Why P2P is not a four letter word for banks - Mobile World Live

Why P2P is not a four letter word for banks

29 MAY 2012

What is it with banks and peer-to-peer payments via mobile phones? At the end of last week leading US financial institution Wells Fargo launched a new P2P service that enables its customers to send money to one another by using their mobile numbers. The service will be expanded over time, says the company, so that Wells Fargo customers will be able to exchange funds with the customers of other banks via their mobile phones.

And that announcement was followed by an article in The Wall Street Journal about the pace of mobile money innovation in Sweden, The article mentioned that Swish, the proposed P2P payments venture between six of the country’s leading banks, is “about to launch” the app for its service. Previously it was said the venture was contemplating an autumn launch (of course this is hardly Sweden’s only mobile payments venture since others such as WyWallet involving the country’s mobile operators and iZettle and its card reader are also gearing up).

Also last week UK bank Barclays said that its existing P2P service would be extended to its corporate customers so that they could accept payments from their customers. This is in addition to the existing Pingit service which enables consumers from any UK bank (not just Barclays) to send and receive payments with one another.  

Clearly then banks are excited about P2P payments, but why? Well they appear relatively easy to set up for one thing. Users need to download an app and then use their existing mobile numbers for identity (no need to exchange bank account details which is reassuring for users of course) as well as a PIN for security.

Barclays can set this up straightforwardly for its existing bank account holders. For non-Barclays customers, it is a little more interesting. The bank is clearly unable to route payments to non-Barclays bank accounts. Instead the bank will give such customers electronic wallets to hold their funds (from which presumably they will need to cash out payments and then physically pay them into their own bank accounts).

Nevertheless for Barclays customers at least the service sounds simple. And, more importantly, since they are not revealing their account details, the banks must be hoping customers will feel relaxed about using the service.

What’s really interesting is that such P2P services between mobile phones have been offered in the developing world for several years. They have proved popular in a number of countries, most notably of course Kenya where Safaricom’s M-Pesa is famous for its take-up among the country’s population.

However in the developing world such services are not aimed at bank customers. In fact they are targeted at those users who lack bank accounts but need a service that performs some of the same functions. Also  P2P services in the developing world are generally used to transfer remittance payments between an individual and their friends and families in another location. There is no indication that this is the target market for the US and European banks launching such services. However they might still want to learn some lessons from their forerunners in the developing world.

After the success of M-Pesa, it was widely thought similar services around the world would grow in its wake. In the end, some did but others didn’t. It appears very localised factors account for the success of mobile money services that are not easily reproduced between countries. One factor that does seem consistent is how useful a dominant market share is to deploying a new mobile money service (Safaricom has a market share of about 60 percent in Kenya’s mobile market). I wonder how many banks in the US and Europe can claim something similar? Like most love affairs, it might be the banks’ passion for P2P payments will need to be backed up by some hard work. 

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.


Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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