Consumers And Businesses Increasingly Adopting P2P Payments

Mar 25, 2021

The COVID-19 pandemic has forced many banking customers to convert themselves into “reluctant first-time users” of exclusive digital banking.  A steady rise in the use of peer-to-peer (P2P) payments has been evident long before the pandemic outbreak. It was already flourishing within sectors such as e-commerce, all the way to wealth management.

P2P’s Increased Use By Consumers and Businesses

In March 2019, a report conducted by Zelle, (a bank-owned P2P platform), revealed that more than 50% of new users to the platform were 45 years of age and older. Use of P2P payments are also witnessing a sudden surge due to “food insecurity” and unemployment. The use of these payments is particularly seeing a steady rise between family members. 

The dramatic growth of peer-to-peer (P2P) payment apps like Venmo, Zelle, and Square Cash has made its way into the business arena as well. In a 2019 Small Business Survey carried out by TD Bank, America’s Most Convenient Bank®, it was found that 23% of small businesses were already utilizing P2P for collecting payments. Furthermore, it was estimated that P2P payments to U.S. businesses will top $74 billion by the year 2021. 

The Roadblocks

Although P2P payments seem to be an integral way that consumers are now transacting with businesses, when it comes to business use, adopting this form of payment is not so straightforward.

For one thing, the top P2P payment apps are not configured for or even “officially approved” for business use. P2P payments were originally designed to support payments among individuals who know and trust each other, like friends and family. As a result, these payment apps are simply not equipped to offer the protections enjoyed by credit card holders. 

Since the world of banking is highly regulated, there are different rules that apply for businesses and individuals. These regulations determine how the payments are to be dispersed, protected, and tracked. 

If businesses find that their customers prefer to pay using P2P apps, it’s important to get familiarized with its business payment rules and requirements. Some small businesses use their personal bank accounts for their business payments in order to abide by the requirements set by certain P2P apps, like Zelle. 

Not only are there transaction fees to be fully aware of, but then there is the added dilemma of how you can incorporate these types of payments into your current accounting system. When customers typically pay by credit card or a check, there are tracking mechanisms associated with that payment that can be applied to your accounting system. The P2P payment apps tend to avoid the accounting system entirely. 

Moreover, forget about refunds. Payments can’t be reversed once submitted. 

Bottom Line

Although adopting a P2P app solution would greatly benefit a business, it is important that business owners take the time to familiarize themselves with the constraints of each solution as well as its terms and conditions. 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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