Peer to Peer payments

Europeans coming to visit or study in United States are usually surprised by dozens of differences between both places; the type of food, the transportation system, etc. However, nowadays Europeans need to add another difference to their list, peer to peer mobile payments which are only available in US.

Peer to peer mobile payments allow users to send and receive money with their friends by simply using their smartphones and without knowing other’s people account. Currently there are several applications available such as Venmo, Square Cash, Google Wallet, PayPal, Dwolla or Clinkle. All of these applications solve the same “job to be done” which is to transfer money in a convenient and easy way. However, each one of them has several features that make them different from the rest.

Analysis of differences between applications

Venmo brings together mobile payment and social network. It allows transferring money between Facebook friends registered on the platform. Moreover, Venmo also allows users to comment on the payments done by their friends, which helps to make the payment process fun and engaging. For those users that don’t want to share their payments it is possible to change the privacy setting to avoid sharing payments details with their contacts.


Square cash is the easiest application from the user perspective since it does not require that the person receiving the money is registered on the platform. The recipient receives an email where he needs to introduce his debit card to finalize the transaction. Contrary to other applications, Square Cash is only available for debit cards; it does not accept either credit cards or bank accounts.


Google Wallet apart from allowing users to transfer money between accounts, Google Wallet let users to attach coupons, gift cards and loyalty cards to their accounts. Moreover, users can also make payments on stores by either tapping their android phones or swiping a Google card.


PayPal is the most established player and a lot of people have already an account. It allows transferring money among national and international PayPal users. Another differentiation factor (except for Google Wallet) is that allows larger amounts of monthly transactions than its competitors (up to 10,000$/transaction, whereas other apps allows only ~3000$/transaction or per week).


Dwolla differs from the other application in that is the only application that verifies the user ID and makes him comply with customers regulations before he can start using the platform. Even though this additional security could be considered as a positive feature; the users perceive it on the opposite way because it requires completing an exhaustive registration and waiting several days for the verification process to be completed.


Clinkle has recently launched it service (September ’14) and it is based on “treats”. The idea behind the platform is that after seven different transactions users will receive a “free treat” (e.g. coffee) that they will be able to share with their friends. It does not have any other main difference in comparison with the other applications.


Market Design – Safety and privacy

Now that we understand the main differences among platforms, the first concern for users in order not use this application is the potential lack of security and privacy on these applications. Fortunately, there is nothing to be worried about, because all the companies have created agreements with the main credit card companies (MasterCard, Visa and American Express) to ensure protection for all the digital transactions, and also to support users with teams against fraud and risks.


The other main concern that could avoid users from adopting this peer to peer technology is the cost of using the service. Different companies have monetized their services on different ways, either by charging a flat fee per transaction, or by charging variable fees when using credit or debit cards. Additionally, another method used by these companies to monetize their services is to invest the money transferred from the bank account to the peer to peer account as any typical bank would do.

The only platform that is currently not monetizing its users is Square Cash that is not charging any fee. All the transaction costs for users for the different platforms are summarized in the following table:


Peer to peer payments are here to stay and is very unlikely that they will disappear any time soon. “Venmo, alone handled $314 million in mobile payments in the first quarter of this year” according to Bloomberg. Moreover, the total global market according to BI Intelligence could “worth well over $1 trillion” by 2018.


Network Effect and Winner take all

By this time I am quite positive that most of the readers are already convinced of the attractiveness of peer to peer payments. However, they might be wondering which application to download from all the existing.

Taking into consideration that there are not big differences between platforms, what really makes the difference is the number of users on each of them (network effect). The platform that will manage to grow faster will take control over the market, because the more users available in the platform the more powerful it will become (winner-take-all). Currently Venmo is winning this race and is fairly common to hear among Millennial users to use Venmo as a verb and ask their friends to “Venmo me”, which reminds to what happened in the past with Facebook or Google (“Facebook me” or “Google it”). However, it is important to keep an eye on the rest of applications, especially on Square Cash that is currently trying to increase its Network effect by not charging its users and by giving 1$ away for new users to start using its services.

