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What are Peer-to-Peer Payments?

Jordan Bishop • December 7, 2023

You may not be familiar with the term peer-to-peer (P2P) payments, but chances are you regularly use a P2P service. After going out to dinner with friends, you might pay your part of the bill by sending your friends money through an app instead of cash. Or you might send your roommate your half of the rent on your phone instead of writing a check.

P2P stands for peer-to-peer (it’s also sometimes referred to as people-to-people). A P2P service allows users to interact with one another without a third party. These services facilitate transactions where people can directly send and receive money with one another using their mobile devices. P2P can also refer to things like lending and computing software.

The ease of use and convenience have made P2P payment services very popular with consumers of all ages. Around 80% of U.S. consumers have used a P2P payment service, with 50% of new users aged 45 years or older.¹

Find out how P2P payment services work, your options, and how best to utilize them. Let’s dive into the world of P2P transactions and how they can work for you.

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How P2P payments work

P2P payments facilitate digital money transfers from one user’s bank account to another. These transfers happen via an online portal or mobile app. To sign up for a P2P payment service, you choose a platform, download the app, and enter your account, debit card, or credit card details.

When you are logged in, you can usually search for friends by their contact information (email or phone number) or their username if you know it. Once you’re ready to send or receive money, you simply choose who you’re sending money to, the amount you’re sending, and the reason for payment (this is sometimes optional), then submit the payment.

Depending on your platform, some P2P apps may allow you to send payments by linking to a savings account, while others may only allow a checking account.

Are P2P payments safe to use?

The short answer is yes: P2P payments have evolved into secure and reliable payment methods millions of people use daily.

P2P payment systems prioritize the security of both senders and recipients. They use encryption technology and authentication measures to safeguard your transactions. Many P2P platforms offer fraud protection and dispute resolution services to enhance the security of your payments.

Anyone who transfers funds using a P2P payments platform is asked to provide personal information (like their name and email address) and link a bank account, which helps maintain the safety of the platform and its users. This data is generally encrypted and stored on secure servers for your protection.

These and other security features ensure that your financial information remains confidential and inaccessible to unauthorized parties. This makes P2P payments a trusted choice for transferring funds and accessing various financial services.

P2P payment options to consider

As the world of P2P transactions and online payments continues to evolve, quite a few P2P payment services have emerged to meet the needs of a diverse range of users. These platforms come in various forms, some offered by traditional financial institutions like credit unions and others developed by fintech brands.

Let’s look at some of the more common P2P services on the market. Each offers its own unique features and advantages for digital wallet enthusiasts seeking fast, secure money transfers:

PayPal

PayPal is a widely recognized P2P payment platform that’s been a staple in the online payment industry for years. PayPal allows users to send and receive money quickly and securely, making it a popular choice for e-commerce and other online transactions.

Venmo

Venmo, a subsidiary of PayPal, specializes in making P2P transactions simple and social. Venmo users can connect with friends and send and receive funds within Venmo’s user-friendly interface.

Zelle

Zelle is known for its integration with many major banks and credit unions, which allows users to send money directly from their bank accounts. Zelle prioritizes speed and convenience and has strong integrations with foreign financial institutions.

Cash App

Cash App, developed by Square, offers a range of financial services, including P2P payments. Cash App users appreciate features like the Cash Card, which allows users to spend the money in their account fairly easily.

Google Pay

Google Pay combines P2P payments with various other digital wallet capabilities and seamless integration with Google services, making it a convenient option for Android users.

Apple Pay

Designed for Apple users, Apple Pay is a secure P2P payment provider that also supports in-store and online transactions.

Pay Anyone on Chime

Chime members can use Pay Anyone, which offers fee-free transfers and a secure method for instant money transfers. Whether you’re sending money to a friend, splitting a bill, or making rent payments, Pay Anyone is quick and convenient.

Pay Anyone offers the following advantages:

  • No fees, including no instant cash out fees ✅
  • Send money to anyone ✅
  • Instant transfers ✅
  • Supports other mobile payment platforms ✅
Ready to send instant* and fee-free transfers to anyone? Get started with Pay Anyone today. Payments are safe and secure.

P2P pros and cons

P2P payment systems and apps have transformed the way we send money to family, friends, and businesses. However, like any financial service, they come with their own set of advantages and disadvantages.

