P2P Payments: What Businesses Need to Know

Author: Kelley Donald/Thursday, May 14, 2020/Categories: Business Internet

Peer-to-peer or P2P payments provide yet another way for customers to pay small business owners, from dog walkers to daycare centers. Whether you have an e-commerce business or a brick-and-mortar store, your customers can use P2P payment apps to quickly and easily transfer money for the goods or services they received.

But before you jump into accepting P2P payments, you should know exactly what you’re getting into. Here’s what small business owners need to know before using P2P apps.

1. P2P Payments Are Not Technically Designed for Businesses

By definition, P2P payments were introduced as a way for friends to transfer money to each other when they don’t have cash on hand. If you’re splitting a pizza delivery order with friends, for instance, you can use your Consolidated Communications home Wifi to send money straight from your Paypal or Venmo account to your friend’s. Besides PayPal and Venmo, other examples of P2P payments include Apple Pay, Samsung Pay, Zelle, and SquareCash. 

Some of these P2P payment services have business (P2M or pay-to-merchant) options. For instance, PayPal lets you send invoices and receive payments as a business and is recognized as a platform for business owners. Some credit card kiosks even have an option to pay through PayPal without needing an alternate mobile device to process the payment. Some kiosks also accept Apple Pay and Samsung Pay.

Zelle was actually designed for business payment processing, but the goal was to make it easy for businesses to pay their customers — such as distributing cash rewards for customer loyalty or rebates. Businesses also use it as a form of direct deposit for independent contractors and freelancers. Zelle is the only service that offers fee-free transactions and direct-to-bank-account payments.

2. P2P Payments May Be Less Secure than EMV Chip Cards

It has taken the credit card industry decades to develop the most secure digital payment platform available in EMV chip cards. (EMV stands for Europay, MasterCard, and Visa, the three credit card companies that use the technology).

Because P2P payment apps were developed for individuals and not businesses, they may not be as secure as other small business payment options designed specifically for businesses. Even if you aren’t held liable for any fraud resulting from an Apple Pay transaction that originated at your business, you don’t want customers to associate your store as a place that isn’t safe to shop. 

3. P2P Payments May Have Transaction Fees

Small business owners try hard to avoid credit card transaction fees. It’s possible to pass those fees onto the customer by raising prices and offering subsequent “cash discounts,” but only in states where this is legal.

Yet services like PayPal explicitly prohibit business owners from passing transaction fees onto customers. That means you’re stuck paying 2.9% + 30 cents on every transaction.

Venmo, Apple Pay, and Square charge a flat 3% fee for credit card purchases, but debit card or purchases made with funds held in the app are free.

4. You May Have to Wait for Your Money

If you want to transfer money into your business bank account immediately, you’ll pay even more fees. PayPal, Venmo, and Apple Pay all take out 1% (maximum $10) for an instant transfer, which typically means anything from “immediate” to within 30 minutes. If you’re transferring thousands of dollars at a time, that 1% doesn’t sting as much. But for smaller transactions, it’s hardly worth it.

You can transfer money into your bank account with no fees, but you’ll have to wait as long as three to five business days for PayPal and one to three business days for Venmo and Apple Pay. Apple also has limits on how much you can transfer — $10,000 in any one transaction and $20,000 in any seven-day period.

Square has a 1.5% transfer fee for an instant deposit; otherwise, it can take up to three business days. 

Is It Worth It for Your Small Business to Accept P2P Payments?

These drawbacks might make P2P payments sound less than attractive for small business owners. But consumers today want the convenience of multiple payment options.

Adding a P2P payment system can actually increase sales and improve customer goodwill. You’ll just want to make sure you have a secured business broadband internet connection through Consolidated Communications to protect your customers’ data and the money deposited in your P2P account.

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