P2P Payments Review

Find the Best P2P Payment App

Have you ever gone out to dinner or drinks with friends and when it comes time to split the bill, you're embarrassed to find that you can't pay your share because you don't have cash? Or maybe you've picked up the bill and then had to chase everyone else down later to pay you back?

Credit and debit cards, not to mention electronic payment systems like PayPal, are making the days of cash obsolete. It's easier, and in many ways more secure, than carrying money in your wallet or purse. (If you get mugged, you can always cancel your cards.) However, while this works well with most of your shopping and banking transactions, it makes it harder to repay friends or family.

Person-to-person payments (P2P payments) give you the best of both worlds. You can link them to your bank account or debit card and use them to exchange money with your friends and family. They let you send money to individuals without the hassle and delay of paper checks, whether it's to your buddy you owe for that much needed caffeine boost or your nephew you're helping support through college. Using mobile apps or email, P2P payment systems let you send or receive money with a few taps on your phone screen or a few strokes of the keyboard.

If, however, you want an app that enables you to use your smartphone with your credit or debit cards to make purchases at retail stores and restaurants, you want to consider a mobile wallet. Or if you want to be able to accept payments from people outside your circle of friends and family, you may want to consider mobile credit card processing with a company that offers pay-as-you-go service. You can also check out our other articles on P2P payments.

Mobile person-to-person payments are growing in popularity thanks to the prevalence of smartphones and innovations in financial technology. Established companies like PayPal and Square offer P2P payment capabilities, and companies like Venmo and Facebook's Messenger are paving the way by integrating payments with social media. We looked at ten of the most established and reputable P2P payment services to give you a good overview of your choices.

P2P Payments: Avoid Getting Scammed

Person-to-person payment systems are meant to be personal, which means that you use the apps exclusively to transfer money back and forth with people you know and trust, such as your friends and family members. It isn't meant to be used to conduct business with people you don't know, even if you're just selling your old bike or extra concert tickets. It's important to be aware that most P2P payment apps lack buyer and seller protection. In fact, in their user agreements, many P2P payment services prohibit you from using their systems for commercial transactions of any kind, and you may forfeit your account if you do.

Another factor to consider is that although the P2P transactions appear to happen instantaneously, there's actually a processing delay of several days, and the person sending you money can cancel the transaction or reverse it during that time. This might not mean much most of the time, but if you use a P2P payment app to accept payment from someone who contacted you via Craigslist to buy your bike, for example, he or she could conceivably pay you, take the bike, cancel the transaction before it's cleared and disappear. Because most P2P payment services lack buyer and seller protection, and in most cases you would be violating the user agreement, all you would be able to do is to continue trying to contact the buyer. Your smartest move when dealing with peer-to-peer payments is to only do them with people you trust   or with whom you are willing to deal with, should they renege on a transfer.

P2P Payments: What to Look For

Peer-to-peer payment apps have been around since the early 2000s but didn't establish a foothold until recently. Part of this had to do with ease of use, which has greatly improved, especially with the explosion of smartphones and the sophistication of app technology in recent years. As this field continues to grow, more companies, including most major banks, are getting into the game. As you decide on the best person-to-person payment service for you, consider these factors:

Funding Sources & Fees
Each P2P payment system has its own funding requirements. For example, most require you to connect to your bank account, while others let you input a debit or credit card. Some hold the money in your own app-dedicated account, where you can decide to keep it on hand to pay others through the app or transfer it to your checking account.

Most services offer free transactions if you transfer money from your bank account. However, if you choose to transfer money to a friend using your debit card as your funding source, you may be charged a fee. If you choose to use your credit card as your funding source, you are usually charged around three percent for each transaction. Some services charge you a flat fee for each transaction, regardless of the amount or funding source, which can get expensive if you frequently use the service.

This is how easy it is for you to use and how easy it is for your friends to retrieve their money. Look for P2P payment systems that don't require your friends to be members or that are so popular that your friends are already members or are willing to join. Most of the peer-to-peer payment systems have apps, and some allow you to send money to people who don't have the app via text or e-mail. Some enable you to set up cashtags (such as $YourName) to make it easier for others to send you money.

Some apps limit how much you can transfer at a time or over a given period. For example, Square Cash limits you to $250 a week. You can also expect delays as the payment is processed   usually one to four days.

Finally, some of the apps have a social media component, which allows you to share the transaction. These let you post on social media who you sent money to and whatever notes you made about the payment, but not the amount. People can use this to share their activities, whether gifting someone to wish them a happy birthday or announcing the payment of a debt. You can use this feature to brag or to guilt others, such as when the rest of the party owes one person their shares of the bill.

Security is just as much an issue with P2P payments as any electronic payment system. You want to look for companies that are PCI compliant and SSL secured, meaning they have the same kind of electronic safeguards in place as online banks.

Because the majority of peer-to-peer payments are handled on mobile devices, which can be stolen or accessed, look for apps that have passcode and biometric protection, such as Touch ID. If you're the kind of person who leaves social media up and running and have fallen victim to friends typing in prank messages on your account, you want to ensure that the P2P payment system requires a passcode or a thumbprint to authenticate the transfer before you sign up for a person-to-person payment system on that media.

More and more, we depend on electronics for handling our financial transactions. In fact, some experts say that paper checks may go the way of stone tablets and scrolls by 2025. If you're ready for the convenience of peer-to-peer payment apps, then check out the P2P payment companies we've looked into. Maybe next time you owe someone a few bucks, you can pay them right away with a tap on the screen.