Why P2P payments are gaining popularity in Latin America?
In the past, P2P payment involved cash, whereas, with technological advancements, P2P has become more electronic. P2P involves anything from giving cash to someone or to sending money to a seller, no matter where they are.
This payment method has become even more popular from the Covid-19 pandemic (because it’s contactless and safer than using money or credit cards).
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What are P2P Payments?
P2P stands for Peer-to-Peer or Person-to-Person transaction. Any transaction that takes place between two people is simply a P2P transaction. It does not involve a network of people, instead, you receive the payment directly from another person.
Peer-to-Peer Payments allow users to pay instantly at registered businesses and to conduct P2P transactions through digital wallets, with limits to the amount that can be stored and transferred.
What are Cross-border P2P Payments?
The trend of shopping from international websites and drop shipping has gained popularity in the past years and growing profusely. But how is it possible to make payments to other countries?
The answer is simple – P2P payments. P2P transactions have made lives easier by allowing cross-border payments. In the past, it used to be a task to send money from one country to another. Either a person physically traveling from one part of the world to another had to carry cash or you had to pay a hefty amount as transfer fees. Transfer fee is not eliminated from the whole peer-to-peer transaction system, but it has been reduced to nearly nothing.
The transfer of money from one country or another is called cross-border P2P payments. The presence of P2P money transfer platforms has made it immensely easy to make international transactions.
According to World Bank, international remittances reached $716 billion in 2019 and are expected to grow in the coming years. However, it is also acknowledged that people in numerous countries globally have to go through emotional and physical strain to make cross-border payments. The access of people in all countries to P2P platforms will make their lives easier in ways they haven’t thought about.
P2P transfer platforms not only save you from the trouble of waiting for days to receive the payment but also cost less. A report by World Bank shows that international remittances cost 6.51% on average, while P2P transactions cost less. With the adaptation of new technology, individuals and companies can cut on their cost of bank transfers and save a handsome amount in the long run.
How Peer to Peer Payments Work?
P2P payments are quite convenient to make and do not cost you a lot of money or your mental peace. You do not have to think about hefty payments, going through tiring paperwork, or waiting for days and weeks for your payment transfer. If you have not used a Peer to Peer transaction previously, you might be surprised to know that some platforms take only a few seconds to complete the transaction.
Setting up an account with a P2P platform is easy and you can conveniently send money through it. Let’s have a look at how to send money through a P2P transfer service provider (from a consumer perspective).
- Download the application
The first and foremost step is to choose the service provider you would like to use and download their application. Downloading the application makes it easy to operate and process, yet it is not necessary. You can also visit their website and make transfers by logging into your account.
- Create an account
The second step is to create an account on the platform of your choice. When you visit the website, you will find a “Join” or “Sign up” CTA on the homepage. Click on it to create an account and become a part of the platform to make payments. Creating an account does not ask for at-length details, but only your card and ID verification to protect you from frauds and scams.
- Make transfers
Lastly, once you have set up your account, you are eligible to make transfers. Some P2P payment websites allow only sending to a person having the same account, but others allow inter-service and transfer to banks. You can transfer money to any platform instantly with Peer to Peer Payments. Log into your account, select the transfer type, add details, and send the amount.
Whether you have to send money to friends, pay for a purchase made from another country, or receive money for a service you provided, peer to peer payments to the rescue!
Security of P2P Transactions
The security of P2P transactions is not questionable as they offer high security to their users and merchants. All the data is end-to-end encrypted and saves the users from any potential harm. Most P2P service providers apply procedures to ensure fraud and scam protection.
While we talk about the security threats in online P2P transactions, they cannot be just left like that. You need to take measures to keep yourself safe from losing money through any wrong activity.
- Don’t make unknown transactions
The simplest way to ensure security while making a P2P transfer is to send money to only reliable sources. Commonly, you come across an instance where you are asked to send a small amount to an unknown account, and you do it without doubting. You might think that a dollar or two is not a lot, they can cost you thousands of dollars. Always verify sources before you send money to anyone.
