Visa and MasterCard dive head first into P2P payments (V, MA)

BII

This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.

A new partnership with Visa and Mastercard will help grow the reach of the clearXchange network, which allows customers at its member banks to make no-fee peer-to-peer (P2P) transfers.

Users with any US-issued debit card will be able to use Visa Direct and Mastercard Send to transfer funds in real time from holders of accounts at clearXchange’s member banks, which include Bank of America, JPMorgan Chase, US Bank, and Wells Fargo. This helps drive card networks deeper into the digital payment space while giving clearXchange an easy opportunity to scale and present itself as a strong option to users seeking a P2P service.

For major card networks, this is another big push into digital payments. Visa has been working to market Visa Developer, its API platform that includes Visa Direct code. And Mastercard recently rebranded and expanded Masterpass, its mobile payment and buy button, to support a wider variety of in-store and in-app use cases. The added support for clearXchange could help both networks grow their brands and business beyond in-store card payments while entering the fast-growing digital P2P market.

The Visa and Mastercard partnerships give clearXchange another advantage as it tries to grab digital P2P market share. The bank-based clearXchange has an opportunity to succeed because no one firm holds a dominant share of the market.

• The partnership makes clearXchange more evenly matched with PayPal following PayPal’s new deal with Visa. PayPal recently partnered with Visa to push more users away from account-based ACH transfers and toward debit-based real-time transfers. clearXchange’s new partnerships allow it to easily offer the same feature, therefore putting its services on level footing with PayPal’s P2P offerings — including Venmo, which reportedly holds the largest share of the digital P2P market.
• The partnerships will allow clearXchange to rapidly scale. Because both Visa Direct and Mastercard Send are card-agnostic, the service will be available to nearly 97% of the 200 million US debit accounts, according to the card networks. That could be critical in winning over users, who value convenience and popularity among friends and family, two features that the card networks could provide, when selecting a P2P provider.

These partnerships should open up the world of P2P payments to an entirely new segment of the population, which should in turn spur more payments of this type.

John Heggestuen, managing research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report that explores the market for P2P payments, how they work, and the types of businesses that are offering these services and why. 

Here are some of the key takeaways from the report:

• We estimate that US annual peer-to-peer (P2P) payments — informal payments made from one person to another — reached over $540 billion in 2014. These payments were made by cash, check, digital money transfer, or other means.
• Mobile P2P payments are having a huge impact on this informal economy and diminishing the need for cash and checks. We forecast that mobile P2P payments will grow to $174 billion during the same period. That means that 30% of P2P volume will be paid via mobile, up from 1% last year.
• There are four types of businesses making major moves in mobile P2P payments: social messaging companies, banks, card networks, and other payment companies. Each of these types of companies has its own objectives and strengths in offering mobile P2P payment services which we explore in the report.

In full, the report:

• Forecasts the value of total and mobile P2P payments made in the United States through 2019.
• Explains the networks that P2P payments providers use to move value from one person to another.
• Analyzes why mobile P2P apps are seeing such a rapid uptake among millennials and other demographics.
• Explores the disparate objectives different companies hope to achieve by offering these services.

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of P2P payments.