“How Will You Be Paying?”: A Look at P2P Payments

As methods of payment continue to evolve, they have become varied across demographics. While few consumers carry significant amounts of cash, and even fewer write checks, more and more are using a growing number of non-cash alternatives to pay for products and services.

Credit and debit cards are generally the most widely-accepted forms of cashless payments, and most people have at least one card in their wallet. In recent years, person-to-person, or peer-to-peer (P2P) payments have evolved as an increasingly significant way to transact.

P2P payments are electronic transfers of funds made between individuals or between an individual and a merchant. These payments are made using a P2P mobile app or website, and funding sources vary across P2P options.

What is Driving Digital P2P Payments?

In the ever-expanding digital world, payment methods are changing quickly and several factors are driving acceptance.

  • Younger, tech-savvy consumers are driving much of the utilization of P2P payment applications. They are typically more familiar and comfortable using mobile applications for day-to-day activities, including payments to others. From splitting a restaurant check to paying back the $20 they borrowed from their roommate last week, they expect the convenience that these new applications and services provide. Carrying cash, or a checkbook, is less likely to occur with this generation of consumers.
  • Speed and convenience make P2P solutions an attractive option. If you didn’t have time to hit the ATM, you can easily send money through an app or website from the convenience of wherever you are. Payments can be sent and processed in one day, and most situations require that immediate response, such as splitting a check or a sending payment to a friend.

The Options are Many

P2P payment applications can generally be categorized in 3 ways: standalone, bank-based or social media-based applications.

Standalone applications do no rely on a bank or financial institution for handling the payment. They allow users to store money in a “wallet” before sending it to a bank account or sending it to another user.

Bank-Based applications utilize an established account within that bank to transact. Users configure the application to draw funds directly from their bank account, and funds received from others are deposited directly into the account as well.

Social Media-Based applications provide another P2P payment option by offering the ability for payment through their mobile applications. Users can send and receive money from other members/users of the social media application. Payments are typically made via a linked debit card.

Considering your Options: The Selection Criteria

When selecting a P2P payment application, consumer choices are many but there are factors to consider when making a decision:

  • Funding Source
  • Transaction Fees
  • Security

Consumers may fund their P2P transactions using a credit or debit card, linking directly to a bank account or storing money in an account that is tied to the application. As with any transaction, you should be diligent in monitoring the specified account to ensure that the proper amounts are being deducted, or credited, to your account.

Transaction fees may be assessed when you link your payments to a credit or debit card or you may be charged a flat fee per transaction. However, if your app is linked to a bank account, you are unlikely to encounter fees. You should always read the fine print before selecting a P2P app or provider and understand the potential costs associated with each.

Security remains paramount when selecting a P2P provider or service. The level of security varies among vendors, so you need to review how each aim to protect your payment and personal data:

  • PCI compliance
  • Data encryption
  • Passwords/passcodes
  • Biometrics
  • 2-factor authorization
  • PIN

With the number of providers increasing regularly, consumers need to remain diligent in protecting themselves.

Where Does This Lead?

Having the ability to pay whenever, and wherever, will continue to drive P2P payments. The best app is the one that meets your needs as a consumer for simplicity, security and cost-effectiveness. The P2P landscape will remain fluid and users will shift from one application to another when something “better” comes along.

P2P success relies on creating a better way for people to pay one another. Whether it be via a standalone mobile app, your favorite social media platform or your bank, the industry is driven to simplify payments and the transfer of funds between users.

The banking industry is realizing the opportunity of this platform and appears poised to try and engage further with these digital consumers, or risk losing them. Payment providers and social media platforms will continue to evolve their solutions. Consumers will continue to have numerous choices and need to decide what works best for them. The market will continue to grow, and payments will simplify in this industry.

So, how will you be paying?


Questions or comments? contact Jim Friel at jfriel@wcapra.com








Subscription-Based Revenue: It’s Time to Reevaluate Your Business Model

Subscription-based revenue models offer clear advantages to businesses, and many merchants may be overlooking opportunities for their business to grow in this space. Companies like Netflix and Hulu naturally lean toward a subscription revenue model, but less obvious products have found their way into the subscription space as well.

The Subscription-Based Market

“Subscription boxes,” such as those offered by Blue Apron and Dollar Shave Club, allow customers to automate essentials and remove one-off trips to the store. Food and beauty products alone accounted for 68% of subscription box site visits last year.1 Companies in this space have recognized that customers respond positively to this shopping experience and are seeing significant growth in revenue. From 2013 to 2014, Dollar Shave Club’s revenue projections tripled, reaching $60 million dollars.2 In 2016, UK-based transnational Unilever purchased Dollar Shave Club for $1 billion in cash.3

The Subscription Model: Benefits and Gotchas

Subscription-based business models offer benefits to merchants that one-time purchase models do not – i.e., the ability to better plan resources, predict revenue, and develop a more trusting relationship with customers. These models can be a source of incremental revenue as well – Amazon generates $9 billion in revenue before its Prime members purchase any products.4 Amazon can also can expect customers to spend more – customers who currently subscribe to Amazon’s Prime membership spend almost double what non-Prime customers spend ($1300 per year vs. $700 per year).4

With companies large and small starting to shift towards subscription models, no company wants to be the next Blockbuster. In 2000, Netflix founder Reed Hastings attempted to partner with Blockbuster, offering his company to Blockbuster for $50 million dollars.5 At the time, the video rental industry was not running on a subscription-based model, and Blockbuster CEO John Antioco refused. Over the next 10 years, consumer shopping preferences began to change, and the rest is history. In 2010, Blockbuster – with a valuation of $24 million with $1.1 billion in losses2 – went bankrupt. As of 2015, Netflix – having reached 50 million subscribers across 40 different countries – had a valuation of $32.9 billion, over 650 times the asking price in 2000.

