Peer to Peer Transaction

Peer to Peer Transaction

What is Person-to-person payments (P2P)?

P2P is an online technology that allows customers to transfer funds from their bank account or credit card to another individual’s account through Internet or a Mobile phone.

How it works/Example:

Generally there are two approaches for initiating a person-to-person payment:

Method 1:

  • Here, based on the successful Paypal approach, users establish secure accounts with a trusted third-party vendor, designating their bank account or credit card information to be used to transfer and accept funds.
  • Also, by using the third party’s website or mobile application, individuals will be able to complete the process of sending or receiving funds.
  • Generally users are identified by their email address and can send funds to anyone who is a member of the network.

Method 2:

  • In this method, customers use an online interface or mobile application (developed by their bank or financial institution) to designate the amount of funds to be transferred.
  • The recipient is labelled by their email address or phone number.
  • Once the sender initiates the transfer, the recipient receives a notification to use the online interface to input his or her bank account information and routing number in order to accept the transfer of funds.
  • This method does not compel the recipients to have an account with the financial institution of the sender in order to receive a money

 Its Significance:

Consumers these days prefer to go for

  • Online banking,
  • Mobile banking and
  • e-commerce

and this in turn has drawn a road map for a greater use of Person-to-Person payments.


  1. PayPal dominated the market for quite a long time, however, now we see that major banks and credit card companies are finally entering into the system.
  2. This type of facility is available in many parts of the world since long time, however, the major financial institutions in the U.S. are found to be slow in adopting the technology.
  3. Hence, it is time for the banks and credit card companies to adopt themselves to the change, since commerce evolves beyond the individual-to-merchant relationship to a larger, individual-to-individual exchange.

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