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P2P payment apps are booming, thanks to the pandemic

Justin Ho Mar 15, 2021
Heard on:
Consumers are using peer-to-peer apps for investing and other purposes beyond receiving payments. PayPal

P2P payment apps are booming, thanks to the pandemic

Justin Ho Mar 15, 2021
Heard on:
Consumers are using peer-to-peer apps for investing and other purposes beyond receiving payments. PayPal

Peer-to-peer payment apps have been growing like gangbusters through the pandemic, ever since physically handing over cash, a check or a credit card started to feel a little unsafe.

And even after the pandemic, analysts expect usage to keep growing. The research firm Insider Intelligence predicts that the volume of mobile payments handled by PayPal, Venmo, Zelle, Square’s Cash App and a host of competitors will grow by roughly 37% this year. 

People have been paying one another with P2P payment apps for more than a decade. When the pandemic came along, many people started asking businesses if they’d take P2P payments, too.

“People will just say, ‘Hey, do you take Venmo?’” said Ashwin Deshmukh, who owns a cocktail bar in Manhattan called Short Stories. “Or, like, people asking us if they can send us money on [Cash App]. People really don’t want to pull out a credit card at all.”

That’s helped P2P apps muscle in on credit cards and other banking services. Some apps offer lines of credit. Others let you maintain a balance and use it like a checking account. Many apps have let users receive relief payments and tax refunds.

“If they’re successful, they can do almost everything that the bank does. And sneak up on some of the larger banks,” said David Yermack, a finance professor at New York University’s Stern School of Business.

Yermack said more poor people could get access to banking services by using P2P apps.

“In the long run, it will allow them to expand the market for financial services and keep those people maybe from ever joining the customer base of the legacy banks,” he said.

That customer base has been using P2P apps more, too, said Jaime Toplin, a senior analyst at Insider Intelligence.

“The pandemic has catalyzed uptake among older customers,” Toplin said. “Baby boomers especially. And that’s contributing to a lot of the growth.”

Those older consumers have gravitated toward Zelle, a payments app that’s collectively owned by several big banks. Younger users prefer Venmo, and increasingly, Square’s Cash App. Square said its user base has grown by 50% over the past year.

Ron Shevlin, director of research at Cornerstone Advisors, said those users are more likely to pay with apps and do so more often.

“Half of Gen Zers who have the Square Cash App on their phone say that they use it frequently — every week,” Shevlin said.

And they use it for a lot more than paying bills and getting paid.

“I do use it for stocks,” said David Pietz, 37, who lives in Portland, Oregon. “And I use it for bitcoin. I’ve got $1,000 in bitcoin right now.”

In 2013, Pietz started using Square when he was selling collectible cards.

“If somebody didn’t have cash, they wanted to pay with a debit card or something like that, they could swipe their card on my phone,” Pietz said. “It was a little thing that plugs into my phone, and I could accept their payment without having them go to an ATM.”

Then, Pietz started using Square’s Cash App to send money to friends and buy fast food.

Cocktail bar owner Ashwin Deshmukh said he’d love it if more customers paid with P2P apps. He’d save a lot of money on credit card fees, he said.

“I think the credit card fees alone, for 2019, are probably like a month or two of rent for us,” Deshmukh said. “If we could save a month of rent for us in credit card fees, it’d be amazing.”

Deshmukh said he’d love it if more of his vendors accepted P2P apps, too.

COVID-19 Economy FAQs

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

Give me a snapshot of the labor market in the U.S.

U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.

What do I need to know about tax season this year?

Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.

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