank for whomever is the grateful beneficiary of the service.   The shopper sends a request to pay via the Ordo app (along with a picture of the invoice) and once the beneficiary approves, Yapily executes a real-time payment request back to the shopper.  We happened to be attending one of the Nacha remote Smarter, Faster Payments conference webinar sessions yesterday and a representative from the U.S. real-time payments network Zelle indicated that this is also a recently growing use case as well (although not the same purpose-built experience). So this is an open banking initiative, with Ordo also marketing to commercial billers given the changing attitudes of consumers.

“We use open banking software to ensure the receiving bank account title is the official KYC’d customer name provided by the biller’s bank, and not a title made up by the biller,” said Tillotson. With its partner CGI, Ordo is marketing its service to corporate billers and small businesses as an alternative to direct debit payments for recurring bills…“The personal economic impact of the COVID-19 shutdown is driving reasonably large numbers of consumers to cancel some direct debit arrangements,” said Tillotson. “These cancellations aren’t necessarily to completely stop paying for services, but are driven by consumers’ desire to take control of their financial outgoings when their income is less certain. The businesses we’re working with, want to provide their customers with alternative secure and simple ways to pay when direct debits aren’t acceptable.”

For the times, they are a-changin’ all over again.

Overview provided by Steve Murphy, Director, Commercial & Enterprise Payments Advisory Group at Mercator Advisory Group.

The post Ordo Launches ‘Neighbor2Neighbor’ for P2P Reimbursements appeared first on PaymentsJournal.

Social distancing and fee of virus infected materials is creating the opportunity to encourage more electronic payment transactions.  To support and encourage this, Venmo increased their allowable limits for person-to-person payments and for Pay with Venmo purchases.  The limits for registered Venmo customers was highlighted on their disclosure pages and shared here:

If you have not yet completed identity verification, you will have a lower weekly spending limit of $299.99. This limit includes person-to-person payments and payments to authorized merchants. 

To verify your identity, click the ☰ button at the top of the app, tap “Settings,” and tap “Identity Verification.”

If you have completed identity verification, your combined weekly spending limit is $6,999.99. This limit includes person-to-person payments, payments to authorized merchants, and purchases with your Venmo Mastercard debit card. 

Note: the person-to-person sending limit is capped at $4,999.99. 

Perhaps this is intended to help their customers find greater use in their Venmo product in comparison to bank accounts or other prepaid products, many of which have lower spend limits.

Overview provided by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

The post To Encourage Use, Venmo Increases its Spending Limits appeared first on PaymentsJournal.

Mercator Advisory Group’s most recent consumer survey report, Debit Cards & P2P Payments– Valuable Solutions, from the bi-annual North American PaymentsInsights series, reveals that the debit cards and P2P payments both are core components of the payment ecosphere.

The use of debit cards is highest among older adults, females and those with household incomes below $50,000.

For consumers with household incomes below $50,000, debit cards are the most preferred method for paying in stores. This group is also the reports the highest preference for cash.

The primary reasons consumers cite for not using a debit card to shop online are the belief that credit cards are safer online (39%) and a fear that they don’t get rewards (36%).

P2P Service use varied considerably by age. Among those 18 to 24 years of age, 82% have used P2P payments compared to 46% of those 65 years of age or older. PayPal dominates the market.

Consumers make an average of eight P2P transactions per year. Men make more P2P payments than women (9.3 vs. 5.6). Further, with regard to income, the frequency of transactions is highest among those with household incomes over $100,000 (10.2).

Younger adults are more likely to report fraud issues with P2P services (lost money, paying for something that wasn’t delivered, fraudulent charges or, bank account compromise) than those 35 years of age or older.

Debit Cards and P2P Payments: Solid Partners, the latest report from Mercator Advisory Group’s Primary Data Service, is based on a sample of 3,002 U.S. adults surveyed in the annual online Payments survey of Mercator’s North American PaymentsInsights series, conducted in June 2019.

The study highlights consumers’ use of debit cards, relative to other payment types, the use of credit card controls, reward programs, new account opening. Additionally, the survey covers P2P payment use, key brand usage, reason for using and not using P2P payments and P2P fraud.

“This year is the first time we have explored the use of debit cards and P2P payments in Canada. Both play an integral role in the ever-changing payments ecosystem. For many, debit is an alternative to credit. P2P is currently a young person’s payment method, but we expect that to change over time,” stated the author of the report, Peter Reville, director of Primary Data Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

Highlights of this report include:

• Current payment card usage in the U.S.
• The use of payment cards online and off line
• The incidence of debit card fraud
• Debit card rewards
• How consumers use credit card controls
• P2P Payment usage
• P2P Payment providers
• The types of P2P Payments used
• P2P Payment fraud

This report in slide form is 52 pages long.

Companies mentioned in the survey results shown include: Apple Pay Cash, Facebook Messenger, Google Wallet, MoneyGram, PayPal, PopMoney, Square Cash, Venmo, Western Union WuPay, and Zelle.

Members of Mercator Advisory Group’s North American PaymentsInsights Survey Series Service (formerly CustomerMonitor Survey Series Service) have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

Please visit us online at http://www.mercatoradvisorygroup.com.

The post Debit Cards and P2P Payments are Important to the Payment Ecosystem appeared first on PaymentsJournal.

Mercator Advisory Group’s most recent report, Debit Cards and P2P Payments: Solid Partners, a 2019 U.S. PaymentsInsights study, reveals that the debit cards and person-to-person (P2P) payments are both core components of the U.S. payment ecosphere today.

This report from Mercator Advisory Group’s Primary Data service is based on a sample of 3,002 U.S. adults surveyed in the annual online Payments survey of Mercator’s North American PaymentsInsights series, conducted in June 2019.

The study highlights consumers’ use of debit cards relative to other payment types, participation in debit card reward programs, and new account opening. Additionally, the survey covers usage of P2P payment services, key P2P brands, reasons for using and not using P2P payments, and P2P fraud.

“Both debit cards and P2P payments are key components in the payments repertoire of U.S. consumers. Each has strengths in serving different constituencies. Debit card has a core group of users who prefer debit over credit cards and use it for all the transactions for which others would use credit. Person-to-person (P2P) payment services are continuing to grow as people and businesses find more use for it,” stated the author of the report, Peter Reville, director of Primary Data Services at Mercator Advisory Group, which includes the North American PaymentsInsights series.

Highlights of this report include:

• Current payment card usage in the U.S.
• The use of payment cards online and off line
• The incidence of debit card fraud
• Debit card rewards
• P2P payment usage
• The types of P2P payments used
• P2P payment fraud

Companies mentioned in the survey results shown include: Apple, Facebook, Google, MoneyGram, PayPal, PeoplePay, PopMoney, Square, Venmo, Western Union, and Zelle.

Members of Mercator Advisory Group’s North American PaymentsInsights Survey Series Service (formerly CustomerMonitor Survey Series Service) have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

The post Debit Cards and P2P Payments Both Integral to U.S. Consumers’ Payments Repertoire appeared first on PaymentsJournal.

An engineer investigating the code for Venmo’s Person-to-Person (P2P) app believes they have uncovered the details of a new product in development aimed at kids and teenagers.  TechCrunch reports that it appears that adult Venmo users can have a “delegate” account attached to their account and request a separate debit card to be issued in the child’s name.

Teen cards and banking accounts for youngsters are nothing new.  Venmo may be ‘banking’ on its brand recognition to expand its market share with the younger crowd.  I do wonder how many active, current Venmo users, who tend to be much younger than users of platforms like Zelle, actually have children of money-spending age. 

Venmo will run into some competition in this market:

Venmo is arriving late to the teen debit card market. Startups like Greenlight and Step let parents manage teen spending on dedicated debit cards. More companies like Kard and neo banking giant Revolut have announced plans to launch their own versions. And Venmo’s prototype uses very similar terminology to that of Current, a frontrunner in the children’s banking space with over 500,000 accounts that raised a $20 million Series B late last year.

The first signs of Venmo’s debit card were spotted by reverse engineering specialist Jane Manchun Wong, who has provided slews of accurate tips to TechCrunch in the past. Hidden in Venmo’s Android app is code revealing a “delegate card” feature, designed to let users create a debit card that’s connected to their account but has limited privileges.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Venmo Expected to Launch a New Product for Kids to Grow Market Share appeared first on PaymentsJournal.

One of the biggest hurdles in the adoption of mobile payments is consumer comfort. That is to say, in order for consumers to adopt digital payments there has to be a level of trust, familiarity, and acceptance of digital payments that will entice consumers to use digital methods over older, more “engrained” methods. In fact, one of the biggest barriers to digital payments has always been a perception that the “current method works just fine” or “I see no need to switch”.

Well, things are changing. We’ve all read the stories of digital payment successes in place like Kenya and China. Alas, in economies that have had card based systems in place, adoption of digital – phone based – payments has been slower to gain popularity.

With all this in mind, I was very interested to read a commentary in Forbes about the adoption of P2P payments in Canada.  In this piece, Canada Embraces Digital Payments, With Some Behind-The-Scenes Help, by Alan Zeichick from Oracle, he points to the rapid rise of one P2P solution, Interac e-Transfer.

Person-to-person (P2P) payments are one of the fastest-growing segments of business for Interac. Its P2P service, called Interac e-Transfer, saw 371.4 million transactions in 2018, representing a 54% increase over 2017. The amount of money involved is significant, too: CAN$132.8 billion in 2018, a 45% increase over 2017.

This are some compelling numbers and, as usual, I turned to Mercator’s North American PaymentsInsights data to get a better understanding of these numbers. The first thing I wanted to explore was how the numbers in the Fortune article play out in terms of actual people who use P2P services and how that compares with the use of digital wallets.

While the numbers presented by Mr. Zeichick are meaningful, I wanted to examine all P2P services, not just Interac e-Transfer. Nearly, two-thirds of consumers are currently using a P2P service. These data clearly show that P2P payments are becoming mainstream, not something used by a select group of payment nuts. Digital wallets are less used by Canadians, but the usage numbers among the younger adults show real promise for broader adoption.

As consumers become more comfortable with digital payments, however, true mainstream usage requires that merchants boost their end of the bargain and accept these payment methods.  To steal a hackneyed quote Field of Dream “If you build it, they will come.” In other words, if you don’t have the acceptance of new payment methods (the “build it” part), then digital payments will not get used.

Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group

The post P2P Payments Go Mainstream in Canada appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left corner of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s report – 2019 ATM Benchmark Market Report.

Person-to-Person payment apps are eroding cash use:

• 73% of U.S. consumers used cash as a gift in 2019
• Zelle & Venmo combined to transfer over $181 billion in 2018
• Combined, Mercator predicts P2P apps to transfer over $205 billion in 2019
• By dollar volume, Zelle is almost twice the size of Venmo with $119 billion in transactions
• P2P transactions might encroach on cash in auto payments (34% use cash for)
• P2P transactions might also impact cash’s use in food & personal care (34%)
• 24% of consumers use cash to pay for medical, education and personal services as well

About this report

Despite continued pressure from digital payment products, particularly person-to-person (P2P) applications like Zelle and Venmo that are used to pay back other individuals or to send a gift electronically, ATMs remain a fixture in the banking market. On the horizon is the growing threat of contactless cards, predicted to grow rapidly in the next two years, replacing small dollar purchases at the point-of-sale. A new research report from Mercator Advisory Group titled 2019 ATM Benchmark Market Report explores consumers’ trends in ATM use and other market developments.

“It may surprise some readers how strong the use of ATMs for cash withdrawals and other transactions activities continues to be in the face of digital payments. Consumer data supports the finding that individuals who have adopted newer payment technologies still rely on cash and ATMs for their day-to-day transactions. Despite the importance of ATMs, many financial institutions are handing over the operation of their ATM fleets to third parties to achieve reduced and more predictable maintenance expenses. As management and sometimes ownership of ATMs changes hands, the independent operators will be setting the tone and industry direction for ATMs,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

This research report has 16 pages and 8 exhibits.

Companies mentioned in this report include: Avidia Bank, Bank of America, BMO Harris Bank, Cardtronics, Chase Bank, Fifth Third Bank, GasBuddy, McDonald’s, Payment Alliance International, PNC Bank, Salem Five Bank, and Wells Fargo Bank.

The post Person-To-Person Payment Apps Are Eroding Cash Use: appeared first on PaymentsJournal.