Pros

  1. Speed and convenience: One of the most significant advantages of P2P payment systems is their speed and convenience. Instead of traditional methods like writing a check or sending a wire transfer, P2P apps allow you to send money within minutes, making them a helpful option for time-sensitive transactions.
  2. Low or no fees: Many P2P payment apps offer low or no fees for transferring money, making them cost-effective compared to bank transfers or money orders.
  3. Electronic invoicing: By adding a QR code or payment link to your invoice, your clients can pay your electronic invoices directly to the P2P platform of your choice.

Cons

  1. Potential for scammers: P2P payment systems have become targets for scammers due to how quickly transactions take place. As a result, you’ll want to use caution when making transactions, as scammers are actively looking for ways to deceive others into sending money to fraudulent accounts. Find out how to avoid P2P fraud and scams.
  2. Limited recourse for errors: When disputes come up, resolving issues with P2P payment systems can be challenging. Unlike traditional bank transfers, where banks can intervene and investigate discrepancies, P2P transactions may offer fewer avenues for recourse when errors happen.
  3. Processing delays: While P2P payments are generally faster than traditional methods of sending money, there can still be processing delays, particularly when transferring funds to or from linked bank accounts. Some users may find it inconvenient to wait for funds to become available, especially if they need to access them immediately.

Tips for choosing a P2P service

When comparing P2P payment options, think about which service provides the most cost-effective features. You’ll also want to consider how quickly transfers are processed, who you can and can’t send money to, and compatibility with other applications.

Here’s a bit more detail on some of the key things to consider when choosing a P2P payment service:

  • Accessibility and compatibility: Look for a P2P service that integrates with your mobile banking or digital wallet, and make sure it’s compatible with the account you plan to send money to.
  • Cost-effective features: Compare the fees associated with different P2P accounts. Some services offer fee-free transactions, while others charge fees for services like instant withdrawals. Consider your budget and how frequently you send and receive money to find the most cost-effective solution.
  • Transfer speed: Instant transfers are a lifesaver for urgent transactions, but some P2P transfers might delay for a few days. If you need to move money quickly, choose a service that makes that possible.
  • Recipient options: Some platforms restrict international transfers and specific account types, such as sending to a business or personal bank account. Check that the P2P service you choose allows you to send to the people you need to.
  • Security and trustworthiness: Security should always be a top priority when selecting a P2P payment service. Before choosing a specific platform, research its security measures and user reviews to ensure your financial information and transactions are protected.

Embrace the convenience of P2P payments

Digital transactional services like P2P payments are becoming more popular every year. Now may be a good time to start if you haven’t already started using these types of services. Just make sure you are fully aware of how these services work so you can be savvy with your money.

Venmo is a popular choice, but check out our list of Venmo alternatives, too.

FAQs

Are P2P payments a safe way to send and transfer money?

In large part, P2P payments are safe to use. P2P services often have security measures to protect you and your money, such as encryption, multi-factor authentication, and fraud monitoring. But there is always a risk of sending money to bad actors, so take precautions and always double-check your transaction details before sending money.

How long does it take for the money to transfer?

The amount of time it takes for money to transfer from one account to another will vary depending on which P2P payment service you use. The time it takes can range from a few seconds to several business days. Some P2P service providers may charge a fee if you want a transfer to go through instantly.

Can you send money on social media apps?

Yes, these are known as social media money transfers. For example, Facebook has Facebook Pay, a feature that lets Facebook friends send payments to each other. Social media money transfers mostly work the same way a P2P app would.

How much do P2P payments cost?

Some P2P payment services charge nothing to use or download their products, while others might charge a flat fee. When it comes to special services like instant and out-of-network transfers, some services might charge a fee. Research the P2P payment provider to see what, if any, fees they charge for transactions.

Can P2P payments fully replace other payment methods?

P2P payments, while convenient and popular for small, personal transactions, are not a replacement for other payment methods due to limitations in transaction sizes and the necessity of traditional bank accounts for funding.

How are P2P companies regulated?

P2P companies operate differently from banks and are not bound by the same regulations. This difference allows them to provide services with lower fees and additional features, but it also means there are fewer safeguards for consumers against potential fraud.

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  • 50,000+ fee-free ATMs~
  • Chime Visa® Debit Card
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Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

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Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

* Funds are automatically debited from your Checking Account and typically deposited into the recipient's Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

1 Information from Finances Online "64 Key Online Payments Statistics: 2021 Market Share & Data Analysis" as of October 19, 2022: https://financesonline.com/online-payments-statistics/

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