Who will be the winner of this race? Would it be Venmo, Square Cash or any of their competitors? The only thing that I can say is that I hope that these companies expand their services quickly to Europe because if there is one thing that I will miss from United States when I will be go back home, it will be peer to peer payments.



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Payment platforms for online and mobile businesses – current and future landscape

While most of the press around mobile payments has focused around B2C solutions such as Square and LevelUp, online payment platforms such as Zuora, Stripe and Braintree are also seeing robust growth, riding the tremendous growth in e-commerce and P2P mobile payments. Example client include Uber, LivingSocial and AirBnB (Braintree), and zendesk (Zuora) and shopify and edmodo (Stripe).  Such platforms have a few key elements that all competitors in this space try to replicate:

  • A robust, reliable and scalable solution
  • Simple developer-friendly APIs
  • Excellent customer service
  • Quick (and in some cases “instant”) set up, including setting up a new merchant account for the client

A robust, reliable and scalable solution

Accepting payments for a new high-growth startup can be a very painful process if attempted on your own, but companies such as Braintree, Stripe and Zuora attempt to simplify the process as much as possible. The goal is to provide a solution that scales as your startup scales – from facilitating 100 transactions a week to a 1000 transactions a minute, all the while providing a reliable, secure and affordable service. Key to this space is supporting both desktop and mobile transactions, as a growing number of e-transactions occur on mobile devices. A number of startups also make international expansion a very early priority, as they attempt to be the first-mover in several markets. Payment providers try to stay one step ahead of the curve by expanding internationally and having a deep understanding of foreign legal and financial frameworks.

Simple developer-friendly APIs

Stripe is perhaps the best poster-child for having developer-friendly payment APIs. Stripe boasts having APIs “that get of your way” and also pioneered the “instant” setup features that were replicated by Braintree – which allow you to get started with a payment solution in under a day. The key here is to have API wrappers for various languages such as Ruby, PHP, Python and many more to make it incredibly easy to get started and integrate with your service.

Excellent customer service

Braintree seems to be leading here, and promises to always have a real person answer a customer service call. Customer service is key in this business, which is based on having reliable, trustworthy service with quick turnarounds if something goes wrong. Parts of the payments process remain tedious and high-touch. For example, setting up a new merchant can often involve multiple long-threads between the payment-solution provider and the client, where the payment-solution provider acts as the middleman (and underwriter) between the client and the bank. The client wants to have the account set up as soon as possible, while the bank wants to make sure that a proper risk assessment as done – companies like Braintree try to simplify the process by having excellent customer service and quick turnaround times.

Instant set-up

Now that Stripe and Braintree have instant setup (by eliminating the waiting period for a new merchant account or underwriting approval), startups can have a quick headstart in facilitating e-commerce transactions.  Through this process, companies such as Braintree also get more insight about the client’s business model and growth plans, and try to ensure that clients’ accounts are never frozen or shut down because of unanticipated activity.

Disruption and future landscape

While there are certainly scale benefits to serving many clients, I do not see any network effects associated with providing online payments. However, this could change as some of these providers attempt to get into the mobile P2P payments space, such as Braintree’s acquisition of Venmo.

On the other hand, the companies in this space are addressing an unmet need. For many high-growth startups, solutions such as PayPal, are too expensive, slow, outdated and too hard to integrate with. I see solutions by Braintree and Stripe taking away a lot of business from PayPal. Switching costs are also high – it is usually hard to migrate customer payment information from one platform to another.

Although payment providers are seeing tremendous growth just because of the amount of growth in e-commerce and online/mobile transactions, all these solutions (except for Braintree’s Venmo business) are still reliant on the infrastructure provided by the credit-card networks. All the startups in this space seem to be playing the puppy-dog strategy – posing as small players who are friendly with the credit-card networks and are doing little to disintermediate them.

Competition is tough in the payment space, and more and more players (both large and small) are getting into this space everyday. Braintree, Stripe and Zuora seem to have carved out a niche, but need to remain innovative and competitive to stay relevant going forward. I’m looking forward to seeing many more innovate solutions come out of these companies to make payments for young, high-growth startups even easier.


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