You have likely heard of Curve. The company offers the unique payment product that allows users to consolidate all of their cards into one card and one app.  Curve is now launching a P2P app that will reach 25 countries through the use of Mastercard Send and Visa Direct. TechCrunch reported:

Dubbed “Curve Send,” the feature lets you send money from any of your bank accounts (via the debit cards you have linked to Curve) to any other account in over 25 different currencies. It does this by utilising the APIs of Visa and Mastercard, essentially turning the card networks into a single money transfer network via Curve as the intermediary.

“Curve Send instantly solves people’s problem of financial fragmentation by consolidating all their cards into one, eliminating the lengthy money transfer process experienced by most customers when they want to send money to their friends or peers using multiple bank accounts or multiple currencies,” says the London-based fintech.

To transfer money via Curve Send, you simply open the Curve app, choose a contact and amount, and then select which of your linked bank cards you want to send the money from. The recipient will then get notified and be asked to take a photo of their bank card, and Curve will send the money directly to their bank via the card network.

What’s interesting about this P2P app launch is the fact that Curve is using its own brand (Curve Send). Since it is not a significant a brand in the financial services market, it will be interesting to see Curve can gain traction. Brand standards were an important factor in the development of Zelle as a domestic P2P application. Without a recognized, shared brand, financial institutions found that consumers were confused about where they could send and receive funds.  Consumers’ perspectives may have changed since then, and they may be willing to trust a lesser known entity with their money.

Also of note is that the service is fee-free and promises competitive exchange rates:

In a brief email exchange with Curve founder and CEO Shachar Bialick, he said that “Curve is basically operating like an exchange” in that it brings Visa and Mastercard together, with Curve powering communication between the two card networks for peer-to-peer payments. “We’ve done tests for the past two months and people love it,” he says.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Curve Rolls Out an International P2P Option appeared first on PaymentsJournal.

In the U.S., where open banking is not mandated as it is in the European Union and other countries, fintechs offering solutions like financial planning apps, person-to-person  (P2P) payment apps, and retailer payment wallets are running into problems getting banks to allow access to consumers’ data.  The Wall Street Journal reported that consumers who want to open a Venmo account and connect it to their bank account at PNC need to do so the old fashioned way, by entering their routing and transit number and their bank account number rather than their digital banking credentials.  PNC has blocked account verification access offered through Plaid and used by many fintechs who are looking to gain access to consumers’ banking transactions and current balance.  PNC is not the only one.

From the article:

Many PNC client are having trouble connecting their bank accounts to their Venmo aps, cutting off their access to the popular mobile-payment system, owned by PayPal Holding, Inc.  When they have sought help, they have found the two companies blaming each other for disruption.

PNC Financial Services Group suggested I tweets that customers switch to Zelle, a payment app that it and other big banks operate jointly and that competes with Venmo.

From PNC’s perspective:

• They and other banks that offer P2P services are interested in creating more Zelle users not just for P2P transactions, but also as a means to support business-to-consumer (B2C) distributions and payments to small businesses.
• Also, banks are not assured of the security used by fintechs to keep consumers’ data safe.  If something were to go wrong, banks have a lot more to lose in reputation and expenses from fraud losses than the fintech firms offering these services

The flip side, however, is that consumers often prefer financial apps offered by organizations other than their bank.  If their bank cuts them off, will consumers leave their bank for another that does provide access?  It’s a gamble.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post What Obligation Does an FI Have to Provide Third Parties Access to Consumers’ Banking Accounts? appeared first on PaymentsJournal.

MoneyGram announced a new route for sending cross border payments between individuals. MoneyGram is enhancing its debit card solution with the capability to transfer funds nearly instantly to select countries through Visa Direct. As Yahoo Finance reports:

MoneyGram International, Inc. MGI has partnered with Visa Inc. (V) for the expansion of its person-to-person (P2P) debit card deposit service internationally.

A debit card deposit service allows customers to transfer funds to a bank account linked to the eligible debit card at any time, including weekends and holidays.

Per the pact, MoneyGram’s digital network will use Visa’s real-time push payments platform, Visa Direct, to enable cross-border transfers from the United States to Spain and the Philippines. The company expects to launch the service in additional countries in the coming months.

Using debit push payment networks like Visa Direct and also Mastercard Send will be a growing trend. The global network’s ability to reach across borders to nearly all cardholders within minutes, if not seconds, is a clear advantage over other payment types for consumer transactions. It is no coincidence that Mastercard bought Transfast and Visa purchased Earthport this year to bolster their cross-border capabilities.

More about the Visa/MoneyGram deal:

This move is in line with MoneyGram’s efforts to grow its cross-border digital business. The successful launch of the service in the United States, which helped the company to increase its customer base by 50%, is another positive. Solid customer retention rates coupled with good customer response has prompted further roll out of this service.

The company expects to gain from the partnership with Visa given its strong brand name and image that provides safety and security for MoneyGram’s customers.

The extension of partnership between Visa and MoneyGram points to their intent in making it big in the expanding P2P payments market, which is highly dominated by cash and checks. Real time P2P is attracting huge customers due to the widespread use of mobiles to make transactions.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Visa and MoneyGram Partner on Debit Card Cross Border Transactions appeared first on PaymentsJournal.

I’ve been in the P2P/payment space for over 15 years. Before that, I spent a bunch of years selling payroll automation. Payroll automation achieved mass adoption relatively quickly—few companies today pay employees manually.

I figured—wrongly—that procure-to-pay was the next green field for back office technology. Just as every company has to pay its employees, every company also has to pay its suppliers. Manual processing for both payroll and supplier payments is expensive, inefficient, and non-scalable. Technology for procurement and invoice handling seemed on the verge of breaking through, similarly to payroll technology back in the day.

I wasn’t alone in thinking that. In 2005, the company I worked for brought in an analyst in the space to address our sales team about industry trends. He told us that invoice processing would be paperless by 2010. We’ve come a long way, but here in late 2019, far too many companies still deal with paper invoices and manual processes. Supplier payment automation can help change that—here’s how.

Not Just the Novelty

When I first started selling P2P solutions, the primary challenge I faced was a lack of awareness—most organizations didn’t know there was a better way to process invoices. Standard operating procedure was to hire a bunch of people to review invoices, manually enter them into the financial system, and get them paid. More invoices? Hire more people—just as it had been with payroll.

Some companies hired “Black Belts” to make changes to their processes by creating shared service centers or, in some cases, outsourcing the entire department to a Business Process Outsourcing (BPO) company. That had its own issues—namely lack of control and timing gaps, since many of these BPOs sat halfway across the globe.

As time went on, P2P solution providers became more widely known, and a growing number of companies adopted these solutions in order to reduce costs and increase efficiency by getting visibility into spend and putting more controls on how employees purchased goods or approved invoices.

Clearly that real challenge wasn’t lack of awareness. It was getting the project to the top of the list in a given company. Without a doubt, P2P solutions can drive positive ROI, but so can many other initiatives. Implementation of these types of projects can be lengthy, and eat up time and resources in procurement, finance and IT.

Based on my experience, for organizations with annual revenues greater than $500m, a typical P2P project can come with one-time implementation fees north of $250k (or more with the addition professional services) and implementation timeframes of nine months to a year or more. That’s a pretty big chunk of change for ROI that may take another year or so to manifest. As a result, these projects get pushed aside in favor of initiatives that generate revenue relatively quickly.

That was the case with countless companies I called on—they saw the value but still couldn’t get it done. Selling the ROI for P2P solutions was far more challenging than doing the same for payroll solutions. It was frustrating as hell.

The lightbulb clicked on for me in 2013 while attending an IOFM show in Orlando. Across the aisle from our booth was a company I’d never heard of: Nvoicepay. Thinking they were a competitor, I ventured over to see if I could gather some intelligence on them.

They weren’t a competitor at all. They didn’t match invoices to POs or automate the approval workflow for posting invoices to a financial system. They were a payment company that simplified supplier payments by any method—check, ACH or card—through a single interface. Plus, their solution complemented my invoice automation solution, and the increased efficiency and card rebates would significantly increase the ROI for my customer and help get the project to the top of their list! Now we could actually offer customer a procure-to-pay, solution, not just procure-to-ost.

Fast forward to 2019: I’m now working for Nvoicepay. Companies still want to automate their procure-to-pay processes, and still can’t figure out how to get the project onto the go list. Although P2P technology has improved significantly, those projects are still relatively lengthy and require resources—and therefore buy-in—from procurement, finance and IT.

Nvoicepay implementation is fast—we’re talking weeks, not months or years, to go live like a P2P project. We also require very few IT resources during the implementation, which doesn’t require the level of integration a P2P solution does. Quite frankly, when you send us a remittance file, we’ll pay 100% of your vendors regardless of payment type. Additionally, because we collect banking info from your vendors, we indemnify all payments and guarantee that funds will get to the appropriate supplier/vendor. You get a ton of process efficiencies, and the ROI starts on the first day a customer goes live, with monthly rebates generated from virtual card payments.

There’s still a conundrum. Companies want P2P but can’t figure out how to get there, and they’re not sure what to do first. Do we automate P2P and then finish it off by automating payments, or do we flip the scenario around? As companies trying to discern which should come first, I firmly believe that many companies may not fully understand what an enterprise payment platform can bring to the table and how the ROI it drives can fund their P2P project.

What I’ve Seen in 15+ Years in the P2P Space

Swinerton is a $3.6b construction company who implemented Nvoicepay’s Payment Gateway in a manner of weeks for just a few thousand dollars. They quickly started seeing monthly rebates via payments processed on virtual cards add up to $1m in the first year. Their finance department saw huge process efficiencies in their first year, and actually generated better relations with their vendors and contractors. Swinerton planned on leveraging the annual rebates to fund a T&E solution that they wanted to implement. The only thing they wished they did differently was to not take so long to decide on automation.

So, what should come first, the chicken or the egg? If egg = payments, then I say egg—and not because of the side of the aisle I sit on. I say this for my investment over the past 15+ years in the space with a desire to help our customers achieve their P2P goals and operate more profitably. Additionally, it is why most if not all P2P (procure-to-post) providers are trying to figure out how to automate payments!

Jim Wright is the Vice President of Enterprise Sales in the East Region at Nvoicepay. He is a veteran of the financial industry, having served in senior roles at companies like Zycus, Corcentric, and SAP Ariba. With Nvoicepay, he delivers scalable payment solutions to enterprise companies and other large organizations.

The post The Chicken or the Egg: Should You Automate P2P or Payments First? appeared first on PaymentsJournal.

Growing immigration and disappearing economic borders are creating an urgent need for faster, secure and simplified cross-border payments. International payments is one of the largest opportunities in the financial services space, expected to approach $3 Trillion by 2023.

Although cross-border payments are mostly driven by B2B transactions, the amount of small value payments that exist in the category is not one to be overlooked. Small value payments are amounts ranging from one dollar to $5,000. And they account for an enormous piece of the cross-border payments pie.

In North America alone, Peer-to-Peer payments total more than $173 Billion in remittance flows and within the retail segment specifically, cross-border e-commerce sales are expected to surpass $900 Billion next year.

But while e-commerce payments are typically managed with credit cards or platforms like Paypal, there are many obstacles in other sectors that millions of people face when it comes to sending small value payments internationally.

The examples are plentiful: Businesses trying to make travel payments or ongoing international payroll transfers and commission payments; an international student paying to study abroad; an individual trying to send money back home to family on a monthly basis; or even paying a bill overseas.

In increasing cases, the demand for simple and convenient payment options only continues to grow. And while basic e-transfers have long been the norm for sending funds domestically, sending funds across borders has remained a costly and tedious endeavor.

Take for example making a bill payment in a different country; while domestically a simple task, it becomes a far bigger endeavor when crossing a border is involved, resulting in headaches for the payer, and potential losses for the payee due to fluctuating currency rates and payment latency.

Or what about e-gifting? With cash disappearing, gone are the days of a $20 bill in a birthday card from Grandma. E-gifts represent an enormous growth opportunity for digital banking, if only they can make the costs palatable for customers.

Whether paying bills, sending money abroad, or paying tuition, historically customers wanting to make routine small value cross border payments have been required to either open bank accounts in other countries, or use expensive bank drafts, wire transfers or currency exchanges to settle such transactions, all of which come at a steep cost and inconvenience to all parties involved.

This is part of the challenge, but the pain is magnified the smaller the amount: While a costly wire transfer can be factored into the cost of doing business for corporations, for individuals seeking to send small-value amounts internationally and on a regular basis, a new solution is long overdue.

Thankfully, fintechs are emerging to simplify various types of cross-border payments and provide a great customer experience.

Peer-to-Peer (P2P) payments are booming thanks to improving technology, and fintechs around the world are jumping on the trend to offer the service across borders. African startup Chipper is partnering with Paystack to bring its P2P solution to Nigeria. Meanwhile, Visa has recently announced it is teaming with MoneyGram to leverage debit push payments for P2P payments in the US, with plans to eventually expand the service internationally.

