5 ways P2P payments can become a game changer for Community financial institutions

By Pavithra R

Peer-to-peer transactions (person-to-person transactions, P2P transactions, or P2P payments) are electronic money transfers made from one person to another through an intermediary, typically referred to as a P2P payment application. The COVID-19 pandemic has highly contributed to the rampant increase in the use of P2P payments. FIs understand that P2P payments are no longer just a “nice to have” service.

Fiserv, a leading global provider of financial services technology solutions, has outlined 5 ways by which P2P payments can enhance engagement, deepen relationships for community financial institutions.  These are:

1. P2P users are more engaged

For financial institutions, digital engagement is an opportunity to have their brand regularly in front of consumers. Whenever a member or customer engages with an FI’s website or app, it’s a chance to deepen the relationship, build loyalty and offer additional products and services. Digitally engaged customers tend to take more loans and use more revenue-producing products. That consistent pattern of use from a P2P perspective drives engagement.

2. P2P helps level the playing field

Community financial institutions competing in the market with the largest banks and credit unions (CUs) has the advantage of having powerful local connections and loyalty. Offering P2P services further levels the playing field as the service is the same as that offered by the biggest FIs. Community banks and CUs can take advantage of this opportunity. Besides, P2P use can increase significantly when the FI offering the service make a concerted effort to let customers and members know about it.

3. P2P meets real-time expectations of consumers

Having access to money in real-time is at the forefront of consumers’ minds. But not all P2P services are equal. Some require an interim account where it looks like the money is available in real-time, but the consumer still must transfer the money to a bank account to get access to those funds. Offering P2P service directly through a bank or CU erases doubt about real-time access to money. The funds are in the account within minutes. As the expectations for speed continue to ramp up, financial services won’t be excluded from the pressure to deliver on the promise of real-time money movement.

4. A strong P2P strategy minimizes disintermediation

Not just financial institutions but there are many third parties-providers also playing in the field of P2P. They provide a good user experience and get between FIs and their customers and members.  They consider consumer visit to their website or mobile app as an opportunity and tries to sell more services, often services people could be getting from their financial institution.

Community banks and CUs can limit that disintermediation. Offering a P2P solution helps develop broader relationships, meet consumer expectations and let customers and members work with their trusted FI.

5. P2P can reduce expenses

Digital engagement helps drive longer-term loyalty. Keeping a customer or member is far less expensive than getting a new one. Besides, digital payments cost only a fraction of processing a check, and it’s clear that P2P can help a financial institution’s bottom line.

Also, read Wealth Management and Private Banking Systems Report 2020