P2P Can Open the Door to Faster Payments

May  27 
Tim Ruhe  Vice President, Real-Time Payments, Billing and Payments Group, Fiserv 

Offering the service enhances consumer engagement for community banks

The past year has accelerated digital transformation across the financial services market as consumers seek ways to enhance the mobility and speed of their transactions. Often, they're turning to their community banks or credit unions for the anytime, anywhere flexibility they find through third-party person-to-person (P2P) services.

Platforms such as Zelle® help financial institutions satisfy that demand. Beyond meeting consumer expectations, community financial institutions that offer P2P services can deepen engagement with customers and members, develop opportunities to offer additional products and services, and avoid the risk of losing consumers to third-party providers.

Demand for Faster Payment Options Is Growing

Aite Group recently surveyed leaders from 117 community banks and credit unions to understand their strategies for offering faster payment options. The survey found that community financial institutions are losing consumer engagement to nonbanking P2P payment apps. At least half of the respondents said they clear as many as 5,000 each of PayPal and Venmo transactions through customer accounts each month.

Committing to speed, agility, mobility and other digital priorities can help financial institutions attract new customers and satisfy existing ones.

The good news is the technology to provide those services is readily available. Financial institution-based P2P payment options have now reached sufficient saturation to prove their value to consumers. For example, approximately 200,000 email addresses or U.S. mobile numbers were used to enroll in the Zelle Network® per day in March 2021, according to Early Warning Services LLC, which is the owner and operator of the Zelle Network®.

Committing to speed, agility, mobility and other digital priorities can help financial institutions attract new customers and satisfy existing ones.

The Competition Is Real

Why implement a P2P service when customers and members are already using third-party apps? Neglecting the opportunity to implement P2P can introduce disintermediation that negatively affects a financial institution's ability to compete in other ways.

The nonbanking firms that offer those services understand the value of digital engagement and its capacity to capture the attention and loyalty of consumers. Those firms collect valuable data, enabling them to develop, target and sell more services, many of which are available through financial institutions. The more time consumers spend engaging with those third-party providers, the more likely it is people might take advantage of offerings such as debit or credit accounts, business banking and other services.

Still, financial institutions in some communities might not be seeing an urgent upsurge in demand for digital payment options. But consumer demand for digital adoption is accelerating and will eventually reach every community. Adopting P2P services now can help financial institutions get ahead of the curve.

Begin by Evaluating Consumer Priorities

Anticipating customer and member needs can help financial institutions increase consumer engagement and earn loyalty. Those are investment-worthy benefits. True, third-party providers don't require any effort or implementation by financial institutions, but banks and credit unions also don't receive maximum value from those transactions.

Effectively and efficiently rolling out a P2P service starts with evaluating what's most important to customers and members. For example, P2P might be a first step, but some financial institutions discover that real-time, digital interbank transfers and commercial payments are also high on consumers' wish lists.

Consumers are likely to quickly realize the benefits of a financial institution-provided P2P service, which effectively removes the middleman from transactions. The increased engagement can help drive consumer demand for other services, enabling financial institutions to build a solid business case for further digital expansion and increased consumer satisfaction and loyalty.