A number of outlets are cracking the student payments space as well, enabling international students to pay their tuition directly to the institution, and facilitating transfers as needed for books, meals and living expenses. International students contribute $42 Billion to the US economy alone, representing a market with immense growth potential.

Fintech’s like Buckzy Payments Inc. have emerged providing real-time network for enabling financial institutions and fintechs, helping remove the friction that exists within cross border payments, including; peer-to-peer transfers, international bill payments, and student payments by making customer settlements in real-time, 24×7, 365 days a year delivering consistent real-time settlement capabilities and experience. Buckzy enables its customers to send to any bank account or third-party wallet globally and maintain multi-currency virtual accounts.

With Trillions of dollars at stake, small value payments are a massive opportunity in the cross border space.

Banks and financial institutions have seriously lagged on international payments, and while steps are being taken to provide solutions, the market is far outpacing the progress. With small value and micro-transactions clearly emerging as a multi-trillion-dollar opportunity, banks need to offer realistic and cost-sensitive payment products if they hope to acquire and retain customers.

The race is on to modernize payment infrastructure in order to embrace all this innovation and with it, the future of payments.

The post There Is Nothing Small about the Small Value Payments Market appeared first on PaymentsJournal.

With Pay Pal and Early Warning recently reporting second quarter results, it’s time to take a look at Venmo and Zelle person-to person (P2P) transaction growth rates. These two P2P solutions represent the majority of U.S. digital P2P volumes, but not the total industry. Other bank solutions, Square Cash and Pay Pal also contribute to total volumes.

For second quarter, both solutions returned fantastic growth rates. Venmo’s dollar volume reached $24 billion, a 70% year-over-year increase and Zelle reached $44 billion, a 56% year over year increase. These are some great numbers considering how nascent this market was 5 years ago. Here’s how those numbers compare for the last several quarters:

These reported numbers aren’t truly an apples-to-apples comparison. Venmo is also including Pay with Venmo purchases in their volume data. This is where consumers can use their Venmo balance to make purchases, both in digital and physical store locations. This is all a part of the efforts to monetize Venmo transactions.

Bank Innovation had this to say about Pay Pal’s efforts to generate revenue from Venmo’s 40 million customers:

PayPal is continuing along its path to monetize Venmo’s 40 million-strong user base. On Wednesday, the company said 15 million Venmo users engaged in monetizable transactions.

The company is focusing its efforts to generate revenue from Venmo by taking use cases beyond casually paying friends for beer, rent or other peer-to-peer transactions, which aren’t moneymakers for the company. Instead, PayPal’s plans center around e-commerce payments through Venmo to participating merchants and fee revenue generated from those transactions.

To drive up adoption, PayPal is testing incentives to encourage more consumers to use Venmo debit cards. In May, the company offered 5% cash back on all purchases made at a grocery store. The incentive was designed to drive adoption and increase interchange fee revenue

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Venmo and Zelle Report P2P Volume Growth appeared first on PaymentsJournal.

A fintech is not a bank yet the public is apparently unaware of the difference. A bank would never knowingly release private consumer information, but fintechs will. This TechCrunch article shows that a year after being caught leaking hundreds of million consumer transaction details, Venmo is still doing it:

“A computer science student has scraped seven million Venmo  transactions to prove that users’ public activity can still be easily obtained, a year after a privacy researcher downloaded hundreds of millions of Venmo transactions in a similar feat.

Dan Salmon said he scraped the transactions during a cumulative six months to raise awareness and warn users to set their Venmo payments to private.

The peer-to-peer mobile payments service faced criticism last year after Hang Do Thi Duc, a former Mozilla fellow, downloaded 207 million transactions. The scraping effort was possible because Venmo payments between users are public by default. The scrapable data inspired several new projects — including a bot that tweeted out every time someone bought drugs.

A year on, Salmon showed little has changed and that it’s still easy to download millions of transactions through the company’s developer API without obtaining user permission or needing the app.

Using that data, anyone can look at an entire user’s public transaction history, who they shared money with, when, and in some cases for what reason — including illicit goods and substances.

“There’s truly no reason to have this API open to unauthenticated requests,” he told TechCrunch. “The API only exists to provide like a scrolling feed of public transactions for the home page of the app, but if that’s your goal then you should require a token with each request to verify that the user is logged in.”

He published the scraped data on his GitHub page.

Venmo has done little to curb the privacy issue for its 40 million users since the scraping effort blew up a year ago. Venmo reacted by changing its privacy guide and, and later updated its app to remove a warning when users went to change their default privacy settings from public to private.

Instead, Venmo has focused its effort on making the data more difficult to scrape rather than the underlying privacy issues.

When Dan Gorelick first sounded the alarm on Venmo’s public data in 2016, few limits on the API meant anyone could scrape data in bulk and at speed. Other researchers like Johnny Xmas  have since said that Venmo restricted its API to limit what historical data can be collected. But Venmo’s most recent limits still allowed Salmon to spit out 40 transactions per minute. That amounts to about 57,600 scraped transactions each day, he said.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Venmo Continues to Release Consumer Transactional Data a Year after Being Notified appeared first on PaymentsJournal.

Today’s episode was recorded at Nacha’s Smarter, Faster, Payments 2019 event. Now on this episode, I have Lou Anne Alexander, who is the group president of payments at Early Warning. And Sarah Grotta, who is the director of the debit and alternative products advisory service at Mercator Advisor Group. During our conversation, we’re going to be talking about Zelle’s recent success. And where Zelle sees potential growth moving forward.

Ryan

Okay, so thank you for coming to talk to us. And after just having won the Nacha excellence in payments award, and congratulations to that. What aspect of EW was the award?

Lou Anne

Thank you. And we’re ecstatic about the award. This was awarded for our innovations, not only in bringing Zelle to the marketplace, but also our long history of fraud and risk management solutions that helped us brings Zelle into real-time payments.

Ryan

Again, congratulations. Bet that must feel fantastic to have won the award?

Lou Anne

Absolutely. In fact, this was a collaboration with all of our partners, as well as our participating financial institutions. It truly has taken a lot of people a lot of hard work to bring us out to the market.

Ryan

To continue on that success. Early Warning’s Zelle posted yet another great quarter in q1 of 2019. Now, I’m curious, is that growth coming from the fact that you’re onboarding more financial institutions more quickly? Or is it organic growth coming from existing clients, finding new customers and existing users executing more transactions?

Lou Anne

The answer is yes and yes. We posted $39 billion in first quarter. That was 147 million transactions, and as you can see, we’re on target to hit 600 million plus transactions by the end of the year, but you’re right this is coming for an organic growth with our existing financial institutions. All of them are seeing great growth and we’re seeing that network effect as more and more financial institutions come into the network.

Sarah

I think what’s interesting too is we’re also seeing from an industry perspective, growth and some of the other p2p apps, Venmo, Square cash and  I think it’s kind of interesting. I do think that sort of, all of the p2p apps continue to feed off of each other and encourage growth. Do you have a sense of how many p2p apps would a consumer use generally? Do they share? Do they have loyalty to one app?

Lou Anne

I think it’s very generational, and, as you might imagine, when we entered the market, one of the things that we wanted to do is take p2p from millennials to mainstream. Baby Boomers tell us, 70% of those that are using p2p do so because they can get it through their banking app. I think that’s one of the things that really sets Zelle apart, as well as our ability to move money right from checking account to checking account, without additional steps.

Ryan

I certainly think that the baby boomer statistic is very interesting because I guess I kind of look at is myself being a millennial and just this type of technologies just being native to my generation in a way to kind of see older generations kind of take it and adopt it. I can certainly say that my grandmother. God bless her. She does the best that she can with electronics, but she actually does use Zelle as well too. She will send her grandkids money through, through Zelle. So I think it definitely talks about ease of use, oft Zelle,and I think it’s very interesting that you’re seeing this product be used across generations. Now if I could jump into and kind of look at beyond p2p here. I’ve heard that Early Warning is rolling out a solution for small businesses can you tell me what that product is and how it works and some use cases for?

Lou Anne

Sure. In fact, today, probably about 20% of our volume in the network is coming from small businesses. We haven’t had a product that was targeted toward that segment of the marketplace. So I think it’ll look a little different depending on where you bank. If you’re a small business that uses a small business payment product within your bank, you’ll see Zelle integrated into that product. If you’re not if you’re a Soho, it’ll look very similar to the way that p2p operates today. So think about it could be home services such as landscaping, maid services, window cleaning, pool service, could be your therapist, your piano teacher, your masseuse. All of these are great applications for Zelle.

Sarah

You know, I think that’s interesting because at this conference, the Nacha payments conference I’ve really heard the conversation about p2p start to turn to other use cases, whether it’s, you know, b2c, or this small business environment. So, is this something that you’re seeing financial institutions really get focused on?

Lou Anne

Oh, absolutely. And in small business I think is just the start. I think you’ll see other innovations come like bill pay, as you know, we are operating under a 25-year-old online banking bill pay model today. Many millennials are not adopting that, and we need a next-generation user interface for bill pay.

Sarah

Yeah that’s interesting, so yeah, I’m looking forward to seeing some of the rollouts of some of the small business applications in particular, and I think that’s going to be a great way to bring out some of the inefficient checks in the industry. I think that has to be a place where we’re still seeing a tremendous amount of check. I know just from personal experiences. Those are the only checks I write to the plumber or, the guys doing drywall out my house. That’s where I write my check so looking forward to this.

Ryan

Before we wrap up here, is there anything else that’s new for the Zelle products such as new promotions new features, or new tech for financial institutions, real-time settlement perhaps?

Lou Anne

Lots of things, well in fact, before I talk about what’s new we haven’t mentioned disbursements. So today we have many corporations who are using it for items such as home insurance claim payouts auto insurance claims payouts. We have higher education using Zelle in order to provide tuition and financial aid without having to go stand in line to get your all of the things that happened when you are a new student with a new account depositing a new check. So that’s an area I think that we will continue to grow.

Sarah

And that’s a big dollar item and that’s that kind of gets you into a different segment.

Lou Anne

It is. And in fact, our p2p payment dollar average is about $260 for disbursements that’s in the 1300 dollar range, and some very large payments even in the millions that we see particularly for home claims.

Ryan

Excellent. Well, thank you, Lou Anne and Sarah, for taking the time today for speaking to us about Zelle and we hope to have you both back on the podcast real soon.

The post Where Award-Winning Zelle Sees Potential Growth appeared first on PaymentsJournal.

Bigger and more diverse.

That’s not the just the world at large but also the payment technology ecosystem. Technology is advancing at a rapid pace and consumer expectations are in driver’s seat when it comes to how, when, and where they pay for things.

New gadgets are always being launched and payment softwares are evolving faster than ever. Executives must keep their companies observant and nimble when it comes to noticing and responding to these new trends in payment technology.

The first step for executives is simply knowing what’s going on in the payment technology industry. The next step is taking action to ensure that your company is offering the right payment solutions for your customers.

To help you with that first step, here’s a deeper look at a few current trends changing the landscape in payment technology that every executive should consider when looking at payments

Common Trends Reshaping Payments Industry (That Executives Need to Know)

For consumers, it’s all about ease, reduced fraud (better security), and increased satisfaction.

For businesses, while the above are extremely important (especially customer satisfaction), there’s also the reality that revenues increase with many new payment innovations.

Here’s a quick look at the trends reshaping the payments industry:

Same-day ACH

Nothing drives customer frustration more than waiting.

Whether it’s submitting a late payroll filing as a business or needing to make a last-minute payment as a consumer, the need to move money quickly comes up often.

As of 2017, SDA debit transactions now allow for same-day payments without the burden of new infrastructure or governance, allowing for virtually universal access to banks and customers. While this is faster, it’s still not real-time and nor does it allow for making payments on weekends or holidays.

Many retailers still reel from the interchange fees imposed by debit and credit card payment processing. As such, same-day ACH is gaining ground as a potential solution that could allow businesses to reduce their processing fees while still offering similar benefits to consumers as credit cards companies do (discounts and rewards).

Digital wallets

With more than one in three consumers saying they plan to use a digital wallet for purchases, the growth potential here is clear.

Consumers are hungry to consolidate and secure their payments. They want to avoid long payment processing times and having to hand over sensitive customer data whenever they make a purchase. Digital wallets reduce that friction at online checkout while increasing security at the same time.

Adoption has slowed on this particular innovation, but businesses stand to win by offering trending digital wallet payments options to consumers as a way to encourage secure, speedy spending.

