For many years, my personal hell was splitting the check at a restaurant, especially with a big group of friends. A perfectly nice evening was always capped by a sharp stab of social anxiety, as we spent the last 15 minutes of any dinner figuring out who has cash and who has a card, who had salad and who had steak. But lately, I haven’t traveled to that personal hell quite as often, because of the rise of peer 2 peer payment apps like Venmo, Cash App, and Zelle. P2P payment apps allow their users to send each other money, directly from their bank account with only their smartphone. And while they have taken a lot of the stress out of life’s little monetary exchanges, these type of payments have yet to make their way onto eCommerce checkout pages in a big way. So I wondered, how good is peer 2 peer payment for eCommerce stores?
Let’s begin by saying that almost all eCommerce stores do use a particular peer 2 peer payment app, Paypal. Paypal was the first of the P2P payment systems. It was created in 1998 with eCommerce transactions in mind. It remains very popular among eCommerce merchants because it allows their customers to submit payment quickly and easily, without having to enter credit card information. But when compared to the ease and informality of another Paypal product, Venmo, which often sends money accompanied by a string of emojis, Paypal can sometimes feel like writing a check. So, does it make sense for eCommerce merchants to go beyond Paypal and start accepting these even simpler forms of payment in their checkouts?
We know that the easier it is for your customers to pay you, the higher your conversion rate will be. Research has shown that about 1 in 4 shoppers will abandon their carts due to a long and complicated checkout process. Payment takes up the majority of that process. Sites like Amazon have increased their conversion rate immensely by saving customers payment info and allowing them to pay with the click of a button. But for those of us on hosted eCommerce platforms, saving credit card info isn’t always an option. P2P apps save the banking information of their users. It seems like a perfect happy medium. You can get the ease of stored credit card info to simplify your payment process, without the risk associated with storing those details yourself.
Additionally, the use of peer 2 peer payment apps is growing at an impressive rate. The transactional value of P2P payments grew 55% last year, to just over $120 billion, and that figure is on pace to double by 2021. At the same time, mobile wallets like Apple Pay and Google Wallet, seem to be faltering with a transaction value just shy of 50 billion. This trend is also related to ease of use. Consumers don’t want to bother to transfer money into a mobile wallet when they can connect the bank account they already use to a P2P payments app.
On the flip side of the coin from ease and informality, is the question of trust and reliability. As eCommerce merchants, we work hard to engender trust in our customers. Is it possible that these P2P payments methods are just a little too easy? Research suggests that, for some customers, they may be. Only 36% of Baby Boomers and 17% of Retirees report having favorable impressions of paying through P2P payment apps. Younger consumers report being much more comfortable. Millennials and Gen Xers come in at 66% and 55% favorable impressions, respectively. Name recognition has been shown to make a big difference in trust response. Older consumers report a much higher level of comfortability with Paypal than any other P2P payment method.
Greater name recognition has already started making its way into into the P2P market to address this. The P2P payment app Zelle is backed by a network of over 30 banks, including Bank of America and JP Morgan Chase. Facebook has also built P2P payment capability into Facebook Messenger. The rate of adoption of this technology, compounded by the increased comfortability of younger consumers, means that these payment methods, while on the margins now, are getting more and more accepted every day.
P2P payment apps are encrypted. They have fraud monitoring and will help users resolve unauthorized transactions. But that doesn’t mean they aren’t vulnerable to hackers and scammers. In fact, one of the biggest challenges to using these peer 2 peer payment for eCommerce stores may be right in the name, and that’s peer 2 peer. Users feel comfortable sending money to friends and family with P2P, but there seems to be a reticence to send money to a stranger using P2P. Keeping track of how your money is going in and out is easier when you’re making occasional payments to someone within your circle of trust. For these apps to become something people use for everyday transactions, beyond splitting the check, strides will need to be made both in security and in public perception.
The fact of the matter is that peer 2 peer payment for eCommerce stores just isn’t where it needs to be for widespread adoption yet. Will it be there in 2-5 years? Bet on it. The ease of use, the rapid rate of adoption, and its popularity with younger consumers all make P2P a solid contender to be a big part of the way that eCommerce stores will do business in the coming years. My advice is, be an early adopter. Keep an eye on your eCommerce platform and their partners for integrations and connectors. And if you ever have questions about how to keep your store converting better, and working with bleeding edge technology, feel free to talk to an expert at 1Digital Agency.
- Joe Chilson
- April 16, 2018