P2P Payment Boom is here!

Written By Masayo Kondo

Masayo Kondo

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Do you carry cash? - Most Japanese people would say yes. The Cashless settlement ratio in Japan was only 20% as of 2016, compared to the United States, Europe, and China, where the ratio was 40-60%. Cash settlement in Japan is still the mainstream, and compared to the rest of the world, we are lagging behind. There are various cashless payment methods, such as a debit card, credit card, online banking, and mobile payment, but this time I focus on introducing Peer to Peer payments (P2P) that is rapidly growing among millennials.

First of all, what is P2P payment?-  It is the electronic transfer of money from one person to another. In the United States, P2P payments have become popular due to the rise of Fintech companies, and incorporating P2P payments into the foundation of life has become mainstream. This blog gives you an insight to predict the future of the Japanese Fin-tech market landscape and the consumer’s financial behavior in general.  

Three popular P2P Payment Apps

There are many P2P payment services in the market, but in this article I will focus on three apps; Venmo, Cash App, and Zelle. These applications specialize in P2P services and can only be used in the United States.

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Venmo

Venmo is one of the most popular P2P payment apps owned by PayPal. You can send money with a few taps and swipes to your friends and family. It is a mobile first experience built primarily for use with your smartphone and it has  a social networking component as an unique function. There’s no charge when you send money from your linked bank account, debit card or Venmo balance. Besides the transaction between friends, Venmo can be used to pay for transactions at many businesses including restaurants and cafes as well.

Cash app

Cash App is developed by Square Inc. The application allows users to send and receive money. Individuals and businesses can send and receive payments using credit cards or debit cards with no fees. As a unique feature of the Cash app, there is an investment function in which you can invest in stocks and cryptocurrency within the Cash app.

Zelle

Zelle is one of the fastest growing P2P payment apps which partners with over 100 banks and credit unions. It allows users to transfer funds from one checking account to another in a matter of minutes without a fee. Zelle offers a standalone app that users can download to their smartphones, but it's also integrated within mobile banking apps of major participants' banks, including Bank of America, Chase, Citi and Wells Fargo. It is a revolutionary system that is different from other P2P apps in that you can easily transfer money between bank accounts.

Here is a comparison between these three apps.

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How can you use them?

The best way to understand a service is to actually use it. Here are some specific features and benefits that I noticed while using each app.  


Venmo

  1. SNS function which remembers the moments you share with friends such as splitting the dinner bill, sending a birthday gift, or just saying hello.

  2. Venmo Rewards is a program that rewards customers directly when they shop at a particular partner such as Netflix and Chipotle. Rewards can be used for payments or sent back to bank accounts or debit cards as cash.

  3. Affiliated with Uber and occasionally launches new promotions such as 50% off of next 5 rides when you pay with Venmo.

Cash App

  1. $5 cash back if you invite a new user.

  2. Create “Cash card” and use “Cash boost” to get discounts on select merchants and categories. Cash card is a Visa debit card which connects to your Cash App balance and offers Boosts to help you save money. Famous Boosts include $1 off at coffee shops, 10% cash back at Trader Joe’s and Whole Foods, and 15% off at Chipotle and Shake Shack.

  3. Easy user experience to invest in stocks and bitcoins.

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Zelle 

  1. Minor banks that do not have online banking can now provide online payments through the Zelle app. It brings convenience and advantages to banks that have never had an online banking system. For instance, BB&T Bank users can use Zelle (the standalone app) to send and receive money between bank accounts.

  2. Large banks are more likely to have their own online banking system, and for those who already have an existing system, Zelle will provide the transfer functionality in the standalone bankingApp. (Ex. Citibank: Refer to Figure below)

  3. The security is solid. It locks you out for inactivity after a certain amount of time. It will then ask you to enter your password to log back in.

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Which one should you choose? 

Overall, these apps have their own characteristics, and it is convenient to use them interchangeably depending on the purpose and the remittance partner. However, there are three points that users value when choosing an app.

1. Number of users
# of users directly affect usability of the app simply because the more users, the more often you can use the app with your friends and business partners. 

  • Venmo:      40 million users

  • Cash App:  15 million users

  • Zelle:           31.5 million users

2. App Features
Each app has unique features and has different user experiences. You may choose an app which fits your personal needs and lifestyle.  

  • Venmo: Specializes in money payment with the largest number of users. 

  • Cash App: In addition to money payment, you can invest using the funds in your app account. You can manage a broader range of your financial activities in this integrated platform.

  • Zelle: Instantly transfer money between bank accounts and it is immediately available for withdrawal for the receiver. It is also  safer because the money you send or receive comes from a bank directly to yours.

3. Transaction fee and limit
Last but not least, this is probably the most important point to many users . You should carefully examine the fees and limitations when using each app. After all, these are all money-apps, so money matters!

  • Venmo: 

    • No fee for standard transfers. 3% fee when you use credit cards.

    • Transaction limit:  $2,999.99/week (Basic)

  • Cash App

    • No fee for transfers even if you use credit cards.

    • Transaction limit: Send up to $250/week, Receive up to $1000/month

  • Zelle

    • No fee from any bank account

    • Transaction limit: Depends on bank or credit union offers

What’s Next ? 

According to research firm eMarketer, US P2P mobile payments are expected to reach $ 396.5 billion this year, an increase of 27.9% from $ 301 billion in 2019. In addition, by the end of 2020, P2P payments will reach 73.8 million users. As we saw, in this area, Venmo and Zelle, are the two giants holding the majority of the market space. However apps with value-added functions like Cash App are also growing, which may change the landscape of the market. This  trend will affect the Fintech market as a whole including the Japanese market, thus we will keep track of the growing P2P payment players.


ISI Dentsu of America,Inc. not only supports system integration projects but also conducts research on the market trends in the U.S. Our mission is to keep up with the latest technology trends in the United States and contribute to Japanese corporations growth.

Masayo Kondo
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