Peer-to-peer payments

Everyone dreads the hassle of settling up the bill at the end of a nice group dinner.

While that pesky problem hasn’t been completely solved, peer-to-peer payments are extremely popular and increasingly offered as a feature in digital wallets or as standalone applications. Solutions like Paypal, Venmo, and Chase QuickPay (now with Zelle) offer consumers the opportunity to move money within groups and among individuals with relative ease and speed with little to no cost in many cases.

Some solutions (like Zelle) even allow for immediate availability of funds for the recipient while the funds are settled by the banks later.

For consumers looking to step away from paper checks and ATM withdrawal fees, P2P payments are an increasingly attractive payment technology in this shifting ecosystem.

Biometrics

Watch out for biometrics to begin replacing security solutions such as passwords and PIN numbers (which are hard to remember and costly to maintain for companies in terms of security, storage, and support) when it comes to account security.

The bet here is that consumers are willing to sacrifice a little bit more personal information (fingerprints, facial recognition, voice identification, iris scanning, etc.) to allow for great speed and security in payment processing.

With consumers already opening up their phones using facial scans and climbing into cars with touch recognition applications, the future seems bright for biometric security in payment processing and business should take note.

Public cloud

Gone are the days in which businesses had to build huge internal infrastructure to reach peak volume. Now, cloud-based infrastructure can shift outside of core infrastructure and can be built in just weeks.

This means more agility and higher revenues.

Payment providers can now deliver fast and frictionless payments around the world, at scale. Some companies have enabled themselves to bring new products to market in under two weeks by switching to the public cloud.

With consumers hungry for new and better payment products, that kind of lean speed can make a big difference for many businesses.

Open API

“Open banking” is all the rage right now.

Customers want the power to enable third-parties (think Mint, Robinhood, Acorns, etc.) to access their banking information so they can use services that exist outside of traditional financial institutions. In some places like Europe, banks are even required to open up for these providers (with protections for consumers and after meeting regulatory requirements for data security).

Banks run the risk of losing customers if they are overly restrictive (even in the name of security) such that customers cannot use nonbank tools adjacent to their banking. On the flip side, banks without adequate data security protocols potentially attract more fraud and can easily lose customers that way of course.

Businesses that allow customers to connect their trusted banking institutions to third-party while also effectively protecting personal financial information will win the day when it comes to the open API trend in payment technology.

How businesses can get payment innovation right

Knowing the payment technology landscape is the first step to nailing payment innovation. While the benefits and convenience of new payment technology are great, the connected ecosystem for vendors presents some unique challenges. A core goal here should be maintaining payments ecosystems that are adaptable and flexible with the right integrated support in place to solve business and customer needs.

Not every new payment solution your business rolls out will go as planned. Vendors rolling out new payment technology for consumers need to have support for handling integrated solutions.

Businesses should evaluate payment tech vendors (from whom they purchase payment tech products) on their ability to provide support for their products and the integrations with other tech solutions.

Another hurdle is keeping track of regulation while moving at the speed of rapid technological changes in the payment technology industry. That’s a tall order on both the payment tech vendor side as well as for the businesses they serve. It’s also very doable and can lead to exciting advancements, as we have seen in recent years.

It’s undoubtedly an exciting time to be innovating in the world of payment solutions.

The post What Every Executive Needs to Know About the Ecosystems Reshaping Payment Tech appeared first on PaymentsJournal.

Bank of America, Venmo and Zelle have all reported data recently on their respective person-to-person (P2P) transaction. The following takes a look at all three announcements to see what we can tell about the state of the market beyond the point that it’s showing great adoption rates.

• Early Warning reported Zelle Q1 2019 volumes of $39 Billion on 147 Million transactions for an average transaction amount of $265.  The processes volume is up 54% over Q1 in 2018.
  • A subset of the Zelle volumes includes activity from Bank of America.  They reported 58 million transactions and $16 Billion in volume from 5.4 million users.  So doing the math, Bank of America was 41% of Zelle’s dollar volumes.
  • We don’t have the same details from Chase bank, but we do know that they have 40% more active users than Bank of America. (7.6 million in Q1 2019).

Two take-aways here:

• The overwhelming Zelle volume belongs to Chase and B of A customers.
• The average transaction amount is coming down as consumers use Zelle for more varied use cases, including gifts to other consumers.  Chase responded to this use case by rolling out the opportunity to use Zelle to buy gift cards.

• Venmo also reported recent P2P numbers for Q1.  Their 40 million active Venmo users (used Venmo at least once in the last year) generated $21.3 in processed volumes.  Venmo still does not make money, but monetization is an important focus for Pay Pal.  They look to make money on an optional, faster cash-out solution that charges a fee and also by allowing balances to be used to make purchases which generates interchange income.
• Square disclosed little about the Square Cash App, other than to they have 15 Million active users. Like Venmo, offer the opportunity to store funds and use the app to make purchases.

The take-away here:

• The non-bank solutions are still showing fantastic growth.
• Soon, Venmo and Square Cash App won’t really be considered as much P2P apps as they will be prepaid debit cards.  The distinction means little to the consumer, but it means everything to the regulatory treatment.

Here’s a snapshot of recent reported growth from Venmo and Zelle:

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Round Up of Recent Person-to-Person Payment Data appeared first on PaymentsJournal.

How do you determine the nature of a digital transaction? How can financial services organizations and nonbank financial institutions (NBFI) ensure that all transactions conducted via mobile or online peer-to-peer (P2P) payments networks are legal and not the result of criminal activity?

As more consumers embrace P2P solutions such as Zelle, Venmo, ApplePay and the hundreds of smaller fintech startups promising to make it easy to move money, financial services organizations and NBFIs must prove to Financial Crimes Enforcement Network (FinCEN) and other regulators that they comply with all Bank Secrecy Act and Anti-Money Laundering (BSA/AML) laws. The consequences of non-compliance can be costly. In 2015, FinCEN fined Ripple Labs $700,000 for failing to properly register its subsidiary that sold digital tokens to settle payments on the ripple network.

The key to avoiding these costly fines is understanding and adhering to the BSA/AML regulatory requirements. To do this, organizations must ensure employees have the proper training and understand the impact of the regulations on their day-to-day job.  Taking steps to eliminate the risk associated with non-compliance will help protect the organization’s reputation and mitigate potential repercussions that could negatively impact their bottom-line.

BSA/AML’s Rules Regarding P2P Payments

Traditional financial services organizations are already aware of their obligations to comply with BSA/AML laws. The addition of a P2P service does not change the requirements. However, many fintech companies also meet the definition of a “financial institution” under the BSA/AML rules. In addition to traditional financial services organizations, FinCEN also includes money services businesses (“MSBs”), which covers peer-to-peer transfer systems (such as Venmo) and digital wallets (such as Google Wallet).

Compliance with the BSA/AML requires organizations to complete four primary tasks:

• Maintain an adequate AML and Know Your Customer (KYC) program;
• File Currency Transaction Reports (“CTRs”) for transactions over $10,000;
• File Suspicious Activity Reports (“SARs”) when the organization “knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part) involves money laundering, is designed to evade the requirements of the BSA, serves no apparent lawful purpose, or facilitates criminal activity;” and
• Register with the Department of Treasury.

Conducting BSA/AML Risk Assessments

Beyond simply understanding these regulations and reporting suspicious transactions, P2P payments providers must conduct risk assessments periodically to remain in compliance. Every financial services organization, whether it is a traditional bank or credit union, must create and follow policies and procedures to ensure BSA/AML compliance. The policies and procedures must fit the needs and risk profile of each particular organization.

The risk assessment process involves identifying specific risk categories, such as products, services and geographic locations. Some products and services that fall into the higher risk category include services provided to third-party payment processors or senders, foreign exchanges, lending activities such as loans secured by cash collateral, and others.

Financial services organizations should flag transactions to higher risk international locations, which include countries that are subject to OFAC sanctions, those that have been identified as supporting international terrorism or offshore financial centers. For domestic transfers, higher-risk locations include those that have been flagged as high intensity drug trafficking areas or high intensity financial crime areas.

Identifying Suspicious Activity in a Digital World

As regulations tighten, NBFIs need to examine the actions of customers carefully, which goes well beyond simply verifying their identity. Many of the techniques used to identify suspicious transactions in a physical interaction are not possible in a digital P2P environment. An organization may not be able to see when customers seem unusually nervous, and transactions made on P2P networks may need to confirm the source of the funds to ensure they are not the result of criminal activity.

In the absence of in-person cues, organizations may look for suspicious patterns. For example, if a customer makes a habit of making transfers of $9,500 once a day throughout the week, this activity could be highly suspicious. Organizations are required to file a Currency Transaction Report for cash transactions exceeding $10,000, and by limiting his deposits to $9,500, this customer may be trying to avoid having his activity reported.

When opening new accounts for customers virtually, organizations should set up their systems to flag new accounts which trigger suspicious activity, which could include listing a permanent address outside of the country or using a phone number that is no longer in service. Also, if customers are unwilling to provide personal background, such as identification, details about their business activities, or provide financial statements or documents, all these behaviors are extremely suspicious.

Understanding BSA/AML is critical for financial services organizations and NBFIs, as limiting money laundering and cutting off terrorists’ access to funds is a high priority to the regulating and law enforcement agencies.

And the risk is not limited to financial institutions. NBFIs also run the risk of an audit or fine, such as the one levied on Ripple, if they fail to adhere to these rules. Having documented proof that employees are aware of the rules and been trained can reduce fines – or eliminate them all together – preventing monetary damages.

Maintaining high compliance standards is not only important to avoid fines and penalties, but also to maintain an organization’s reputational security. Financial services leaders and NBFIs should ensure employees have the tools, training and information necessary to uphold the highest standards and minimize organizational risk.

 About the author

Ed Marcheselli is managing director of Learning & Development of BAI, a nonprofit independent organization that delivers the financial services industry’s most actionable insights.

The post Do You Know Your Digital Customer? Addressing the Anti-Money Laundering and Bank Secrecy Act Implications for P2P Payments appeared first on PaymentsJournal.

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Data for this episode of Truth In Data provided by Mercator Advisory Group’s report – U.S. Consumers and Debit: Fewer Use It for Purchases

About this report

The latest Insight Summary Report from Mercator Advisory Group’s CustomerMonitor Survey Series reveals that 54% of all respondents use debit cards for purchases and that figure has declined steadily since 2011, the year following the enactment of the Durbin Amendment. The report, U.S. Consumers and Debit: Fewer Use It for Purchases, presents the findings of an online survey of 3,002 U.S. adults conducted in June 2018.

While consumer ownership of debit cards remains strong and people who have recently opened a checking account are even more likely than average to own a debit card for transactions, the percentage of all U.S. consumers and even those that own debit cards who report using their debit card for transactions is declining.

Today, more U.S. consumers, especially seniors are more likely to use credit cards than any other payments in stores. Young adults and adults whose annual household income is less than $75,000, however, are still more likely to use debit cards than credit cards in stores.

Only half of debit card users report using their card for online purchases. The perception of greater online security with credit cards (41%), fear of checking account compromise (30%), and lack of rewards when using debit cards (30%) are the main reasons consumers do not use debit cards online.

As U.S. consumers make a greater share of purchases online and by mobile using a wider range of payment options, they often prefer credit cards to debit cards online. And with the rising use of online payment services, consumers may start to bypass traditional payment cards and keep funds in their payment service rather than transfer it back to their checking account.

“The rise in use of online and mobile commerce is heightening the need for enhanced security measures such as mobile card controls, especially for debit cards,” states the author of the report, Karen Augustine, senior manager of Primary Data Services at Mercator Advisory Group, which includes the CustomerMonitor Survey Series.

The post Do Young Adults Prefer Paypal or Venmo? appeared first on PaymentsJournal.

Some readers may not be particularly familiar with Interac, which manages a major interbank network in Canada, and during 2018 converted over to a for-profit corporation. The company products are synonymous with debit and ATM in Canada. In this release through PaymentsSource, the piece discusses e-Transfer, which is a P2P money transfer system that operates 24×7, sends funds in near-real time and requires the receiver to ’deposit’ the funds when they are notified. The app used to be called Email Money Transfer and has been operable for more than 10 years already. The e-Transfer volumes reportedly exceeded those of Zelle in 2018. The point of the release is that Interac expects to add an overlay of services for expanding the usage to the SMB sector (some businesses already utilize the service anyway).

‘In the next year, Interac plans to put new capabilities on top of its P2P app, to broaden usage among the app’s base. Of particular interest is how small to medium-sized businesses can use P2P capabilities, either for their own transactions or to engage with consumers.’