- Double-check the details
Money transfers to wrong accounts are not only intentional but also unintentional sometimes. You might be sending money to a friend, and misplace a digit resulting in an incorrect transaction. It is to remember that you cannot reverse a transaction mostly when making peer-to-peer payments through P2P service providers. The only way to prevent any such incident is to double-check the details before sending.
- Link to a bank account
While P2P transfer vendors are quicker and more economical, banks ensure better safety. Some P2P service providers offer such safety concerns, but many do not. In this regard, banks are more helpful and can track transactions smartly. Attaching your bank will allow legal grounds to track any transactions.
- Build a strong password
The password is the gateway to your account and you can secure your payment with a strong password. It is with some applications that keep you logged in, many ask you to log in every time you need to make a payment. Create a strong password for your account that you enter at every transaction. Also, you can log out every time to eliminate any chances of fraud.
How Fast are P2P Transactions?
P2P transactions are the present and future of the payment dynamic and companies are putting efforts to make it as efficient as possible. Depending on the service provider you are using, it takes as less as a few seconds to as much as 3 days to make a P2P money transfer. The main purpose of using P2P payment methods is to reduce the transaction time and fees charged by banks. These payments are quick and also cost less than traditional international bank transfers.
Popular P2P Services
The P2P service provider network is vast and there is no monopoly. While some services are well-known than others, each of them has a wide loyal customer base. Depending on their needs and requirements, people and businesses opt for the service providers accordingly.
- 1. PayPal
PayPal is a brand that needs no introduction and the name speaks for itself. With services in over 200 countries, they have a global P2P money transfer network to facilitate a large population. PayPal is believed to be the earliest platform to properly introduce P2P payment and 3rd party online money transfers to the market.
The application is fairly popular as it not only allows P2P money transfer but also online payments to vendors and brands. Users can transfer an amount from one account to another by using a credit card, debit card, bank account, PayPal Credit, and PayPal balance. The limits are up to $60,000, but it might be restricted to $10,000 for a single transaction.
- 2. Venmo
Venmo is another well-known P2P service provider, but did you know that Venmo is owned by PayPal?
If you are wondering that what's the need for having two options from the same origin, let us tell you that they are not the same. Both have different functionalities and operate differently. Venmo is a more common option among teenagers and students as it is a quick option, and more feasible for smaller transactions.
Venmo is the perfect option if you have to split a bill or send an amount to your friend in a moment. Take out your phone, enter transaction details and you're good to go! It is not surprising to know that Venmo crossed 40 million users in 2019. In contrast to bank accounts, Venmo gives you a free debit card without any fees or additional charges.
- 3 - Mercado Pago
Mercado Pago is a digital payment platform available to consumers and businesses exclusively in Latin America. According to MercadoLibre’s financial results for Q3 2019, Mercado Pago processed $19.72 billion worth of transactions between Q1 and Q3 2019.
MercadoPago is accepted by multiple platforms, including MercadoLibre, ecommerces, email, social network and so on. MercadoPago is the payments subsidiary of Nasdaq-quoted MercadoLibre, which owns online marketplaces across Latin America.
- 4 - WhatsApp Pay
While you might not be aware about the newest feature of WhatsApp, WhatsApp Pay is another addition to P2P payments market. With this, WhatsApp users can send money to anyone using a UPI supported app. Purchases will be made through Facebook Shop, a feature that will also be used on Instagram, starting in 2022.
The application will allow customers to purchase products and pay through a chat, likewise, entrepreneurs will have the opportunity to provide customer service.
P2P payments are not entirely new, bit are evolving every day. The world is moving towards a more no-cash approach and people are looking for ways to make payments without cash (choosing to pay using Digital Wallets, for example). After credit and debit cards, P2P transfers have revolutionized the way international payments were made. Now you can just log into your P2P account and make peer-to-peer transactions within seconds.
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