Google Enters the P2P Fray, and It's a Good Thing
With the entrance of Google (and now, presumably, Square), the universe of social person-to-person (P2P) payments just expanded. By offering the ability to attach money via an email, Google just threw the significant clout of Gmail behind a concept the financial industry has been making progress on for several years: digitizing the social payments to friends, family members and small business providers that have long been dominated by cash or check.
Some of the media coverage around the Google announcement has characterized P2P payments as an "idea that's been around but hasn't really caught on," which I think misses the mark. Shifting from cash and checks to electronic payments requires a significant change in consumer behavior, which cannot be accomplished overnight. It requires consumer education and awareness.
Overall, while Google's foray into P2P payments might look like another disruptive challenge for financial institutions, it's also a momentum shift for consumer awareness of the category as a whole. That's a positive for financial institutions, and will prompt many of them to offer and more heavily market their own P2P services.
It is tempting to view payment services through the lens of a features race – but it is a mistake to get bogged down in bells and whistles at the expense of the user experience. Consumers will choose payment services that make sense to them, that are convenient for them, and that ultimately make their lives better.
It is unlikely that there will be a single winner in the field of person-to-person payments. As more players join the party, we will enter a period of higher awareness, but potentially higher fragmentation. Some consumers will choose to use P2P payment services at their banks, and others may choose alternatives.
Banks and credit unions have several advantages on this front. Fiserv research shows that, if given a choice, consumers prefer to get payment services from a bank or credit union. And, let's face it, managing multiple payment services and connecting them all to your financial institution accounts isn't a great experience. Direct integration to the deposit account is an advantage for financial institutions that belong to a single, strong network brand, such as the 1,900 banks and credit unions that offer Popmoney® from Fiserv.
As P2P payments rise in the national consciousness, it's time for financial institutions to make their move. Consumers are primed to adopt these services, and they will gravitate to the ones that meet their needs, offered by the entities they trust.