This era of humanity has been spoiled with convenience. Technology combined with our innate desire for instant gratification have made convenience-based apps and technology a multi-billion dollar industry. The latest darling of this industry is peer-to-peer payment systems. Quick and easy to use apps – also known as money transfer apps or P2P payments – allow users to transfer funds via one’s mobile device through a linked funding source. Splitting restaurant bills, taxis, and pretty much any expense has never been easier.
How P2P Payment Systems Work
On the spot money transfers was introduced to the masses by PayPal and Google, however there was often a delay in receiving the funds depending on how the sender and the recipient have their accounts set up. These days, apps like Square, Venmo, and CashApp offer the option of a genuine instant transfer through technology linked with the user’s bank. There are also instant payment options now available through social media networks like Facebook and Instagram.
P2P systems save folks from scrambling to split the cheque or embark on the tedious task of splitting expenses for various types of purchases. Let’s say you’re out for a dinner with friends and want to split the cheque. Instead of each guest digging around for cash or burdening the server with 6 credit cards to swipe, one person can simply pick up the bill, while the remaining guests send over their portion instantly via a P2P app. The recipient can then instantly transfer the funds to their bank account or keep them housed in the app for later transactions. Different apps may vary in their process, but this is generally the functionality of a P2P system.
Technological advancements have led to an exorbitant peak in hackers and online crime. In the back of most minds there is a lingering concern regarding anything to do with mixing transactions and the internet, as millions of people have lost billions of dollars to hackers over the years. And although P2P systems continue to build on their security systems, investing millions into the protection of consumer data, we all need to take extra steps to protect ourselves when relying on apps to send and receive money.
Ideas for staying safe:
- attach a PIN or password to your app and every transaction
- update your notification settings to ensure you receive an alert for every transaction
- Only use the app with people you know. For example, opt to use cash when purchasing tickets or sale items from sites like Craigslist and Kijiji. You never know who is at the other end
- Link an external account to the app so you can transfer your funds immediately over to a traditional financial institution instead of leaving the funds in the app account. Banks tend to offer much more security and peace of mind than an app.
Choosing the Right P2P System
It’s important to determine what’s right for your needs. Read through the functionalities of each app carefully before signing up. Keep in mind some apps impose a hold of a few business days, while others offer instant deposits for a nominal fee. Speaking of fees, some apps charge a flat rate or even no fee for transfers, while others charge a percentage of the balance being transferred. It’s also be a good idea to check out consumer reviews – the internet never holds back its opinions!