Peer-to-Peer Payments: Who Do We Owe?

Peer-to-peer payments or P2P payments are transactions between two individuals that can be used to repay dinner or pay your share of the rent. The 2019 Statista Global Consumer Survey found that 44% of respondents used a direct money transfer service in the past 12 months to transfer money to friends and acquaintances. In 2018, more than $172 billion of funds were transferred between people. The P2P industry has been rapidly growing, particularly driven by an increased use of technology and desire for convenience, but when did this P2P payment industry boom and where did it all start?

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PAYPAL

PayPal was the first innovator in the peer to peer payment space. It was originally established in December 1999 as Confinity, and after the merger with X.com, PayPal was formed in March 2000. Due to its seamless payment process, PayPal experienced rapid growth and became the premier choice for Internet auction shoppers. Soon after its IPO in 2002, it was acquired by eBay that October and became the main point of transaction for all buyers and sellers. In 2015, PayPal was spun off by eBay as an independent and publicly traded company. In 2019, PayPal serves both individuals and business and has 286 million active account holders. It’s no doubt they dominate the P2P and B2P market.

VENMO

Venmo is arguably the most popular P2P payment application among the younger generation. The startup, now company, was founded by two University of Pennsylvania roommates, Andrew Kortina and Iqram Magdon-Ismail. The idea sparked when Iqram was paying back Andrew for a weekend in New York City via check. They both realized that writing checks were very outdated given that so many processes were being done on phones. PayPal was an option, but none of their friends were using it. Thus, they looked to fill this void. In 2009, they launched Venmo as a social peer-to-peer payment platform. Users can see who is paying whom and send emojis and creative messages with their payment. In 2012, the company was acquired by Braintree and in 2013, PayPal acquired Braintree. In 2019, PayPal reported that Venmo had 40 million users at the end of the first quarter and is expecting significant growth in the next year.

ZELLE

Zelle is one of the few peer-to-peer payment services that is integrated with and approved by many major banks, including Bank of America, Chase, Citi, and Wells Fargo. People who have accounts with those banks can start a Zelle account right away. In 2011, the company was first launched by many of the aforementioned banks as clearXchange to rival PayPal. In 2016, clearXchange was sold to Early Warning Services, a company also owned by many large-household name banks. In 2017, Early Warning Services released Zelle, a new and improved clearXchange. Zelle transfers money directly between bank accounts, rather than within the app. Bank of America reported over 163 million person to person transactions in less than nine months. Zelle is expecting increased growth within the next year.

MEMENTO

Memento is a peer-to-peer payment service focused on money gifting for special events such as weddings, graduations, bar/bat mitzvahs and more. Memento was founded in 2019 by Chelsie Patterson who, like the founders of Venmo, thought writing checks for events like weddings was outdated and inconvenient; however, she felt that the existing P2P services were too casual for such monumental events. She and her boyfriend, Jeff Borders, developed Memento to really celebrate and commemorate these events by personalizing money gifting through shared videos, intimate feeds, and opportunities for tangible gifts. In 2019, they were accepted into The University of Chicago Polsky Accelerator Program and in September 2019, they officially launched their product to market. They and the rest of us at Memento are excited for the future.

Written By: Caitlyn Tien, Summer 2019 Intern

Sources:

An Inside Look into Application Development with Jeff Borders, CTO

Cultural Trends: Not All Gifts Are Considered Equal