Challenges Facing Existing P2P Payment Solutions
Views of Maxime de Nanclas, COO and Co-founder of Mobeewave
The future looks bright for mobile payment. Banks, original equipment manufacturers (OEMs) and tech giants are all committing time, money and effort to carve out a piece of this burgeoning market. And if eMarketer’s forecasts are anything to go by – that mobile payment transactions will grow by 210% in 2016 – it’s easy to see why.
Peer-to-peer or person-to-person (P2P) payment solutions, which make it possible for money to be sent to individuals, are also enjoying significant growth within this space. P2P players like Venmo and Square Cash are leading the charge in this area – Venmo has proven to be particularly popular, with the company reporting that more than $1 billion in payments were made through their app in January 2016.
The ultimate prize for P2P solutions is considerable. Let’s Talk Payments predicated that the size of the US P2P payments market would reach anywhere between $70 billion and $90 billion in 2015, while Business Insider has previously suggested that the volume of global P2P payments is over $1 trillion dollars.
But the success of P2P payment solutions has inevitably drawn the attention of tech giants: Facebook has already made it possible to exchange payments through Facebook Messenger, while Apple and Google are expected to play a greater role in this area. Faced with the likelihood of increased competition, the success of existing P2P payment solutions is dependent on their ability to overcome certain key challenges.
Overcoming the obstacles to growth
To ensure continued success, P2P payment companies need to remove the barriers to growth. In an already overcrowded FinTech space, it’s important to reach as large an audience as possible.
At present, this is not a reality for many of the leading lights in this area – like Venmo and Square Cash – who operate within regional constraints. While the US market is by no means small, companies that cannot provide their service to users outside of North America are in danger of falling behind.
When you consider that an OEM could gain a greater foothold in this space by incorporating a technology to allow users to collect money in-person through their mobile wallets, it is possible that the tech giants could soon leapfrog existing P2P players.
Staying vigilant in the face of security threats
Beyond opening up additional avenues for growth, existing P2P solutions must address the ongoing challenges posed by pressing and potential security threats.
When it comes to executing transactions, most people are understandably wary of sharing personal and financial information. Frequent reports of high-profile data breaches in recent years have brought the importance of security into clearer focus for users.
When it comes to FinTech, the threat posed by cyber hackers is by no means imaginary. A recent Android attack on the banking apps of Australia’s largest banks – including ANZ, CBA, NAB and Westpac – targeted millions of users.
Faced with such organized criminal efforts, existing P2P services that rely on cloud-based services must invest considerable resources to ensure their users’ data is protected. Measures such as tokenization must be adopted to counter such threats.
Alternatively, the security challenges thrown up by dealing with cloud-based systems may be avoided altogether if a solution instead opts to facilitate transactions that are secured within a device’s hardware. Such approaches ensure sensitive information is encrypted in the embedded element – removing the potential for it to be hacked.
The problem of flexibility requires an open solution
The sustainability of existing P2P solutions depends on whether they can continue to provide a flexible service that really meets the needs of their users.
While many tools make it easy to share money between friends and family, those that rely on closed loop systems are not quite as convenient as they appear. Requiring both parties involved in a payment transfer to be signed up to the same service limits the flexibility of the solution and can potentially add a hurdle to getting paid back.
Closed loop solutions also become problematic when it comes to receiving payment from a stranger. If you’re selling or renting something on craigslist or Kijiji, or holding a garage sale, you don’t want to scare off a potential customer by asking them to sign up to a particular platform, nor does either party necessarily want to share their personal information or contact details.
Today’s mobile payment users obviously need the option to both make and receive payments through their mobile phones. But more than this, they need solutions that take into account how the transactions they carry out can vary depending on who they’re accepting payment from. Only truly open loop solutions can offer individuals the flexibility to painlessly get paid back from someone they know and receive payment from someone they don’t.
There are frequent occasions when we need the ability to essentially become merchants for a day. From service providers – like tutors, landscapers, babysitters or personal trainers – to fundraisers to those of us simply selling our stuff, we all need a convenient way to collect the money we’re owed that makes the process as easy as possible for the person paying.
Open loop solutions enable users to easily accept payment from anyone – removing the need for the parties involved to connect through the same platform or exchange personal information. This approach coupled with a means to accept payment from a contactless credit card easily and securely through NFC-enabled mobile devices would solve the problem of getting paid by strangers – without requiring them to share personal information with you or a third party.
Addressing the awkwardness of owing and being owed
P2P payment solutions also need to address the psychology of debts. For the person who is in debt, they are under pressure to pay back the money they owe. The more time that passes the greater that pressure grows and the absence of a means to instantly repay a debt means the indebted person has to endure the burden of being in debt for a certain period.
On the other side of the equation, the person who is owed money can be placed in an equally awkward situation. Without a way to get repaid straightaway, they are not only forced to wait to get paid back, but also put in the difficult position of having to remind the other person about the debt. The act of chasing someone up to repay a debt can be problematic, especially as many people do not want to send the message that they are in a particular hurry to get paid back – indirectly implying they are in a difficult financial situation.
Addressing the potentially awkward situation between the two parties is something that Venmo does particularly well. Their method of offering users the ability to send reminders that have been generated by the application automates this element of the interaction between the person who owes and the person who is owed. This can be a helpful prompt for the person in debt and good way for the person awaiting repayment to avoid the awkwardness of asking to be paid back.
An alternative approach to addressing the awkwardness surrounding owing money and being owed is to avoid it altogether. By making it possible to collect money in-person from a contactless credit card using a mobile device, P2P payment solutions could solve this challenge before it even arises. By giving the payer the option to repay his debt instantly such a technology would remove any potential burdens or difficulties for both parties.
About the Author
Maxime de Nanclas, COO and co-founder of Mobeewave
Over the last 12 years, serial entrepreneur, Maxime de Nanclas has founded and guided a string of successful tech start-ups. From embedded systems to payment, Maxime has a proven track record for building thriving companies and cultivating strategic partnerships with global players.
Before founding Mobeewave, Maxime was the CEO and founder of Nuum Design – a provider of disruptive software services. In this role he quickly took the company from zero to $2m annualized revenue and secured key customers including Nintendo, Intel and the Canadian Space Agency.
Maxime launched his first start-up, Space Codesign Systems, in 2004. In addition to overseeing commercialization, IP licensing and product development, he played a primary role in delivering key strategic sales and partnerships, especially with international aerospace manufacturer Thales Alenia Space.
Maxime was the driving force behind Interfrench in Canada, an entrepreneurship network and coaching service for French entrepreneurs immigrating to Canada. He has also been highly involved in a number of non-profit organizations. As a vice-president & board member of Francogenie – which helps the French engineering community in Quebec – Maxime directed marketing efforts, funding and operations for the organization. He holds an engineering degree from École Polytechnique de Nantes, France and a Master’s degree from École Polytechnique de Montréal, Canada.
An award-winning FinTech company, Mobeewave brings balance to the mobile payment world, empowering people to securely accept contactless payment using their phones.
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