A conversion to subscription-based revenue models will not lead to unilateral success across verticals. But it’s important to consider that even luxury automotive companies like Cadillac6 and Porsche7, established firms whose industries have never traditionally operated in a subscription-based model, are experimenting with monthly subscriptions that give customers on-demand access to an entire range of vehicles.

Simply put, the old ideas of what customer’s will subscribe to are no longer relevant.  With the recent incredible growth in subscription revenue, and in light of cautionary tales like Blockbuster, now is the time to reevaluate whether a subscription-based revenue model is right for your business.


For further discussion, contact Pat at pbehrens@wcapra.com.



1 – https://www.forbes.com/sites/richardkestenbaum/2017/08/10/subscription-businesses-are-exploding-with-growth/#383a70d26678

2 – https://www.entrepreneur.com/article/243573

3 – http://fortune.com/2016/07/19/unilever-buys-dollar-shave-club-for-1-billion/

4 – http://fortune.com/2017/10/18/amazon-prime-customer-spending/

5 – http://www.businessinsider.com/blockbuster-ceo-passed-up-chance-to-buy-netflix-for-50-million-2015-7

6 – https://www.forbes.com/sites/dalebuss/2017/01/05/cadillac-launches-book-vehicle-subscription-service-as-new-user-model-for-new-age/#14f9abe4a849

7 – https://www.cerillion.com/Blog/October-2017/Fancy-a-Porsche-subscription-service

Should Your Organization Find a Loyalty Partner?

If a loyalty member is part of competitor programs as well, are they actually loyal? In many verticals, consumers follow incentives to register for competing loyalty programs. This is because, for large merchants, a loyalty program in and of itself can no longer be considered a competitive advantage—a loyalty program is a minimum requirement for the license to operate in today’s competitive landscape.

As with any component of consumer engagement, it’s how a company executes on loyalty that really can provide an advantage.

The Problem with Value Prop

Companies have traditionally looked to value proposition as a means to gain advantage over competition. While consumers do appreciate value, that the industry has seen value props become so complex that the average consumer often doesn’t understand how to redeem their rewards. It’s important to remember that consumer communications must be simple— the average consumer doesn’t weigh the best value across every loyalty program. Even if the consumer does register for a program for which they don’t understand the value prop, they are likely to remain active members of the program.

A Loyalty Partner: One Way to Gain an Advantage

For the last few years, loyalty partnerships have been drawing attention. When Delta and Starwood brought crossover rewards into the market, and when American Express launched the Plenti coalition, many pundits were writing about partnerships and coalitions as the future of loyalty.

The theory behind partnerships is sensible from a consumer standpoint— the consumer has more options to redeem, which is assuredly convenient and appealing. In a recent survey on hotel satisfaction, JD Power found that “Companies in a position to partner with third parties in retail, travel and more are positioned to benefit the most.” The same survey discovered that hotels that offered car rental or dining options scored significantly higher on loyalty satisfaction than those who limited reward point redemption to hotel stays.

In their research phase prior to standing up the Plenti coalition, American Express found that “72 percent of Americans prefer a rewards program that allows them to shop at many stores versus a single brand.” These results are not surprising— we’ve seen airline and hotel alliances in particular that have been taking advantage of the partnership space, and it shows in their customer loyalty.

The merits of the partnership model are simple. A partnership allows a company to extend beyond its own brand’s reach, while simultaneously sharing in the benefits that another brand’s program can offer. If the fit is right, all parties in the partnership or coalition stand to benefit.

Considerations for a Loyalty Partner

The most obvious consideration is to find a loyalty partner that fits with your brand. The aforementioned Delta and Starwood partnership makes more sense than if Delta would have partnered with, say, a fast food brand. More pointedly, however, once you choose a vertical to partner with, is to find those specific brand elements that best complement your own brand.

Although a partnership offers increased brand exposure, it’s inevitable that partnerships impose limits on branding— every corporation will have brand guidelines, and these guidelines will become further restricted when imposed beside the guidelines of a partner brand. Delta and Airbnb recently collaborated on an offer that grants consumers “$25 off your first qualifying Airbnb stay, and up to 1,000 bonus miles. Plus, earn 1 mile per $1* spent on all stays.” While this is a solid, competitor offer in today’s marketplace, it will undoubtedly change as the partnership evolves. Any change, whether to the offer itself or to advertising strategy or terms and conditions, becomes more complex when the project must navigate the guidelines and organizational practices of two large companies.

Understand the Value of your Loyalty Currency

While certain currencies have resonated greater with the public (i.e. airline miles, Starbucks stars, etc.), for those brands that have existing loyalty programs in the market it will be imperative that they do not alienate their most loyal base when moving to a partnership or coalition model. If there are consumers who have demonstrated loyalty to a given currency, it’s important that they have the option to transact in that currency, regardless of the value prop decided in the partnership.

Perhaps the most important piece at present to consider is the data generated by the partnership. Many loyalty programs don’t produce a significant ROI in and of themselves— perhaps their greatest benefit is that they produce monetizable consumer data. When engaging a prospective loyalty partner, the question must arise— who owns the consumer? Who owns the data? This piece is an essential component of assessing a partner for fit.

It is essential when considering a loyalty partner to consider the future as well. Last week, CAPRAplus published an article around how merchants should begin to rethink their approach toward digital wallets. While a single wallet hasn’t yet emerged to dominate the mobile market, it’s a surefire bet that the winning solution(s) will incorporate a robust loyalty solution. If your brand does decide to pursue a loyalty partner or a coalition model, make sure that the brands you align yourself with are those you can grow alongside.


For further discussion, contact Daniel at dkahan@wcapra.com.