Odds are, you’ve at least heard of Venmo, but there’s also a good chance you haven’t used the mobile app or anything else like it to send money to family or friends.
But that’s likely to change over the next few years, as banks, payment companies and even the likes of Google and Facebook push so-called peer-to-peer, or p2p, payment systems — a medium of exchange with revolutionary potential.
The apps and online tools could someday overtake cash and checks as the primary way individuals pay each other, and they even could make inroads at the cash register and with businesses that send refunds and other payments to their customers.
These systems will get a boost later this year when a coalition of the nation’s biggest banks roll out Zelle, a mobile and online money-transfer network that will let any customer of nearly every U.S. bank send money to customers of any other bank using only a phone number or email address.
Analysts say the bank-led system — and the related marketing push — should bring online and mobile peer-to-peer payments to a larger audience. Even competitors, notably the popular money transfer app Venmo, say the Zelle rollout could boost their fortunes by making digital-money transfers more mainstream.
“We don’t see it as a winner-take-all scenario,” said Josh Criscoe, a spokesman for Venmo owner PayPal. “We welcome any effort to move folks to more digital payments and move toward the smartphone as the central point of financial life. The common enemy is cash.”
Online and mobile peer-to-peer payment systems have grown rapidly over the last few years, and analysts expect that to continue. In a report published in March, finance industry research firm Aite Group estimated that Americans made about $147 billion in digital p2p transfers last year, up from $100 billion the year before.
Those are big numbers, to be sure, but last year’s sum still only accounted for about 12 percent of the more than $1.2 trillion that Americans paid each other that year, mostly in cash.
That means there’s still plenty of growth ahead, said Talie Baker, an analyst at Aite Group. In her report, she estimated that the volume of digital p2p payments will more than double by 2020, topping $316 billion.
“Not that many consumers are using mobile payments yet,” Baker said, noting that though these payments are more common among young consumers in big coastal cities, they’re not so ubiquitous elsewhere. “I’m a Gen-X person and I live in Denver — I hadn’t heard of Venmo until 2015.”
There are plenty of players in the p2p game.
Square Inc., the payments company behind the tiny white credit card reader that plugs into a smartphone, has a p2p service of its own, Square Cash, which launched in 2013.
Following the geometric theme, there’s also Circle, a Boston firm that started the same year and specializes in cross-border p2p transfers in dollars, euros and British pounds.
Facebook and Google, too, allow users to send money to friends. Google has Google Wallet, which started as a mobile wallet app but became a p2p payment tool in 2015, and Facebook users have been able to send money through Facebook Messenger since 2015.
Square, Google and Facebook don’t report the volume of payments made through their p2p systems, but Facebook in regulatory filings has said that only “a relatively small percentage” of its users have used the payments feature.
Venmo is arguably the biggest name in peer-to-peer transfers. It even has the coveted status, like Google, Uber and a few others, of becoming a verb — as in “Venmo me.”
Founded in 2009, the company was acquired in 2012 by payment services provider Braintree, which was acquired the following year by online payments giant PayPal — which offers p2p payments under its own name too.
But the biggest players in the market are still the banks.
Last year, Venmo users transferred $17.6 billion. That’s more than double the volume from 2015, but it’s also much less than the $28 billion transferred in 2016 through QuickPay, JPMorgan Chase’s peer-to-peer payment system. And that’s just one bank.
Chase, Bank of America, Wells Fargo and other major financial institutions have had their own p2p transfer programs for years, though it can sometimes be clunky for bank customers to send money to people with accounts at other financial institutions.
Aite Group estimates that of all the digital p2p transfers Americans made last year, non-bank systems such as Venmo accounted for only about 17 percent of that. Banks accounted for the rest, though much of that likely was made through banks’ websites, not mobile apps, and much of it was money transferred between customers of the same bank.
In part, that’s a statement about who uses different systems, and what they are used for. Venmo and other non-bank systems are accessed about twice as often as bank systems, but for much smaller transactions, according to Aite Group. The average money transfer on a non-bank system is $135; the average for bank systems is $1,359, according to the report.