This is sort of a logical progression, and in fact has already been executed in Singapore, where PayNow Corporate was launched in 2018.  In the U.S. we have already seen Venmo moving into B2B and expectations are that Zelle will formally extend into SMB payments fairly soon.

“It comes down to the fact that business want to transact here,” Kar said. “It’s the utility they need. The blend is the same. It’s someone asking to pay or someone shipping funds to another party.” Even as P2P apps grow quickly, they still serve a narrow range of use cases. Diversifying transaction types and reaching to business users is likely necessary to keep the apps from becoming “dumb pipes.”

The plethora of new payments apps and services creates choice and convenience, but most of all, continues to provide digital alternatives to the continued massive SMB use of paper processes and payments.  As we continue moving into Industry 4.0, these types of services will become the default norm.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Interac’s P2P scale extends into B2B payments appeared first on PaymentsJournal.

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The following is a transcript of the podcast episode with Ruston Miles of Bluefin Payment Systems and Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com. During the episode, they cover topics such as:

• What Is the Difference Between PCI-Certified and Non-Certified Encryption?
• How Point-to-point Encryption Fits Into Various Industries
• Why It Is Important for Small Business to Adopt P2P Encryption
• What Are Some of the Security Regulation Differences Between the US and Europe
• How Important Will Security Education Be
• Mobile Point-To-Point Encryption

What Is the Difference Between PCI-Certified and Non-Certified Encryption?

Ruston Miles of Bluefin Payment Systems

I get that question a lot. For purposes of my definition, folks might hear “PCI-certified,” they might “PCI-approved,” and they might hear “PCI-validated” point-to-point encryption. These terms all refer to the same thing. This has to do with the fact that the PCI Security Standards Council has created the standard for encryption, particularly device-based encryption. That standard has been around for quite a few years now. Certified encryption is encryption that has met or exceeded the level of protection of all the different points; it could be more than 1,000 requirements by the time you add in the required baseline DSS — that’s the underlying environment – and then all the controls that have to do with the encryption itself. Over 1,000 requirements. So these are the ones that have met that standard for encryption.

What are some of the differences when we look at anything that’s non-certified? It basically means that no one has looked at it. There’s no independent third party, no auditor, no assessor, no other company that has reviewed, “Does this encryption product meet some sort of minimum viable product or baseline of standards such that when a company is considering looking at that encryption product, they can have some level of confidence to know that the vendor claims and the salesperson gymnastics that are surrounding the marketing of that encryption product are actually something that they can rely on, they can believe. This thing gives them criteria against which to compare against other encryption products in the market. Now, some folks just look at a big name processor or provider and say, “Okay. Well, they’re big enough. I can trust what they provide.” The question to ask themselves is, “Well then, why hasn’t that vendor gone through and gotten that product audited if it’s all that great?” Oftentimes I can tell you the vendors have tried and the products have fallen short, but there are some definite differences as to the value proposition that come out of that.

I’ll get just a little bit of technical and we’ll talk a bit of value proposition. The technical difference between certified and uncertified, the ones that we constantly see out there in the marketplace are (1) that the devices — the credit card terminal or machine that’s accepting the transaction — most of the time do not have a technology called SRED or secure reading, an exchange of data, and they do not have tamper awareness with a lifetime battery. These are really important. What this means is that when you unplug the device from power, it stays alive. It stays self-aware for a lifetime. So you can imagine you unplug this device. You put it in the back closet of your business, and it sits there for six years. Somebody at that time steals it, goes away, tries to break it open and put software or hardware in it and sneak it back into your closet or put it back onto your countertop and somehow start to compromise data. Well, if the device is part of the P2PE Program with PCI, that device will have recognized that, even though it has no power provided to it externally, it will have erased its keys, and the next time it’s plugged in, it will go ahead and phone home and say, “We need to quarantine this device and notify all those involved that there’s been some sort of security compromise on the device.” This is a really important sort of holistic thing that even goes outside of the encryption. A lot of the requirements in fact with PCI’s program actually do go outside Of the encryption. Encryption is the easiest part of a point-to-point encryption program because it’s the math and etcetera that surrounds that and that’s all well known.

The more important part is the protection of the keys and the protection of the device. If you had the world’s strongest safe with the thickest walls and the hardest combination or lock to crack open, but you had the key sitting on a chair right next to it, it wouldn’t matter how strong that safe is. The bad guy would just take the key and open the safe. It’s the same thing with point-to-point encryption. It doesn’t matter how great your encryption is: If the keys are compromised, then the bad guys can just unlock anything that you’ve encrypted, and we’ve seen that — not going to call anyone out, but in the latter part of 2018 we have seen that. And even going back into 2017, we have seen that some of the major breaches actually did employ encryption, but it wasn’t PCI-certified encryption, and the bad guys were able to get to the keys. Or in some cases certain parts of the program were where the bad guys were able to get into the devices and change the hardware and just change the settings to deconfigure or unconfigure the encryption settings that were in there.

That’s some of the technical differences. When we go over to the value proposition differences, one of the main reasons why we’ve seen literally hundreds and thousands of merchants getting into this PCI-certified encryption or making it an absolute requirement of their RFP, the request for proposal, we see that all the time where it says, “Is it validated and if it’s not validated, when will it be validated? Any of the people who respond to this RFP must be certified. One of the main reasons is twofold. Number one is compliance. And then also simplification of their programs and security.

So I’d say from a compliance perspective what we see is that if you’re a merchant that is doing a report on compliance, what we call a ROC, from the PCI or SAQ, which is the self-assessment questionnaire, you can take as many as 300 of the security controls, also known as requirements, out of the equation as many have if you implement this kind of technology. So that’s a 90% reduction of the moving parts of your compliance program, which massively simplifies your program, allows you to focus on other parts of the program and make it much more manageable. And of course any time that happens, it’s going to make it less costly in terms of human costs and also real costs for things like that. It’s a massive night-and-day difference, up to 90% reduction. So that’s driving a lot of the demand.

But then also on the security side, folks are wanting to implement encryption that they can count on. If you look back over the last couple years, as I said, there have been breaches and compromises where encryption was in place but it wasn’t PCI certified. And so that is driving a lot of merchants to say, “Gosh, we’ve got to have some sort of confidence in the technology that is supposed to be securing us.”

How Point-to-point Encryption Fits Into Various Industries

Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com

Any time that we talk about security or encryption, my mind goes to that common phrase that a chain is only as strong as its weakest link. I think you put out some really great points there. Now if I could I’d like to go to a certain section of what you were talking about, the point-to-point encryption. Could you break down a little bit more for us how to point-to-point encryption fits into various industries?

Ruston Miles of Bluefin Payment Systems

Sure and I want to be clear for the audience here that point-to-point encryption is just what PCI Security Standards Council’s calls its version of certified end-to-end encryption. Some folks, especially the technical and the networking community, get “point-to-point encryption” confused with peer-to-peer encryption or some sorts of encryption that have to do with the tunnels etc., point-to-point tunneling protocols between two different routers and firewalls and those sorts of things. But that’s not what this is. This is standard point-to-point encryption is what PCI its certified end-to-end encryption.

So really, end-to-end encryption has been here for quite some time. When I founded a Bluefin back in 2002, it wasn’t a couple of years before we were actually implementing end-to-end encryption in various industries. So it has been around for a real long time. What has not been around for a real long time is any sort of standard surrounding that: How should you do it? What are the best practices? What are the requirements? What things should you not do? Should keys live in databases? Or should keys only live in HSNs and hardware modules where bad guys can’t get into them? And so it’s been around for a while, and it’s been used in lots of industries. It fits into every industry that one can think of. The only channel that it’s not as relevant for is e-commerce because one of the things that end-to-end encryption or PCI’s point-to-point encryption presupposes is that for the merchants themselves, the retailer, it’s their device. They’re the owners of the device which the transactions that are being keyed, swiped, dipped, or typed into it etcetera or tapped into. With e-commerce, or as they call it, remote commerce, it’s the consumer’s own keyboard at home that is entering the card data. So, point-to-point encryption at this time is not relevant for that particular channel, but all other channels, meaning any other retail, including NFC for tap or contactless, all these different ways, point-to-point encryption exists and is in use.

How does it fit? I’d say there are obvious use cases. When we look at a retailer and understand that when that card is slid through the magnetic stripe reader, there’s encryption going on in that magnetic head. If it’s an EMV chip card right there at the ICCR, the integrated chip card reader, where it’s touching in there; it’s being encrypted in hardware right there. And some folks who might say, “Well, why do we need encryption for EMV?” might be surprised to know, but if we pulled out an EMV reader and we dipped a card into it and I showed you a scope what came out of the other end of the wire that goes into the workstation or over your network, it’s not encrypted and the full 16-digit card number is in clear text for all to see. That surprises a lot of folk because they think that somehow the chip is supposed to be encrypting something there. But in fact that’s not why the chip is there. The chip is there to say that that plastic card is not counterfeit. That’s all it does. So very much so encryption is important, point-to-point encryption is important in conjunction with the EMV to provide data security on the EMV data that’s passing through. When we go over into tap, which we see a lot maybe in transit especially. I was over in London speaking at the PCI Security Standards Council community meeting a couple months ago, and there’s a lot of tap going on to the turnstiles for Transport for London and other places like this. So that’s certainly it. So all the different industries can come across that, but I’d say the one that is interesting.

I’d say in new, that represents greenfield, if you will, for a lot of folks, any of your listeners who are in the industry of selling payment products is card-not-present. Folks often say, “Oh. Well, point-to-point encryption does not handle card-not-present, Ruston, and you just said the keyboard and whatnot can’t be protected.” But if it’s a merchant’s own environment, let’s say a contact center, a call center, a back office where someone’s keying in data through a PC workstation or lab or laptop or Apple or whatever into some sort of application. Gosh! There can be all sorts of bad things like keyloggers, malware, RAM scrapers, shared memory attacks, all sorts of things that can happen to grab the data as you key in this card data into the applications that these businesses use. Well what’s come on over the last four or five years and, believe me, we are placing thousands and thousands of these every month, is encrypted key pads. There’s a USB key pad that looks like an accountant’s 10-key, something you might buy at Office Depot or Office Max. However, when you’re keying into that, it’s encrypting the data and then wherever your cursor is instead of putting the card number, it puts abc123, or what we in the business call ciphertext. So in this way, point-to-point encryption can be used at call centers and back offices in order to protect card-not-present environment like that. So we see that as a definitely a growing area. And in fact, we see very large organizations sometimes implementing that first because it may be more costly to replace devices that are already in the field and being used and that impact operations and so they’ll go and fix the back office in the context. And believe me some of these folks have thousands of contact center agents working phones or working the mail. And so that’s certainly an area where it might not be readily understood.

And then finally what we’re seeing is for example for airlines. There are certain ways that folks use cards that have nothing to do with payments. Maybe you’re sliding your card in order to check in. So it provides some sort of identity. Well that needs to be encrypted too. What we’re seeing is any time a card is touched or the information on a card is used by a business, there is a use case and also there is an answer for encryption and specifically point-to-point encryption.

Why It Is Important for Small Business to Adopt P2P Encryption

Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com

I think it’s extremely interesting. When we’re talking about security, I always wonder: How would a fraudster think about this, and how would they attack this? So my next question takes a look at P2P encryption. Is it that the mindset of fraudsters particularly is, “I’m lazy, so I want the biggest bang for my buck, and so I’m going to go after large institutions.” But maybe, as you said, those larger institutions have implemented more of these security measures because they have the resources to be able to do it. So why are fraudsters thinking in sense of volume and going after the larger players? Why would it then be particularly important for small businesses to adopt the P2P encryption?

Ruston Miles of Bluefin Payment Systems

Great question, and I’m going to answer in two parts. Right now, we only think as an industry.Aand you’re absolutely right: If you look at the statistics, as an industry, as a payments industry, we only think that the bad guys only care about and are going after the large businesses. But actually those are only the ones that we know about. Remember, hackers don’t come and check in and say, “Hey guys, we’re going after only this.” We only find that out because it’s those big, giant breaches that make the news that can be found because a lot of bad things happen all at once. In fact, hackers are in the business of getting caught. So anytime we see learn that so-and-so company, a huge company, was just breached, that means the hacker did something wrong.

