Peer-to-peer payments vie to make wallets a thing of the past

Cash is still king when it comes to paying a friend back for money you borrowed or splitting a dinner cheque. But mobile services offer a cashless system that a growing number of Canadians find easier to use for peer-to-peer payments.

What's on the market
1. Interac e-Transfer.
In Canada, the market leader in peer-to-peer payments is Interac and its email money transfer system, e-Transfer. To use e-Transfer, you log in to your online banking platform and select "email money transfer." Then, you enter the email you wish to send money to, or select emails you previously added from a drop-down menu. Next, choose the account you want to send the money from, enter the amount you want to send, select or create a security question and send.p2p-payments

"We view the speed, convenience and security as the top three reasons more Canadians use email money transfer," says Teri Murphy, senior manager of public affairs and stakeholder relations for Interac. "Also, the availability; it's available at over 200 financial institutions across Canada."

The sender does not need to provide any financial information to send the money, while the recipient only needs to enter the answer to the security question. Interac works from any device, be it desktop, laptop, tablet or phone.

2. Payso app.
App developers are also getting into the peer-to-peer payment space. One such app is Payso. Jake Tyler, co-founder and CEO of the Vancouver-based company, believes his technology is already faster, more convenient and user-friendly than Interac's e-Transfer.

"It takes five to 10 seconds to send a payment to your friends using Payso, while with an email money transfer it will take you at least a couple of minutes," Tyler says.

To use Payso, you download the app to your phone or tablet, select someone from your contacts list and click the dollar sign at the top of the screen. Then you enter the amount you want to send and a four-digit passcode assigned to you. The recipient gets the money in their Payso account instantly. If the recipient doesn't already have Payso, he will get a text message with a link to download the app. It takes less than a minute to sign up, and recipients don't need to enter any verification information to access the money.

You can send funds either directly from money you have in your Payso account, or from a linked credit or debit card. If you receive money into your Payso account, you can "cash out" and have the money sent from your Payso account to your Canadian bank account, where you can withdraw it or spend it as usual.

3. PayPal App.
Sending money with PayPal's mobile app is similar process to using Payso or Interac. You just enter the recipient's phone number or email address and the amount you're sending and you're good to go.

"Unlike the competition, we're global, serving 203 markets and operating in 26 currencies," says Kerry Reynolds, head of consumer marketing at PayPal Canada. "No PayPal account balance is required; people can [use] their bank account, Visa debit card or a credit card as their funding source. PayPal is device and platform agnostic so people can send money from any Internet-enabled phone, tablet or computer."

Fees, speed and security
The platforms all vary in speed and fees. For instance, many Interac transfers are free, but not all.

"Interac email money transfer is offered free by many financial institutions as part of their online banking packages, and that's something we are very keen on," Murphy says. "However, some banks do charge and it's up to them how much that is."

Payso is always free, and PayPal is free if you send money from a bank account linked to your PayPal account or from your PayPal account balance. If you use a credit card or Visa debit card connected to your account, however, there is a fee of 2.9 per cent plus 30 cents per transaction.

There are no fees for individual recipients in any of the systems.

Payso may sometimes beat Interac in the fee department, but Interac holds the upper hand when it comes to the speed at which the money appears in the recipient's bank account. Because email money transfers are facilitated through a financial institution's online banking platform, the money appears in the recipient's bank account instantly.

While Payso transfers appear in a Payso account immediately, cashing out via your bank account can take up to five business days. PayPal is similar -- the money should appear immediately in the recipient's PayPal account, but it takes three to four business days to withdraw the money via your bank account.

"[Speed is] a big item we are aiming to improve and you'll see some changes there over the next few months," says Payso's Tyler. "It's partly a function of the partners that we use, as well as a function of the clearing schedule and the rails that we're using in Canada to send money from one bank to another. It's also a function of the way we manage fraud within the platform."

As far as safety, Tyler says that Payso is just as secure as an Interac money transfer, but instead of the recipient typing in the answer to a security question, Payso requires a passcode to be entered by the sender.

"At the back-end, all of the money within Payso is handled by a regulated financial institution," he says. You must type a password to make a payment within Payso, and your credit card information is stored using a bank-grade, tokenized system. "[Security] is clearly a very fundamental part of what we're doing."

With PayPal, users' financial information is stored in the cloud, not on your device, so sensitive information is still protected if your device is lost or stolen. Plus, PayPal covers the full amount of every eligible, unauthorized transaction.

"People trust us with their money because we have a 16-year history in enabling safe e-commerce transactions on the Internet," says Reynolds. "We've developed sophisticated fraud and risk capabilities to ensure customers' information is secure, using over a thousand characteristics to detect suspicious behaviour, such as device type and dollar amount."

Paying friends through social media
In 2013, RBC launched a way for its customers to send Interac money transfers via Facebook messenger.

"We are excited to bring this new capability -- the first of its kind in North America -- to Canada and to our clients, who we know are avid Facebook users," Dave McKay, president and chief executive office of RBC, said at the time. He said the new solution would add simplicity and convenience to a platform that revolves around social interaction, such as repaying a friend for dinner.

Payso is looking to follow RBC's lead in partnering with Facebook and other leading social media platforms in the future.

"What you'll see with Payso over the [next few months] are integrations with different social networks, so you'll be able to share money through Facebook, Twitter, email or wherever else you're  already having conversations with people," says Tyler.

See related: Want more rewards? There's an app for that, How to safely use mobile banking, Third-party financial apps: convenient, popular -- secure?
Published August 28, 2015

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