Brother, Can You Spare a Digital Dollar?

Category: Finance

There are many occasions when people need to exchange small sums of money: a group dinner, after-work happy hour, a shared taxi ride or shared “friends and family” phone account. Typically, cash is used to settle debts like these, but there is always that one guy who’s short of cash and says, “I’ll have to owe you.” That's where person-to-person payment systems come in very handy. Here's what you need to know...

P2P Payment Options

Every parent has received at least one desperate phone call from a child who needs money immediately for a car repair, unexpected college fees and books, medical expenses, and so on. A check in the mail is too slow, and Western Union is too expensive. Even online banking transfers can take a couple days to clear.

Person-to-person (P2P) payment systems have evolved to address these and similar circumstances. Only a few years ago, Paypal’s “friends and family” payment option had the P2P payment sector all to itself, but now the field is crowded. Read on to learn about some of the most popular and consumer-friendly P2P payment systems.

PAYPAL FRIENDS & FAMILY is by far the most widely known and used P2P payment system. More than 180 million people have a Paypal account, so it is usually the first option suggested and used. When you send money to someone using the “friends and family” option no fees are deducted; the recipient receives the full amount sent.

Send money electronically

Paypal can be used via the Web or mobile apps for iOS and Android. The recipient’s email address or phone number serve as the address to which money is sent. All funds go into the recipient’s Paypal account instantly. Money can be spent or withdrawn as cash using a Paypal MasterCard debit card. If the recipient doesn’t have such a card, it may take 1-5 business days to transfer funds from a Paypal account to a bank account.


SQUARE CASH - differs from Paypal in that funds are transferred directly from bank account to bank account. Both parties must register a debit card issued by a U. S. bank; funds are transferred to and from the checking accounts linked to the cards.

A Square Cash payment may be available to spend in a matter of days or seconds. The clearing time depends on the policies of the recipient’s bank and how many times two parties have exchanged money via Square Cash.

Unlike Paypal, Square Cash cannot use a credit card as a source of funds. Also, prepaid debit cards are verboten. Also like Paypal, Square Cash can use phone numbers or email addresses, although the latter are being phased out. There is no charge to either party for use of Square Cash.


VENMO has seen explosive growth since its founding in 2009. In 2012, Venmo was acquired for $26.2 million by e-commerce payments processor Braintree. The following year, Paypal bought both Braintree and Venmo, at costs of $800 million and $300 million, respectively.

Like Paypal, Venmo has a middleman account through which money flows. Also like Paypal, Venmo can use multiple sources of funds: Venmo balance, bank account balance, or credit card. A 3% fee is deducted from the amount sent if a credit card is used.

The most startling thing about Venmo is its “social” aspect. When users log in, the first thing they see is a Twitter-like timeline of transactions between other Venmo users - including many they don’t know. The amounts exchanged and personally identifying information are omitted, but it’s a bit crazy to see who is paying who in real time. You can make your transactions private, but most users never change the default settings of Venmo or any other app.

Venmo is so popular with Millennials that “venmo me” is a common phrase among them. But I don’t plan to use Venmo. The company seems to have very little regard for the privacy of its users. Recently, Venmo settled a myriad of charges laid by the Texas Attorney General that included the perfectly outrageous practice of scraping contacts from a user’s phone without his permission or knowledge; presumably for marketing purposes. http://fortune.com/2016/05/24/venmo-investigation/


FACEBOOK MESSENGER - Facebook knows everything else about you... so why not give them access to your bank account as well? You can use Facebook Messenger (on desktop or mobile) to send or receive money by linking a debit card (issued by a US bank) to your account. On this plus side, if you're already a Facebook user, you don't need to create a new account or download an app to send money with Messenger.

To send money, first open a Messenger chat with the recipient. Click the "$" icon and enter the amount you want to send. (On mobile devices, you may need to tap the "..." icon to find the "$" icon.) If this is the first time you're sending money, click Next to enter your debit card, then click Pay.

On the receiving end, open the conversation from the person who sent the money. Click Add Card to add your debit card to receive the money Your bank may take up to 3 business days to make the money available to you. Facebook does not charge a fee to send or receive money over Messenger.


More than a dozen other P2P payment services are offered by everyone from household-name brands to obscure startups. Wells Fargo, JPMorgan Chase, American Express, and Bank of America have P2P payment services. Odd names such as Dwolla, FaceCash, and Popmoney are struggling for a piece of the action. Google Wallet still exists primarily as a P2P payment system.

Have you ever used an online person-to-person payment service? Your thoughts on this topic are welcome. Post your comment or question below...

 
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Most recent comments on "Brother, Can You Spare a Digital Dollar?"

Posted by:

Brad Tomlinson
28 Jun 2016

I use Venmo to pay my portion of the rent and to exchange money when dining out.


Posted by:

Diane
28 Jun 2016

I regularly send money to 3 relatives using interac/email. I'm in Canada using Bank of Montreal services. No one has ever waited more than 30 mins for a transfer to be complete even during non banking hours. I pay $1.50 for the service (regardless of amount sent) but there is no charge to the receivers. As I senior I get the rest of my banking services free so this charge is peanuts! The only downside is that I like to choose a different security code each time so have to remember to text that info separately to the receiver. I'm not usually sending amounts less than $50 but if I start doing that on any regular basis I might try the Pay Pal option -they seem to be a trustworthy company.
Thanks , Bob, for keeping us up to date as usual.


Posted by:

Ken Ormson
28 Jun 2016

Hello Bob,

In the UK we have a "Faster Payments System" between bank accounts, which is usually instant but guarantees to transfer funds within 2 hours. It is limited to £10,000 by most banks, but that is more than enough for most purposes.

