Independent Banker - December 2018 - 64

key. If the customer's happy, we'll retain the customer. "
Let's run through a few of the fintech offerings.
PayPal
The p2p solution with the longest history, PayPal offers
brand recognition and established accounts for users. Yet,
the company appears to be driving more of its p2p efforts
into its Venmo service. It does, however, emphasize growth
in overall payments and accounts, demonstrating the
potential for a bigger banking experience.
Social media solutions
Social media platforms have gotten into the p2p payments
game with limited success. Snapchat closed down
" The important thing
is the ease of use
for the receiver, so
they don't have to do
anything. That's what I
think is the key. If the
customer's happy, we'll
retain the customer. "
-Michael Bilski, North
American Banking Company
Snapcash earlier this
year. Twitter appears
to be more focused on
its original mission
but is allowing other
providers to leverage
its network, including
cryptocurrency
solutions. Facebook
Messenger has seen
some success, mostly
with one-off payments
that move money via
debit card. But don't
count them out: These
social media solutions
have the advantage of meeting users on channels where
they are already engaged.
Cash App
It's a p2p solution, but Cash App (from Square) positions
itself more like a bank account with a cryptocurrency bent.
It is less focused on emphasizing p2p payments, listing
them as one option. Instead, it publicizes users' ability to
direct deposit to the app, save with it and make purchases
with it, including buying cryptocurrency. It has launched a
rewards program, Cash Boost, to encourage people to make
payments from the app or from the corresponding credit
card, Cash Card.
The Pays
They're individualized solutions, but Apple Pay, Samsung
Pay, Google Pay and their ilk function in a similar way,
presenting a digital wallet experience. They offer p2p
64 Q ICBA Independent Banker Q December 2018
and in-store payment functionality, and they allow users
to connect their accounts and cards. Because they use
infrastructure customers already have, often coming
standard on the device or linked automatically to an email
account, the Pays have a built-in potential user base.
Venmo
Venmo is often considered the biggest competition for
bank solutions. It positions itself as a free digital wallet
for U.S.-based transactions. The social sharing aspect of
Venmo has contributed to its popularity, as has its ease
of use. Transactions are free for standard payments via
bank accounts, debit cards or Venmo balances; there's
a 3 percent fee for credit card transactions and a $0.25
charge for instant payments.
What does it cost to offer p2p?
No matter how you slice it, it will cost your community
bank money to launch and maintain a secure, relevant
p2p product. There are varying upstart costs, transaction
fees and promotional expenses that community banks will
need to weigh as they consider various solutions. And,
with a precedent set that standard p2p payments are free,
charging for them won't get a bank very far.
" p2p is not going to make money for the bank in the
traditional sense, but there are other factors to consider, "
Giorgio points out, " customer retention being at the
forefront. Every time a customer seeks a payments solution
from someone other than the bank, that customer is at risk. "
So, perhaps the better question to ask is: What is the cost
of not offering p2p?
" This is a franchise strategy around retaining your
customer relationships, " cautions Ian Macallister, vice
president, head of sales and customer success at Early
Warning Services, the company behind Zelle. " There's no
doubt that the industry is going more digital and more
real-time. If your customers aren't overtly asking for [p2p],
they are absolutely going and finding these types of services
somewhere else. "
p2p is clearly here to stay, and while it raises challenges
for community banks, opportunities loom large. To
embrace the full potential of p2p, community bankers must
anchor their decision-making around their institution's
strategy. By identifying the right solution for their current
and future customer base, p2p will spell success for
community banks.
Colleen Morrison is a writer in Washington, D.C.
Independent Banker - December 2018

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