Small Businesses Including P2P As Payment Method

Aug 09, 2022

There are two qualities that consumers want for their payments: faster and more convenience. Peer-to-Peer (P2P) mobile payments apps are making this happen as people use them to send money to both friends and family.

Can businesses take advantage of this popular way to accept a payment? The answer is a definitive yes.

The Challenges Small Businesses Are Facing

A study conducted by Intuit Inc., “The State of Small Business Cashflow”, revealed that 61% of small businesses worldwide struggled with their cash flow. Almost a third (32%) were unable to pay their vendors, pay their employees, pay back loans, or even themselves. This was all traced back to issues with their cash flow. 

Even with tax cuts, stimulus policies, and “regulatory rollbacks” to assist small businesses, 42% of small business owners said that they had experienced cash flow issues in the previous year. For a significant amount of small business owners, 69%, their cash flow issues have kept them up at night due to these concerns.

For many businesses, it’s not so much that they don’t have money, the real issue is that they do not have access to this money to take care of “real-time expenses.”

The biggest perpetrators of causing a bottleneck to the cash flow? Cash and check payments. Both of them require an excessive amount of time to collect and deposit. Furthermore, checks and cash are less secure and more difficult to track and ultimately reconcile in a merchant’s account system. 

According to a collaborative report by PYMTS and FIS, “The New User Experience: Tracking The Consumerization of B2B Payments”, “invoice reconciliation complexity” was the main cause of problems in businesses paying their suppliers. 

As previously mentioned, more consumers are moving towards “digital-first and mobile-first payment options.”  The use of cash was the second most utilized form of payment at POS systems in 2019. In a 2021 study, it dropped to fourth place globally. 

Although businesses want to offer digital payments, many struggles with payment processing fees. They simply don’t have the same capabilities and resources that larger businesses enjoy. 

The Growing Adoption Of P2P Payments By Businesses

While consumers have fueled the massive growth of peer-to-peer (P2P) payment apps, this popularity has also caught the eye of forward-thinking businesses. A small business survey conducted by TD Bank offered its insights and demonstrated that 23% of small businesses were already using P2P to collect their payments. Crone Consulting reported that P2P payments to U.S. businesses will hit $74 billion by 2021. 

The Benefits Of Accepting P2P Payments

So should more businesses look towards accepting P2P payments for their small business? Take a look at some of the advantages that P2P provides:

  • More Cost-Effective

The great advantage of taking P2P payments is that you can take payments directly from your smartphone. That means you will avoid any exorbitant processing fees typical of accepting credit card payments. However, before you choose your P2P provider, ensure you are aware of any “provider fees.”

  • Customer Convenience

Another key advantage is that accepting P2P payments is much more convenient for your customers to make a purchase. Offering a variety of payment methods for your business always makes sense. 

Customers are more likely to shop with you if you provide their preferred payment method. Not only can it convert first-time customers to repeat customers, but it can also expand your current customer base.  

  • Draw In The Younger Generations

By far the biggest demographic of those using digital payments are the Millennials and Generation Z. A study conducted by Billtrust unveiled that 75% of this sector is currently using digital payments. 

The Downsides Of Accepting P2P Payments

Although the statistics reveal the lucrative potential of accepting P2P payments, the truth is that there are some cons to be aware of:

  • Fees, Fees, And More Fees

One aspect of P2Ps that you will not be able to avoid is the fees. These vary greatly, depending on the provider you choose. 

  • Delays In Receiving Payment

Once a transaction is made, a notification is sent immediately. However, this does not mean that the funds have arrived in your account. It really depends on the service provider you use. Some P2P providers play more of a “middleman” role, adding more delays towards receiving your money. 

  • Mistakes Can Happen

Although payments between businesses can be done erroneously, it is far more likely to happen “person-to-person”. If your customer accidentally sends money to the erroneous e-mail address, your business bottom line, as well as your cash flow, will suffer

P2P Payment Method Still Evolving For Businesses 

Although the possibility of accepting P2P does exist for business, it is still in its infancy. Some changes are being made to move P2P to serve beyond individuals and serve more merchants. 

For now, small business owners should stay informed and be on the lookout for the latest innovations in P2P payment methods for businesses. 

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