It also requires the recipient to provide his/her bank details (Routing code and account number), but NOT their security details.

This means that I have never had to use any of the P2P systems you mentioned.


Posted by:

Hawk
28 Jun 2016

I have a question - I live in the UK and have children in the USA, I occasionally need to send them money.

The question is - will any of the P2P's allow me to send money from my credit/debit card from the UK to the US?


Posted by:

Rob Smith
28 Jun 2016

I've used Wells Fargo's SurePay service to send money. Both myself and the recipient have Wells Fargo accounts and the service is free. Curiously though, instant transfers are only available when using the mobile app. When on my computer, only the "standard" (next day) delivery is available.


Posted by:

LadyLiberTEA
28 Jun 2016

Venmo scrapes your phone contacts. PayPal recent security breach. My people and I more safely use our different American banks POP Money we all have, to our email addresses, since some of us haven't gone to the smartphones now recommended for safety from hacking to use the old flip-phones for calls in public.


Posted by:

Sarah L
28 Jun 2016

I had bad experiences with Pay Pal after one successful person to person, country to country transfer of money. If other software is as bad as PayPal was, I do not want to try it. PayPal caught people hacking my account but still will not let me close the account. Easy to open, impossible to close. Instead the credit card company issue me a new credit card.

More successful was when a friend set up an account with her bank (Chase) and I set up an account simply to receive money from her, though I had no other connection to Chase. We had a loan arrangement, and this worked so well, once a date was set for money to go from one checking account to another, no check written.


Posted by:

Chuck
28 Jun 2016

Wondering why Google Wallet wasn't mentioned. Been using it for some time with nary a hic-up.


Posted by:

Lee Strabel
28 Jun 2016

I, personally like the money transfer company called XOOM. It is cheaper than WU, but is just as fast.


Posted by:

LeeH
28 Jun 2016

Several of my children have Bank accounts at the same Bank that I use, so I can do an "in the bank" online transfer to their account that posts "immediately". I also pay the rent using the bank pop money service that can transfer using a phone or email address usually in a few business days.


Posted by:

Gloria Huffman
28 Jun 2016

PayPal has saved my life a few times. If sender and recipient both have PayPal accounts, the money goes from one to the other in a matter of 15 minutes or less (the "recipient" is the recipient's PayPal email address, which puts the money straight into the recipient's PayPal account). There's never any waiting for 1-3 or more business days for the funds to become available to me. Admittedly, I have no experience with international PayPal money transfers, only domestic in the United States.

How do I know when the money's there for me? I get an email alert, I can see the money in my online PayPal account as being available, or I can call the sender or they can call me (I have a simple cell phone, not a smartphone). In one case, I was literally driving to where I had to pay money before I knew the money had been sent, and I called the sender just in time to go in and make the payment before the deadline (and I mean 5-10 minutes before the deadline). I didn't want to ask for the money, but wasn't able to come up with the last few bucks. I can repay the money by the same quick PayPal method (which pays my money via the sender's PayPal email address to their PayPal account).

I have a PayPal debit card and the money can be debited via the card the instant it hits my PayPal account. It takes time to set up a PayPal account, and you have to wait weeks (or is it months?) before you can apply for the debit card, plus you have to jump through all kinds of verification hoops, so don't look to this avenue of help if your need is immediate. However, once everything is all set up, the money couldn't fly faster from sender to me and on to my payment.

If I need cash in hand from my PayPal account, I go to a grocery store with a generous cash back policy (like $200) and use my PayPal debit card to buy some tiny thing. Once I needed more than that, so the manager said I could buy two tiny things and get the cash back on each purchase (a bottle of water or pack of gum costs a dollar or so).

The amount of total cash back (for multiple purchases) is limited only by my bank's policy, not the grocery store. If my bank sets my daily withdrawal limit at $400, for example, I'm in trouble if I need more that evening and I didn't call the bank before closing hours to ask them to increase my daily spending limit (which usually lasts only 24 hours unless you're heading into a weekend and ask for a few days more on the extension to get you through the weekend).

I'm so glad I found out about this PayPal transfer option.


Posted by:

Gloria Huffman
28 Jun 2016

I forgot to add that there is no fee for these PayPal money transfers, either on the PayPal end or when using my PayPal debit card. It's a FREE transaction.


Posted by:

Rhonda Lea Fries
28 Jun 2016

I have used Google Wallet to send to/receive from my daughter since November 2013.

Except for one time, the only problems I've had were self-inflicted. The one time involved an inexplicable long hold on a very small sum of money I added from my bank account. It cleared before Google could figure out what had gone wrong. (Now, of course, this is not a potential issue.)

If I send money through Google Wallet, it gets there in a flash, and life goes on smoothly. I have not had this experience with PayPal (which I no longer use) or with Square Cash (which worked okay, but not so well as Google). Serve (American Express) just...well, it sucks. I closed that account several years ago.

Weirdly enough, I bank at Wells Fargo, and I had no idea they're offering P2P services. Guess I'll have to investigate. Always nice to have an alternate in case Google goes south.


Posted by:

RichF
28 Jun 2016

I use Chase's Quick Pay. You can send to anyone as long as they have a bank account. It doesn't have to be a Chase account. Fast and painless. I used it around 100 times with no problems either sending or receiving money.


Posted by:

Ken
29 Jun 2016

I live in North Carolina. PayPal stuck its nose in our politics and made a big deal of not moving to our state. I will not use any of their products.


Posted by:

David Quinn
29 Jun 2016

A good articall. Not sure if it covers English banks?


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