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COVID-19

P2P payment apps are booming, thanks to the pandemic

Justin Ho Mar 15, 2021
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Consumers are using peer-to-peer apps for investing and other purposes beyond receiving payments. PayPal
COVID-19

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
HTML EMBED:
COPY

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.

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