The evolution of peer-to-peer payments

Within fintech, the P2P payments space is arguably one of the oldest and most developed. Despite the relatively stable presence of stalwarts like PayPal, Venmo, Zelle, and others, the subsector is nevertheless as dynamic today as it was at the time of its founding.

Through the introduction of new technologies, asset classes, and legal frameworks, P2P payments has seen product features and use cases evolve significantly over time.

P2P 1.0 and 2.0

Peer-to-peer payments arguably started with PayPal. Founded in the late ‘90s, the platform first saw major success after its acquisition by eBay in 2002. The auctioning site filled a crucial niche within payments by using PayPal as its payments engine, letting buyers purchase goods without sharing their credit card information with sellers, and letting sellers avoid having to create a credit card merchant account to make money.

The advent of the smartphone bolstered demand for P2P solutions in the 2010s, compelling incumbents like PayPal to offer mobile apps, and minting major newcomers like Venmo and Cash App. This new technology helped businesses and merchants, but also rapidly increased the volume of truly peer-to-peer payments carried out by consumers.

New asset classes

The rise of alternative assets has compelled P2P leaders to include non-fiat forms of payment. Venmo, for example, now lets users see their Venmo wallet balance as well as their crypto balance.

It remains to be seen how long these product offerings will stick around as standalone features. With the growth of stablecoins and other digital solutions, we may see blockchain-based products folded into more traditional P2P offerings over time.

Bank-to-bank and cross-border

A growing number of banks are addressing P2P use cases through in-house products. Beyond Zelle, which is owned by a consortium of banks, new infrastructure like FedNow and Real Time Payments may let users conduct instant transactions without the need for an intermediary like Venmo—all within the walls of their mobile banking app.

In countries with more advanced P2P infrastructure, such as India, these products are beginning to look to cross-border transactions as the next pathway to growth. By linking its UPI infrastructure with Singapore’s PayNow system, India may see the results of its international collaboration shaping the future of P2P payments.