The attack vector and the whole approach to hacking and breaches has changed over the last decade. It used to be they wanted to go crack into some big business to get a giant database of cards. Now that just happened recently with a large hotelier, but that kind of thing is not the norm. The1,600–1,700 breaches that happened last year were not all instances of companies losing giant databases of cards. What’s been happening since the very first Target breach if you go back to 2013, has been this whole move toward malware. What that means is the bad guys get this malware into systems by using a variety of things like spear phishing, phishing, and other sorts of hacks. They get this malware in there, and it silently sits there and listens transaction by transaction by transaction, getting this data and then sending it out of the system. So that’s the way that the hackers have been doing all these breaches, these thousands of breaches, every year. And so what happens is that finally somehow enough of that gets put into a pile somewhere that they finally get caught.

But what’s really happening on top of that — that is really just the tip of the iceberg. When you look at statistics, you’ve got to look at the sample, asking what’s our group that we’re basing these statistics on? Small merchants often are left out of those discussions because their breaches go unreported and widely unknown. If a hacker gets malware into a small business and they’re able to steal a hundred cards this month, who’s going to know about that? The small merchant doesn’t have a security professional monitoring the network to say, “I found data exfiltratiing the system.” They’re not big enough for any large bank or card brand to say, “We’ve done a common point of purchase here, where we’re all these millions of cards have been going on to the dark web and these all have been cross refrenced and we’ve figured out it’s ABC large corporation or retailer.” That’s not going to happen for a small merchant. So that’s why these hackers do in fact like small merchants. What they do is they don’t typically go in and just target a single small merchant. To your point, they take the lazy but highly effective approach to hack the application that a small business might be using and then say, “Okay, give me the 10,000 small merchants out there that using XYZ version of this particular application because they haven’t updated to the new security patch or whatever it is and then we’ll automate a hack that goes out that gets into the system. And then the hacker wakes up in the morning, they’re sitting there eating their cereal, the hacker is, and says “Okay. Here’s all the different credit cards to come in from all these businesses all over the world.” And then they go and sell them on the dark web. So the threat is real there.

It’s important now getting small businesses to take that seriously and understand that that is a risk. Oftentimes a small business thinks that the greatest risk that they face is going out of business for not selling enough hot dogs and hamburgers. They might not feel that their largest risk is a breach. And their brand might not be a world presence where they might feel that a breach would impact them or that anybody would know and not come by and buy another sandwich from them. So the threat is real, but the perceived threat might not be as much. But I want to talk about it from a compliance perspective because this is where, along with Dan from Coalfire, I put together a panel from both the U.S. and Europe at the PCI Community meeting, and one of the things that we could talk about was small business compliance. When we look at the PCI Security Standards, there’s 335 of them that businesses have to manage 365 days a year. We know that these small businesses are not security professionals. So they might not even be qualified to answer some of these questions. And certainly if they do, they may answer them wrong. Or they may not answer them at all. However, they bear the compliance burden with point-to-point encryption, all of those 300 or more requirements go out the window for them and for their small environment. To be clear: As many as 300 requirements cannot be relevant for their environments if they use point-to-point encryption.

So what this does is it is simplifies their compliance program to a level that they can actually access it, attain it, and be compliant with it. And so we’re seeing a lot of processors start to think this way and say, “Look, there’s the do-it-yourself approach. There’s the , “Hey, go figure out, Home Depot, go figure out how to build your own thing.” Or there’s the don’t do it yourself approach, the “Hey, buy this product or solution, small merchants, and if you buy this then you don’t have to do that.” And we have seen some providers starting to say, we’re not even going to let small merchants make that decision. We’re just going to require that they use a certified, validated version of our solution if they if they want to be in compliance at all because what small margin is going to get it right? Even if a small merchant, a very small one, does buy that firewall and configure it correctly on day 1, what about day 3,000, 9 or 10 years into the situation? Or even a year: What about day 300? Are they really keeping up with everything that they need to do to secure all of the particular parts of their environment? So to wrap it up, the whole do-it-yourself approach for small businesses, we’re learning of course over the last decade, it’s not working out for them. And so we’re starting to see folks just say, “Look. Don’t do it yourself. Buy a solution that takes care of this for you.”

What Are Some of the Security Regulation Differences Between the US and Europe

Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com

A surprise to no one here is that there are major differences between the payment security rules, regulations, and the way that the U.S. and Europe essentially view security in general here. So I was wondering if you could take a deeper dive into what some of those differences are between the U.S. and Europe.

Ruston Miles of Bluefin Payment Systems

Sure. We’ve all heard about GDPR, the EU’s General Data Protection Regulation one way or the other. This is the privacy regulation. Of course, anything that deals with privacy should necessarily be impacted by security because the lack of security creates a privacy issue when that data is compromised.

So it’s going to have an overall effect, and I feel the effect is going to be to move forward technologies. Of course. I am a big evangelist for this, but technologies like encryption and point-to-point encryption, because there’s two approaches to security: You can defend the data. That’s sort of the 335 security controls where you’re trying to do all these things to play cat-and-mouse and keep the bad guys out. And then when they get in, you lose and they win. So that’s the “Defend the data” approach. Or there’s the “Devalue the data” approach, which says, “Look. Let’s go ahead and encrypt, or tokenize, or both, all this data so if the hacker does get in while the breach may have happened, they can’t compromise the data. A big difference, key difference is a breach happens, but data compromise doesn’t happen. This is major difference, especially, as it pertains to privacy regulations like GDPR. Are these other things because what we’re saying here is “No, there was no privacy breach here. Excuse me, privacy compromise.” So big difference and the big impact.

We’re seeing encryption happening in Europe. Europe actually was ahead of North America in terms of point-to-point encryption. Back in 2014, Bluefin was the first certified provider in North America, but there were three others prior to us across Europe. One of the things I really like that’s going on in Europe and has for the last few years that’s really helped us with our business development efforts is that Visa actually requires for any mPOS (mobile point-of-sale) device and new implementations that they have to be PCI certified. They’re required to be. And so that’s the big difference. There’s no option there. Big or small, if you’re going to offer this, and we all know that that’s where the market is going. Retailers everywhere, all over the world, are moving and extending their reach to merchants with line busting or even just putting mobile point-of-sale devices at the checkout. But all these different ways — think about in airplanes, and think about car rental situations where folks go out to your car. So this is an important new growth and they are saying mPOS has to be PCI certified because it’s virtually impossible or very difficult to secure and keep up with security on mPOS environments.

So I do like that requirement for certain areas of risk. I would hope to see something like that here in the U.S. at some point, but there are some of the differences in payment security. I’d say that the Europeans are ahead of us in terms. Of course as we all know with the EMV chip for counterfeit card prevention, we all know that they were there several years before the liability shift happened over here. And also in Europe, it wasn’t a liability shift. It was a mandate they had to implement EMV. So what that also did was that it meant that all those devices that accepted cards had to be upgraded. And they were all upgraded to newer versions that did support point-to-point encryption, which means that these providers didn’t have to go out and buy new devices in order to enable the point-to-point encryption. Same thing has happened here. The liability shift has caused many merchants to upgrade their credit card devices that they receive credit cards on and many of those, maybe most of those, are capable of performing this point-to-point encryption. In many cases the merchant just doesn’t know to turn it on and I think that’s where education, awareness, and business development comes into play.

How Important Will Security Education Be

Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com

I’m glad that you brought up the word “education.” Before we wrap things up here, when you take a look at payment security in the next 5–10 years, what do you think is next and do you think that education is going to play an extremely important role in that?

Ruston Miles of Bluefin Payment Systems

As I pointed out a couple times, I’ve just come back from the PCI Council meetings. We are not going to see a major revision change this year to point-to-point encryption and in even the changes that will be coming in the coming year are not going to be changes to the technology. It’s going to be changes to the program to streamline and make the program even easier to access. But the technology is state-of-the-art security, so the problem we have right now is not trying to find better ways to secure it. It’s actually getting the technology’s point-to-point encryption to be used more by merchants. And so that awareness, education, maybe compliance, program reductions, different ways, different benefits and carrots in order to have merchants participate in that. And at some point I would imagine there will be some sticks driving merchants.

I think the next big thing in security will be how can we put a program around contactless? Everybody’s got a lot chip cards. I’m sure everyone’s sitting on at least one or maybe two or having them in their purse right now. So I think that what we’re going to see is that in a lot of the cards that we have right now, the chips do not have the contactless feature in the card and we are going to see major banks start issuing, probably in 2019 and definitely into 2020, cards that have those. Merchants are going to be enabling the contactless feature. How do we secure that? The Council is going to be coming out with standards around contactless, a security standard around that. So I think is where we’ll see the next big shift.

As I said, point-to-point encryption already can assist with contactless by an NFC, or Near Field Communication, radio inside these devices that receives that tap when you tap the card against it. And that can already be encrypted today. What we’re going to start seeing, though, is standards around contactless as that becomes the preferred mode of interaction and of course it will speed up that data card data interaction between merchants and consumers.

Mobile Point-To-Point Encryption

Ryan McEndarfer, Editor-in-chief at PaymentsJournal.com

That brings up then one more question. You were you talking about contactless, and I know particularly in the U.S., mobile payments adoption has been a little sluggish but it is slowly starting to pick up here. But what about mobile point-to-point encryption?

Ruston Miles of Bluefin Payment Systems

It’s already a requirement for mPOS in Europe. When we say mPOS, the distinction is that this is a merchant’s device that they’re holding that is receiving the payment in some way. When we talk about Apple Pay, that’s a consumer-held device. We’re going to start to see that point-to-point encryption already provides benefit around that, but for some merchants point to point-to-point encryption is not a requirement right now. It’s definitely something that we see merchants using in order to remove 300 of the requirements for PCI compliance. But it’s not you must do this. Only for mPOS and only in Europe is it is an absolute requirement that you must do it. So the contactless standard will come out and will delineate the things that you have to do then in the U.S. if you don’t use point-to-point encryption. I think this provides yet another carrot for folks to say, “Well, we don’t want to have to do all those things. So let’s go ahead and just encrypt the stuff, which is what we should have done in the first place.” That’s my prediction. The standard has not come along yet and it’s something that I know my company Bluefin, we are what’s called a participating organization with the PCI Council and so we are involved along with many, many other companies, hundreds of other companies in creating and editing a version of and providing input on these standards for showing “This is what’s happening on the front lines for us. Here’s what would make this easier. Here’s what make this more secure. So providing that input it’s something that I encourage any of your listeners to participate in.

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The post What Is the Difference Between PCI-Certified and Non-Certified Encryption? appeared first on PaymentsJournal.

PayPal reported their fourth quarter and full year results yesterday. I pay close attention to the Venmo numbers to get a sense of the growth of their person to person (P2P) solution, Venmo, and its contribution to the greater P2P market. Venmo was truly a bright spot in their earnings announcement. Some of the numbers:

• $19 billion in processed volume was conducted on the Venmo product in fourth quarter, representing 80% growth over fourth quarter 2017.
• $62 billion in processed volume was conducted on the Venmo product for the year, representing 79% growth over the full year 2017.

Yes, the growth rates are slowing as the product matures, but these are tremendous stats.

This announcement really points out, however, that Venmo can no longer be compared to other P2P products like Zelle and probably shouldn’t even be called a P2P solution.  It’s not just a mechanism for moving money from one individual to another or one account to another. Within all of that reported processed volume are also payment transactions through the Venmo card and through apps like the ability to use Venmo to pay for Uber rides.

Turning Venmo transactions, which on their own are a net loss, into revenue generating activities has been a focus. By allowing Venmo to be used to make purchases and charging merchants acceptance fees, plus charging consumers for “instant” cash-outs of their Venmo balances into a bank account is now generating over $200M in revenue. That revenue is evenly split between the two activities. As an article in Digital Transactions points out, despite that impressive revenue growth, Venmo is still not yet profitable:

The knock on Venmo has been that it’s free to users, so costs ratchet up with volume with no compensating revenue. But Schulman said the service ended the year with a $200-million “run rate” in annual revenue as it began tapping acceptance fees from both online and physical merchants and also took in fees from consumers for instant transfers. Indeed, Venmo is “getting into everyday spend,” said Ready, through the Venmo card and Pay with Venmo programs. 

All told, some 29% of Venmo users made a “monetizable” transaction last year, said Schulman. But, in response to a question from an analyst, chief financial officer John Rainey cautioned Venmo “is not in the black yet.” The first step, he said, was to stop the growth in losses as volume grew. “We’ve done that,” he added, and now, “the second step is to break

The post Venmo, a Very Shiny Bright Spot in PayPal’s Earnings appeared first on PaymentsJournal.

