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Digital P2P Payments in the U.S. … and the Beat Goes On

It’s been just a few days since I published my latest report on the digital person-to-person payments landscape in the U.S., and recent announcements in the industry have already made some of the information in the report a little …. well, passé, I guess. This signals the intense competition, continuous innovation, and perceived importance of digital P2P payments as part of the core business model for both financial institutions and alternative providers.

Here’s what’s happening:

  • On Monday June 5, 2017, Apple announced that once launched, iOS 11 will support P2P payments capabilities via iMessage. Users will be able to send and request money from contacts with one tap. Once a payment is sent, the cash balance will be stored on Apple Pay Cash (an Apple-branded digital debit card) in the Wallet app and can also be transferred to a user’s bank account. Apple Pay Cash can be used to make payments with merchants that support swipe and tap payments.
    • Pros: Apple is a trusted brand for payments with a large consumer base, so it will likely see strong adoption initially.
    • Cons: The service can only be used between users of Apple devices, and as interoperability becomes the de facto standard among P2P providers, Apple may not be able to maintain long-term market share.
  • In the first quarter of 2017, Tilt was sold to Airbnb in a fire sale. At the end of 2015, Tilt was valued at US$375 billion, and less than a year later, the company was sold for an estimated 15% of the 2015 valuation. The company fell victim to the characteristic dot-com-era pattern, in which investors see the promise of a viral app but founders fail to build a truly profitable and sustainable business. Despite its viral coefficient greater than 1 and steady return rate of users, investors finally realized they had overvalued Tilt’s user growth and began to mandate that Tilt deliver a viable path for fiscal sustainability. Unfortunately, Tilt was unable to rise to the challenge and instead of going out of business was sold to Airbnb. The purchase is viewed by many as an aqui-hire, in which Airbnb gains in-house payments expertise by retaining key Tilt employees along with being able to leverage Tilt’s social payments technology for customer acquisition. Airbnb will keep Tilt operational for now, but in the long run, the market will see how Airbnb leverages Tilt to follow the American Express business model of combining payments and travel.
  • To echo Early Warning’s press release on June 12, 2017, Zelle is now live! Over the next 12 months, Zelle will become available in the mobile banking apps of 30 (and growing) participating financial institutions as well as being available to every U.S. consumer via its stand-alone app. In an informal poll Aite Group conducted as part of my April 2017 webinar on digital P2P payments, we found that in Q1 2017, nearly 30% of respondents were either unable to make digital P2P payments because their social networks were unfamiliar with the technology or because everyone in their social networks uses different digital P2P services. Our poll also revealed that nearly 30% of respondents who made digital P2P payments in the same period had used multiple P2P applications for their transactions. The launch of Zelle is Early Warning’s solution to the fragmentation in the digital P2P payments market. An interoperable, real-time, consistent payments experience is key to making digital P2P payments mainstream, and it’s going to be exciting to see how the market reacts to Zelle across all generations.

As the beat goes on in the digital P2P payments market, it’s likely this blog post will be old news about five minutes after I post it. That’s why my research agenda for the rest of the year includes a couple more reports on the P2P payments space. Be on the lookout for a report that summarizes our latest consumer findings related to P2P payments and a report that discusses the European P2P payments landscape. And most importantly, if you haven’t yet done so, make a digital P2P payment to someone you know, so you can experience how awesome the technology is for yourself!