Brother, Can You Spare a Digital Dollar?
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.
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 Money can be spent or withdrawn as cash using a Paypal MasterCard debit card.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...
This article was posted by Bob Rankin on 28 Jun 2016
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Article information: AskBobRankin -- Brother, Can You Spare a Digital Dollar? (Posted: 28 Jun 2016)
Copyright © 2005 - Bob Rankin - All Rights Reserved