That might suggest that parents sending money to a student for college tuition, for instance, might be more likely to transfer money through a bank, while students are much more likely to split a restaurant bill or bar tab using Venmo.
The payment app is also a social network in its own right, with users sending messages to friends when they transfer money — a feature Venmo pioneered. Those messages shed light on what’s behind each transaction and indicate that Venmo is most often used among friends over food and drink, said Criscoe, the Venmo spokesman.
“Pizza is the No. 1 emoji on Venmo; beer is a close follow,” he said, adding that other messages suggest users are splitting bigger-ticket items too, such as rent.
Though Venmo and other non-bank payment systems are still a small part of the p2p market, banks want to make sure they keep their place in the financial order and keep their customers.
This summer, Early Warning, a company owned by some of the nation’s largest banks, will release Zelle, a payment system built to compete with Venmo and others — and, banks hope, to make digital p2p payments more mainstream.
Along with the release, Early Warning will kick off a marketing campaign showing not only how Zelle works but how it might be used. Lou Anne Alexander, president of Early Warning’s payments group, said the focus will be on appealing to older consumers who might not have tried p2p payments.
“We’re trying to take (p2p) from millennials to the mainstream—customers might use a product like this,” Alexander said. “That might be managing contributions to the high school marching band or it might be renting a home on the beach with friends or family.”
Zelle traces it roots back to 2011, when Bank of America, Wells Fargo and JPMorgan Chase set out to build a system — initially called ClearXchange — that would allow their customers to send money to each other using only phone numbers and email addresses. Before, customers could only transfer money to friends and family by entering account and routing numbers — information customers often didn’t know and might be concerned about sharing.
Zelle is essentially a souped-up, rebranded version of ClearXchange. It will be available to anyone with a U.S. bank account, and it aims to overcome some of the limitations and confusion around the ClearXchange system.
Sarah Grotta of research and consulting firm Mercator Advisory Group said banks didn’t do a great job of explaining that ClearXchange would allow customers to send money to customers of other banks.
Part of the problem, she said, was that every bank has its own name for its ClearXchange-powered p2p system, including Chase QuickPay, Wells Fargo SurePay and Capital One P2P Payments.
“It wasn’t well-marketed that someone at Chase could pay someone at Bank of America because they had different marketing and different branding,” Grotta said. “You could pay someone at any financial institution, but people never realized that.”
To address that problem, banks over the next few months will begin rebranding their p2p transfer systems to include Zelle in the name. Chase, for instance, will start calling its system “QuickPay with Zelle.” Customers of more than a dozen big banks — representing most U.S. account holders — will be able to transfer money through the banks’ mobile apps. For other banks and credit unions, customers will be able to do so through the Zelle mobile app, set to be released this summer.
Once the system is running and the marketing campaign kicks off, Grotta expects Zelle to be a hit.
“This is going to be a much better user experience than the banks had before,” she said. “I think it will start to catch on once people see that they can in fact send money to another person at another financial institution.”
For banks, the stakes are high. Though Venmo and other money transfer apps are tiny by comparison, Baker said banks are rightfully worried about what might happen if their customers interact more often with outside payment companies.
If a customer opens an outside p2p payment app once a day and their mobile banking app just once a week, the payment company has more opportunities to sell that customer on products and services the bank would otherwise provide, she said.
“Once Venmo builds up a strong enough customer base, then it can say, ‘Hey, come get a credit card from us,’ or ‘Come get a home loan from us,’” Baker said. “That’s the approach some providers are hoping to take.”
Banks see other advantages too. Mary Harman, an executive in Bank of America’s consumer payments division, said it’s expensive for banks to process checks and move cash around, so an increase in digital p2p payments could cut costs.
She said banks also want to give customers the services and options they want. Some customers, she said, might prefer using Venmo; others might prefer the implied security of managing financial transactions exclusively through their bank.
“We serve 65-million households in the U.S., and not everyone will act the same way,” Harman said. We have to recognize that and have different products available in different places.”