Great Debate: Will Consumers Pay for P2P Services?

SAN DIEGO — Bankers want to know: If they offer P2P services domestically, will their customers pay to use the functionality? 

At least in some scenarios, according to payment exec panelists speaking at the Emerging Payments conference held here this week. But “some scenarios” is not enough to make money on the service — at least not in the near term. The domestic profitability holdup seems to lie with existing P2P services, such as PayPal’s, tending to already be free, which means consumers are reluctant to pay their banks for similar services unless there’s obvious value.

“It’s hard to compete with free,” said Marc B. Keller, global director of digital networks and mobile at Citigroup Global Enterprise Payments, during a panel. “There isn’t money in P2P domestic payments. It’s an additional cost to serving customers.”

Still, banks want to be part of the P2P conversations today, especially as digital wallets become more of a reality, and Keller identifies expedited bill pay and cross-border payments as two sales opportunities. Plus, he pointed out that converting paper money to digital makes financial sense for banks. But to achieve the currency transformation, interoperability must exist.

“There’s no bank big enough to have a non-interoperable system,” said Keller.

That means technology advances are still needed.

“None of the existing solutions are that great,” said Keller. “Cash is really the only here and now.”

Because of that deficiency, there are “loads” of improvement opportunities, he said. Fellow panelists identified allowing for easier receipt of money as one of those opportunities.

“It’s not just about sending money, but making it easy for receivers to get money,” said Kelly Jurgens, SVP of enterprise payments strategy at SunTrust Bank.

Though the final verdict on how to make P2P profitable for banks is fuzzy at best, what is clear is that consumers hunger for the services to be provided by their banks. SunTrust’s internal data, for one, indicates that the majority of consumers prefer P2P transactions through their financial institutions.

“If we don’t provide technology to our customers, [they] will find others who do it,” Jurgens said.

Still, dealing with how P2P ranks in FIs’ resources will surface as an issue for banks nationwide. Rankins, for one, suggested that P2P services can generate revenue by folding gifting, such as gift cards, into the functionality.

Nevertheless, some maintain that consumers will pay for P2P. Steve Shaw, vice president of strategic marketing digital channels and electronic payments at Fiserv, argued as such, saying some customers will pay for P2P services, but it depends on the use case. In instances where customers are used to paying higher fees to use Western Union’s services, they may instead opt to pay their FI $0.50 to a $1.00 to transfer money, if they see value in the service provided. Additionally, Shaw told attendees that banks could deploy a Fedex-like approach to payments. Ground might be free, but next-day delivery comes with a fee attached, he suggested.

“I think customers will pay for it, if they find value in it,” added John Weinkowitz, head of direct channels at Firstrust Bank. And because paper checks are cumbersome, Weinkowitz said he “wouldn’t be too quick to say [P2P] are not payable services.” 

Ultimately, if consumers don’t pay, banks will stop offering the services.

“You have to pay for services or companies won’t provide them,” said Keller. “If there’s no money in it, PayPal will take it over.”