Early Warning Systems announced new growth numbers for fourth quarter 2018 for person-to-person app Zelle. Here’s the quick summary of the data points:

• Zelle processed $35 billion and 135 million in transaction volume.
• For the full year 2018, that makes $119 billion and 433 million in transactions
• There are now 60 banks integrated to Zelle reaching 58% of U.S. checking accounts
• An additional 169 financial institutions have signed commitments to also join Zelle

The average transaction value for a Zelle transaction has steadily declined in 2018 from $294 in Q1 to $259 this past quarter.  That is a trend that will continue as consumers find more everyday uses for the product.  Interestingly enough, the fastest growing demographic for Zelle are from the baby-boomer generation.

PayPal has an earnings announcement next week and hopefully they will shed some light on their Venmo volumes so we can get a broader view of the P2P market.  I suspect that they will post strong numbers as well for fourth quarter.  One reason for the strength of fourth quarter for P2P, beyond net new growth, is the prevalence of using P2P for giving gifts.

Early Warning is increasing its client base beyond that of its large-bank owners to smaller community banks and credit unions.  This is most often managed through partnerships with core providers like FIS, Fiserv and JackHenry:

Zelle is not just for large national banks. Eighty five percent (85%) of participants in the Zelle Network are regional and community banks or credit unions with assets less than or equal to $10 billion, while 77% of participants list assets less than or equal to $1-billion. Together, participants are helping more than 100-million consumers replace checks and cash for the convenience and speed of person-to-person (P2P) payments.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

Truth In Data

The post P2P Solution Zelle Posts Strong Growth in Fourth Quarter appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower left corner of your screen to receive notifications as soon as the episode publishes.

Data for this episode of Truth In Data provided by Mercator Advisory Group’s report – U.S. Consumers and Debit: Fewer Use It for Purchases

About this report

The latest Insight Summary Report from Mercator Advisory Group’s CustomerMonitor Survey Series reveals that 54% of all respondents use debit cards for purchases and that figure has declined steadily since 2011, the year following the enactment of the Durbin Amendment. The report, U.S. Consumers and Debit: Fewer Use It for Purchases, presents the findings of an online survey of 3,002 U.S. adults conducted in June 2018.

While consumer ownership of debit cards remains strong and people who have recently opened a checking account are even more likely than average to own a debit card for transactions, the percentage of all U.S. consumers and even those that own debit cards who report using their debit card for transactions is declining.

Today, more U.S. consumers, especially seniors are more likely to use credit cards than any other payments in stores. Young adults and adults whose annual household income is less than $75,000, however, are still more likely to use debit cards than credit cards in stores.

Only half of debit card users report using their card for online purchases. The perception of greater online security with credit cards (41%), fear of checking account compromise (30%), and lack of rewards when using debit cards (30%) are the main reasons consumers do not use debit cards online.

As U.S. consumers make a greater share of purchases online and by mobile using a wider range of payment options, they often prefer credit cards to debit cards online. And with the rising use of online payment services, consumers may start to bypass traditional payment cards and keep funds in their payment service rather than transfer it back to their checking account.

“The rise in use of online and mobile commerce is heightening the need for enhanced security measures such as mobile card controls, especially for debit cards,” states the author of the report, Karen Augustine, senior manager of Primary Data Services at Mercator Advisory Group, which includes the CustomerMonitor Survey Series.

The post Young Adults Lead the Way with P2P Payments appeared first on PaymentsJournal.

The growth of person-to-person (P2P) transactions continues to be brisk with leading providers Zelle and Venmo.  It may be surprising to some that Zelle’s growth comes from only 51 financial institutions.  The 51 integrated FIs include the largest U.S. banks, but that leaves 10,000 + other potential providers either waiting their turn to be integrated or waiting it out, preferring to see how the whole P2P phenomena transpires.  An article in PaymentsSource provides background on the long road to ubiquity for Zelle:

Early Warning, the bank-led Scottsdale-based company that operates Zelle, said 51 banks are live on its network, with more than 200 under contract for integration in the coming months.

“We’re accelerating the rollout through resellers, but it’s a process that will take some time,” said Lou Anne Alexander, group president of payment solutions at Early Warning, in an interview.

The consumer use case for P2P took years to materialize, but as momentum builds now from several directions, many small banks and credit unions are overcoming their initial skepticism. And as they wait to add Zelle, their anxiety grows. 

The roll of resellers such as Fiserv, ACI, Jack Henry and FIS will be critical to reaching the remaining FIs.  Although the use of a third party streamlines the integration, it’s not a simple as flipping a switch and magically, overnight being able to offer Zelle. :

Zelle is working with resellers of bank-platform services like Jack Henry to speed up the integration process by onboarding many banks and credit unions at once, versus the more time-consuming individual integrations, but it’s not clear exactly when mass-onboarding will become routine.

“A lot of banks are wondering if Zelle is really coming, and how long it will be until we can onboard hundreds of banks at one clip,” said Lee Wetherington, Jack Henry’s director of strategic insight. “Banks are wondering if they’ll make their 2019 timelines for rolling Zelle out, and what Plan B is, in case Zelle doesn’t become the ubiquitous solution we hope.” 

It’s interesting to note, and possibly a relief to some, that the pre-Zelle P2P solutions like Fiserv’s Popmoney will continue to be available.  Matt Wilcox, Fiserv’s senior vice president of strategy and innovation commented in the article:

Popmoney may be just fine for some financial institutions, but there may not be that many who stay with it,” Wilcox said, adding: “It’s true that for several years everyone was saying this would be the year for P2P, and it was never that moment, but I think we’ve finally landed on that year.”

The post The Long Road to Person-to-Person Payment Ubiquity appeared first on PaymentsJournal.

Lately, the industry has become focused on reducing the friction associated with payments, but perhaps we’ve forgotten why we asked so many questions – HSBC discovered the answer; it’s to keep the criminals out:

“Simple verification procedures for HSBC e-payment app PayMe allowed hackers to carry out unauthorised transactions after luring victims into disclosing their email passwords using phishing scams, a police source said on Friday.

Cybersecurity experts have called on the bank to introduce two-factor authentication, which requires users to provide an additional piece of information besides a password.

HSBC said on Thursday night that about 20 accounts with the e-wallet system had been accessed without authorisation, and transactions carried out involving HK$100,000 (US$12,770).

The breach had been reported to police and the Hong Kong Monetary Authority, the bank said.

A veteran policeman with knowledge of the incident said hackers posing as an email service provider had sent out phishing emails asking victims to submit their passwords to initiate an update to their accounts.

“That’s how the victims’ email accounts were hacked. But the scammers then looked for PayMe notifications in their emails, and if they saw one, would send a message to the app requesting a password change,” the source said.

“The hackers could then control their victims’ PayMe accounts. PayMe has no security issue as such, but the verification process is way too easy.”

Chester Soong, director of the Internet Society Hong Kong, said two-factor authentication should be adopted, which requires information other than a password, such as a thumbprint, face scan, ID card number or passcode sent to a phone.”

In this case a quick biometric challenge issued to the users smartphone would have prevented the fraudsters transfer of funds while still making the payment easy for smartphone users. For millennials and the wealthy, banks that fail to adopt the biometric solutions available on modern smartphones are beginning to come across as simply obstinate. Consumers use biometrics to open the phone and to make card payments via the wallet, they now expect bank apps to similarly adopt that simple and secure method. In the case of HSBC it could have saved them from some really terrible publicity.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post HSBC Implements Easy P2P, So Guess What The Crooks Discovered appeared first on PaymentsJournal.

You have probably heard the sad stories of consumers using a P2P app, sending money to the wrong person by entering the wrong mobile number then having to beg the stranger who received their money unintentionally to do the right thing and give it back. The Chicago Tribune relayed one story like that:

When Michael O’Neil tried to pay the company that inspected the Lincoln Park condo he bought last summer, he had no idea there was a company on the East Coast with a nearly identical name and an email address that differed by just four letters — until he sent $360 to the wrong business.

It was my mistake, but one that I thought was immediately protected,” he said. “Four letters shouldn’t cost you ($360).” 

The problem is that consumers assume that a P2P transaction is more like a merchant transaction and not a cash transaction.  But P2P providers like Venmo and Zelle are rolling out new features to help:

Last year, Venmo gave users the ability to add profile pictures to their accounts, introduced automatic flags that pop up if the sender doesn’t know the recipient, and added other measures to try to slow down users before they hit send. Early Warning Services, the bank-owned consortium behind Zelle, expects its partner banks to roll out pop-ups or alerts by the end of the month that ask users to confirm they’re sending money to the right person. 

Although users often are sending each other $5 or $10 for pizza or beer, those transactions add up. Zelle processed $32 billion in payments between July and September, up 67 percent from the same period last year, according to Early Warning, which is based in Arizona but has an office with about 40 employees in Chicago. More than 75 million email address and phone numbers are enrolled in Zelle, which has its own app and can be offered through banks’ apps or systems. Zelle also processes corporate disbursements, such as insurance payouts, which are included in its numbers.

Overview by Sarah Grotta, Director, Debit and Alternative Products at Mercator Advisory Group

The post Getting Help With P2P Mistakes appeared first on PaymentsJournal.

Last week, Pay Pal announced earnings and also some growth numbers around its P2P service, Venmo.  Yesterday, Early Warning announced numbers for Zelle:

The latest figures represent a year-over-year growth rate of 67% in payment value and 83% in transactions. From the second quarter, volume grew 13% and transactions 16%. Over the past 12 months, bank-controlled Zelle says it has processed $106 billion on 375 million transactions. 

What isn’t disclosed is what other notable P2P providers might be doing such as how much person-to-person volume is flowing across Pay Pal’s namesake accounts, Square Cash, or what is still being conducted through financial institutions using processor provided Popmoney and PeoplePay. Although Venmo and Zelle don’t represent the entire market, as indicators, they suggest the market is still growing rapidly. Below is a chart of this year’s reported dollar value growth.

Combined, Pay Pal and Early Warning have transacted over $128 Billion so far this year, much of that as a cash or check replacement. Pay Pal doesn’t release the number of transactions, but Early Warning does, and what we see there is that transactions are increasing faster than dollar volumes. I would consider that a good thing.  The average Zelle transaction has declined from $294 to $276 from just 1^st to 3^rd quarter this year. This means that consumers are using this for more every day casual transactions and not just for splitting rent of making account to account transfers.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Keeping Track of the Evolving Growth of P2P Payments appeared first on PaymentsJournal.

PayPal announced earnings yesterday and person-to-person (P2P)app Venmo was a star attraction.  Pay Pal continues to engage with customers around P2P and transaction volumes continue to grow at incredible rates.  CNBC reported:

Investors finally got what they were waiting for in PayPal‘s quarterly earnings: Good news about Venmo.

The peer-to-peer payments app, which PayPal acquired along with Braintree in 2012, has struggled to make money for its parent company. Wall Street analysts highlighted the app’s performance as a key metric to watch in Thursday’s earnings report.

Venmo didn’t disappoint. It had a breakout third quarter with payment volume surging 78 percent to a total $17 billion. That’s still a fraction of PayPal’s total $143 billion in volume for the quarter, which missed analysts’ expectations — but it’s encouraging, PayPal’s CEO says.

The next comments from the announcement require a little analysis:

“While it is still early, our monetization efforts appear to be reaching a tipping point,” CEO Dan Schulman said on a call with analysts Thursday. “I’m especially pleased with the strong overall momentum surrounding Venmo.”

Twenty four percent of Venmo users have now participated in what Schulman called a “monetizable action.” That number is up from 17 percent in the second quarter, and 13 percent in May of this year. In September alone, PayPal said it processed more than $1 billion in instant transfer volume on the Venmo platform.

A “monetize-able” action likely means one of two activities: 1) the consumer uses funds from a Venmo P2P transaction to make a purchase at a Pay with Venmo merchant.  PayPal earns fees from the merchant for processing that transaction.  Or, 2) the consumer needs to have a P2P transaction received within minutes and will pay 1% of the transaction amount for expedited delivery.  This fee just rolled out as discussed here.

So now the question is whether consumers will use Venmo to buy and if speed is meaningful, especially in light of other free options.  On the topic of Venmo purchases, I believe that it will be the same slow adoption that the industry is seeing will other mobile payment apps.  Yes, consumers will use these apps, but the benefits aren’t great enough to make it a habit.  Will consumers pay for a faster P2P transaction?  Only occasionally.  With slow Venmo transactions still available for free and other market solutions like Zelle offering real time transactions for free, PayPal will see only modest adoption.  In the meantime, PayPal will continue to support a growing client base and when the market is finally ready to move, PayPal will be well positioned with a large and loyal customer base.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisor Group

The post P2P is Still Hot appeared first on PaymentsJournal.

