A peer-to-peer (P2P) payment is a direct payment method to send or receive money via a third-party website or a mobile app. Examples of P2P payment apps include PayPal, Google Pay, Apple Pay, Venmo and Zelle. This payment service is convenient to use, but one downside is that the payments are irreversible.
What are P2P payments used for?
Typically, consumers use P2P payments to make a quick payment, like paying for their part of a restaurant bill, repaying a loan, sending money to a friend or family member, or even to buy a cup of coffee.
How do P2P payments work?
When a customer wants to use a peer-to-peer payment platform they would most likely follow a set of steps like these:
Sign up with a P2P payment service.
Link their personal bank account to the app.
Add the recipient’s details and send the payment via the app.
The recipient receives the funds in their P2P account.
They can then withdraw the funds into their own bank account.
Are P2P payments safe?
P2P payment solutions are generally safe. But fraudsters do target these instant payments with social engineering scams, as they can get the victim’s funds immediately. Financial institutions can add extra layers of security to reduce the risk of this type of digital banking fraud. This could include multi-factor authentication (MFA), requiring the user to prove their identity by more than one means or factor. MFA solutions that include biometric authentication provide stronger security against identity theft and similar fraud risks.
Another solution is for FIs to send their customers a push notification with the payment details to their mobile device that double checks that it is them making the payment, and whether they’re sure they want to action it. When this measure is combined with context-based authentication, the FI has more data about the context of the transaction and customer to better determine the level of risk involved and reduce instant payment or real-time payment fraud.