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Peer-to-Peer Payments…the Future of Brick and Mortar?

With Apple, Android and Samsung all releasing mobile payment services and more and more stores upgrading their payment devices to accept these new integrated forms of payments…. companies of all size are betting big on in-store shopping. Larger retail players have even begun adding some exciting options for customers at their locations, Sephora is experimenting with augmented reality and beacons, even Best Buy and Nordstrom are now offering curbside pickup. This highly technological and personal focus is not surprising: based on a report published by the International Council of Shopping Centers, 78% of consumers prefer visiting brick-and-mortar locations over shopping online. Keeping that in mind, imagine if you could use that money sitting in your Venmo account to make a mobile payment at your favorite stores, or better yet what if your customers could pay you this way?

Setting the Scene for In-Store Shopping

We live in a world that anything we could ever want is available at our finger tips via one quick internet search, yet people largely still prefer that in-person interaction with the brands and products. It is this want for personal interaction along with the highly technological world we live in today that has provided the perfect circumstances for some unexpected changes within the retail arena.

PayPal, a big player in the online merchant-consumer industry has made some early moves toward Peer-to-Peer or P2P payments, by partnering with Macy’s to roll out PayPal as a payment option for brands in-store, online and on mobile available to all customers. Now, all Macy’s and Bloomingdales’ shoppers can seamlessly shop and checkout across all channels. Companies like PayPal have gone after this market aggressively with tons of success, this speaks volumes about how payment processing is changing. Excited?! Us too! Unfortunately, it may take some time for all dedicated P2P services to make the transition into brick-and-mortar environments.

What is the Motivation for Change?

Easy! Consumers want it! They want their favorite stores to accept all the ways they want to pay, especially newer mobile options. With companies like Starbucks and Taco Bell paving the way for this showing astounding numbers of shoppers taking advantage, the door is wide open for players other than Apple, Android and Samsung to join the party. With millions of people already using the most successful of the P2P payment offerings, many of which have funds sitting in their accounts just waiting for an opportunity to pay someone back, but wouldn’t it be great if they could spend that money at your cafe or deli? Talk about motivation! Consumers and Retailers see the opportunity in being able to spend/accept this money. Apple has already announced plans to get into the P2P payments arena – Apple users rejoice!

What’s taking so long?

We know that consumers want to use their P2P solutions everywhere, so what is the hold up? There are some challenges facing P2P payments services to successfully make the transition into Brick-and-Mortar/ Retail space. Beyond simply persuading merchants to adopt this form of payment, P2P providers looking to expand into this new market will need to make sure the proper infrastructure is in place. Scalability is currently the largest of these concerns, perfecting scaling in physical stores is far more complicated than with virtual scaling and will require many months of testing and re-coding. Since making an in-store mobile purchase via a P2P account is far different from paying with a mobile wallet that is tied to a credit or debit card, the new services will need to accommodate purchases which exceed the balance within the user’s P2P account. Think of this like having a gift card that only has $5 left on it and how the balance is subtracted allowing you to use another form of payment to complete purchase. This will take highly intelligent software and must work seamlessly. Even with these cumbersome hurdles facing P2P service providers, the overwhelming want for this payment type has everyone scrambling and we could begin to see alternative payment players at registers within the next five years.

Still Skeptical?

The future of P2P Payments is still largely unclear, to illustrate why this is I would ask you to look at the history of other industries when they attempted similar changes… uphill battle. In 1998 you could not begin to count the number of different search engines you had to choose from. Now we have gotten so used to “googling it” that not many people would believe that this search engine powerhouse would not be who they are today if not for a strategic partnership with Yahoo in the first two years of launching.

The payment industry is in a similar phase now, with so many new payment options being introduced and so many new companies trying to get a piece of the pie. Just as we saw in 1998 with the search engines, we will start to see key players emerge within the P2P market, and the stakes will be high for those that succeed — it is this fact that is in a sense acting as a catalyst motivating many others to enter the game, further complicating the process.

If the Venmos, Snapchats and Facebook Messengers of the world want retailers and consumers to use their platforms for purchases, instead of the methods already available to them on their phones they will need to develop close relationships with the businesses to provide offers to entice consumers, offering extra incentives to shoppers — otherwise most will likely continue using their credit cards or mobile payment options that they already know. Think of it like choosing Pandora over Shazam; if you have one already what would it take to get you to stop using the one you already favor? It could be done, right? — But the question is, what would it take to get you to make the change?

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