Is it A: Consumers who earn between $75,000 to $99,000

B: Consumers who earn $100,000

C: Mobile payers

D: Young Adults

Data for this episode of Truth In Data provided by Mercator Advisory Group’s report –  U.S. Consumers and Debit: Shift to Online May Inhibit Use

The post What Consumer Segment Is Most Likely to Use P2P to Pay Online for Goods and Services? appeared first on PaymentsJournal.

The following is a transcript of the Zelle podcast episode

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

Welcome to the PaymentsJournal podcast. I’m your host Ryan Mac and on today’s episode we’re going to be talking about Zelle, the digital payments network owned by Early Warning. Joining me is Vice President and Head of Sales and Customer Success at Early Warning, Ian Macallister. Ian, welcome to the podcast.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Thanks. I appreciate it.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

To get things started. Let’s first offer an intro to the topic for those of us who have been living under a rock for the past couple months. Can you give us a little bit of an overview of Early Warning and Zelle?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

I’d be happy to. Early Warning, which is the company that owns the Zelle Network and the Zelle brand, is a company that’s been in place for close to 30 years. The basis of what Early Warning does is work with U.S. financial institutions to do things like protect the financial industry against fraud and bad actors in the payment system. But recently it launched a few years ago a product that now we call Zelle. We’ve been working over the last year to integrate with large financial institutions, and really any financial institution in the U.S. can join Zelle. And we’ve had a lot of great success working with our partners and also our financial institutions to make Zelle a reality.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

How are the implementations going? Are you seeing implementations across the spectrum of financial institutions—big banks, community banks, and credit unions?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

We have. We’ve had a lot of great success especially recently working with those financial institutions. So we have over 140 banks and credit unions signed already to participate with Zelle. We currently have 29 live and a significant amount of the rest implementing. Just to give you a sense of some of the traction we’ve had over the last quarter. In the first quarter, we had over $25 billion moved through the Zelle network and over 85 million transactions just in that quarter alone. Our goal is, like I said earlier, to provide a network where any U.S. bank or credit union can join. A lot of them are doing it directly with us—some working directly with Early Warning in the Zelle network—but others are using partners that we established a few years ago. And those would be Fiserv or FIS, Jack Henry, or CO-OP to provide the ability to join the Zelle network to any of the 10,000 plus financial institutions the U.S. Plus we have other partnerships like IBM and ACI and DCI and D3 where they’re out there as vendors working with a lot of the financial institutions to again educate and help provide technology solutions for them to join Zelle. So that 140-plus institutions is just the tip of the iceberg because our goal is to get to over 10,000.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

How has the growth of P2P transactions been progressing? We’ve seen Bank of America’s report of a 4 million users and Quarter 2. And all Zelle financial institutions collectively completed 35 million transactions worth about $10 billion in Quarter 2. It sounds like numbers like that would make your competition (joking here) “zelle”ous.” But is that kind of growth that you’ve been expecting, and is there any other qualitative information that you can share with us about that?

*UPDATED Q2 INFORMATION FROM EARLY WARNING* 

• Today, we have more than 150 financial institutions signed up to offer Zelle in their mobile banking apps, with more than 30 currently offering Zelle today.
• In Q2 2018, we had 100 million transactions for a total of $28 billion in payments. Transaction volume was up 17% quarter-over-quarter (QoQ), and total money moved was up 11%. Across the entire Zelle Network, more than 67 million tokens have been enrolled.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

The cool thing about Zelle is it is a network and that as networks grow, they have a network effect. So, one friend is sending money to another and then that person sends money to a few of their friends or they split a bill. We’re definitely seeing that element of network effect occurring, and that really helps with partnering with the larger banks so they can provide this as an innovative solution in their own mobile banking. If you look at just those 140-plus that I mentioned earlier, they all have a mobile banking app and when Zelle is implemented to that mobile banking app, there are people out there with phones and a banking app that already has Zelle. So it really is the ability to provide them the knowledge and education that they already have Zelle on their banking app. And once they do, you start to see the growth of the transactions and the interaction with Zelle take off. To give you a sense of those banks, they have over 110 million apps installed on phones across the U.S. So 110 million people already have Zelle. It’s just now educating them that they can use it. Additionally, we’re starting to see the use cases of the network grow too. It’s not only just person-to-person payments. We see a heavy usage for rent. But we also see meals being split. We see utilities being shared. A lot of gifting going on. People paying their dog walkers or paying their friends back for travel when they’ve gone out and traveled together and paying them back. The real cool thing is seeing not only the usage growth but also the use cases across the people using the network.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

I think you make a really great point there in terms of just the education of it. With a lot of new technology being implemented today, especially in the financial institution arena, it makes sense for these financial institutions to get out there and educate the consumers on these because as you were pointing out, there’s a lot of use cases for them and you’re discovering more of them each day as Zelle gets into the hands of more and more users. Moving on, do you think that consumers will use multiple P2P solutions? So for example, perhaps consumers might use Facebook P2P solutions for small transactions when they are in a messenger app and then use Zelle for larger transactions?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

We’re definitely advocates for any digital payments infrastructure. Our goal — Early Warnings’ goal — and our banks and credit unions’ goal is really to reduce the usage of cash and check because those are heavy operational costs for people, for banks, for really the payments industry. So reducing cash and check is really our goal. And if there are other players out there that kind of help facilitate people moving from using traditional cash and check to digital payments, we’re cool with that. It’s kind of like the higher tide raises all boats in this scenario. You mentioned a few things that we’re seeing that when people want to do contextual payments, we focus on making sure it’s fast, safe, and easy for people to do payments through Zelle, but again if people are selecting a digital payment over cash or check, it’s going to benefit not only Zelle but it will benefit the financial industry too.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

There was some press a few months ago about consumers using their Zelle P2P app to buy goods from people that they didn’t know and if the transaction went bad, consumers expected reimbursement on the bad transactions is if the seller were an approved merchant. Now any there best practices that have come out of those instances that financial institutions are starting to deploy?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

First of all, we took this very seriously, and our banks and credit unions take it very seriously too. We certainly want to ensure that we’re providing — I mentioned fast, safe, and easy — the middle word was “safe.” We want to make sure that is the core construct of how we’re building Zelle. So we take it very seriously and we work very closely with our network banks and credit unions. We’ve already put some changes in place, our structure around the user experience that is embedded within the mobile banking app. And that really is to ensure that people confirm or know whom they’re sending money to. So again, we’re doing it both from a user experience standpoint to ensure that if I’m trying to send money to Ryan that I’m confirming via the experience that I’m sending it to Ryan, and additionally making sure that there’s the education for the consumers out there that this this is a real-time payment infrastructure so that when you’re sending money, it’s just like handing somebody cash. So would you hand cash to somebody that you didn’t know or trust? I’m not sure you would, so we make sure that we’re educating customers to send money to friends and family. I think those are important elements of what we’re doing, that enhancement of education. This is a new infrastructure, a new payments rail, and there are going to be scam artists out there. We definitely are averse to people trying to scam people through Zelle, but at the same time through education and through the experience, we feel that that will benefit people’s trust of the safety of the network. We’ve actually recently already seen the fraudulent transactions go down. Based on the [fraud] data we’re seeing, we’re trending below other kind of digital payment infrastructures or systems. Although we did get some negative press, we took that very seriously and made some changes and we feel like we’re trending in the right way.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

I’m certainly glad to see that there’s some good coming out of that and moving forward in a positive direction. Now, can you tell me about your business-to-consumer distribution strategy? As I’ve come to understand, one of the areas of interest is tuition reimbursement. Can you talk about this market and how Zelle plans to help with tuition reimbursement?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Zelle initially was built as a P2P platform, but very quickly our banks were able to innovate. Thinking about that network and the other use cases, even back in 2014 when Bank of America launched their digital disbursements product using the infrastructure of Zelle, they recognized that they were able to build a product that helped modernize the payments infrastructure for corporates where they traditionally relied on just checks most of the time in the way that they did payments. Leveraging Zelle for corporates to be able to send money to their customers is a very innovative way and an additional value-added service that they can provide payments in real time to their customers no matter the use case. One was tuition reimbursement as you said, which is great. The first use case was insurance, which is a very well used use case. We also see rebates, refunds, some emergency type of payroll and transactions, we see tipping, and a bunch of others. The good thing is that when Bank of America launched this, other banks, followed suit pretty quickly. So we already have seven financial institutions with large corporate entities in their bank leveraging the disbursements product. So we’re excited about it. One of the ones that we were really excited about last year was that we could help as a network in times of trouble when the American Red Cross used up the disbursement product for emergency relief funds. So that was a tough situation for those that were impacted, and we at the company felt like we could provide value to those consumers who need to get money quickly, through the American Red Cross. So that was a cool thing to be part of.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

The software development side of my brain really gets excited when I get to talk to platform builders. As you were pointing out with the Bank of America example, it’s providing this platform and then they come in and say, well wait a second, there’s something else here that we can bolt on top of this. And other organizations come and say, yeah well, we can put this on top of here or we bolt this into it this way and then it really becomes something that’s extremely valuable to the end-user. So I definitely get excited seeing over the next couple years how it is that this evolves and who builds on top of this platform and what other things evolve from this. Looking at the five-year outlook, is there anything else on your near-term road map that you can share with us?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Being owned by financial institutions and also having all these clients — we have thousands of clients already at Early Warning, and we have 140 signed up to use Zelle —  we have a lot of input of what our customers want. That’s a good thing. We have a good base of customer feedback. And it’s making sure that we listen to our customers, which are banks and credit unions, but that they listen to their customers, which are people and corporates. So whenever they identify opportunities to leverage over a real-time, fast, safe, and easy type of infrastructure like Zelle, we’ll be there to provide it. Right now we’ve focused predominantly on person-to-person payments and business-to-consumer payments, but as we bring on more financial institutions, our goal is to drive ubiquity across the U.S. financial institutions and do it the safe way. And if there are other use cases that our clients want and their customers want, we definitely will be there for them.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

Well, thank you for taking the time today for speaking to us about.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

I appreciate your time. Thanks for having me.

The post PODCAST: The Rise and Success of Zelle appeared first on PaymentsJournal.

Scottsdale, AZ., July 26, 2018 – In the second quarter of 2018 (April 1 – June 30), 100 million transactions took place on the Zelle Network® for a total of $28 billion in payments. Transaction volume was up 17% quarter-over-quarter (QoQ), and total money moved was up 11%. Across the entire Zelle Network, more than 67 million tokens have been enrolled.

Zelle celebrated its first anniversary on June 12, 2018, and in a year of operation has processed more than 320 million transactions valued at $94 billion. Transaction volume and transaction value are up 77% and 62%, respectively, from June 2017. According to a recent survey on Digital Payments Adoption conducted by Early Warning, the network operator behind Zelle, adoption and usage of digital person-to-person (P2P) payments are high among all generations, with consumers pointing to trust in friends and family and trust in their financial institutions as the primary reasons for engaging in a digital payment. In the second quarter, consumers averaged six transactions, sending $281 on average per transaction.

“In a phenomenal year for the banking industry, consumers have embraced Zelle as a fast, safe and easy way to send money digitally,” said Paul Finch, CEO, Early Warning. “Zelle reaches more than 100 million consumers through mobile banking apps and millions more through our standalone app. Each month, we welcome more financial institutions to the network, moving closer to offering a ubiquitous payments service for banks and credit unions, large and small.”

Today, 29 financial institutions are live on the Zelle Network, with an additional 119 under contract, representing 56% of the U.S. DDA market. Zelle works with core processor partners, including Co-Op, FIS, Fiserv, and Jack Henry & Associates to connect financial institutions to the Zelle Network.

Zelle enables payments from one bank account to another, typically within minutes when both consumers are enrolled, using only an e-mail address or a U.S. mobile phone number. For consumers who bank with financial institutions that do not participate in the Zelle Network, a Zelle app is available in the Apple App Store and Google Play.

About Zelle
Brought to you by Early Warning Services, LLC, an innovator in payment and risk management solutions, Zelle makes it easy, fast and safe for money to move. The Zelle Network® connects the nation’s leading financial institutions, enabling consumers to send fast person-to-person payments to friends and family with a bank account in the U.S. Funds are available directly in consumer bank accounts generally within minutes when the recipient is already enrolled with Zelle. To learn more about Zelle and its participating financial institutions, visit https://www.zellepay.com.

About Early Warning
Creating the Future of Payments™ – Early Warning delivers innovative payment and risk solutions to financial institutions nationwide. For over 25 years, Early Warning has been a leader in technology that helps money move easier, faster, and safer. Learn more at earlywarning.com.

The post Zelle Has a Breakout Q2 appeared first on PaymentsJournal.