KEY POINTS 

  • A peer-to-peer (P2P) payment takes place when one person pays another person or a group of people outside of the context of a business or organization. Even in developed economies, where electronic transactions (e.g., credit cards) are common, people still use cash or checks to transfer money back and forth between each other. P2P payments, the subject of this report, are going after this market.
  • Globally, the volume of P2P payments is over $1 trillion and only a sliver of those transactions are currently conducted via mobile phones and apps. In emerging markets, there is especially huge potential for P2P payments made on cell phones due to a lack of financial infrastructure. A high proportion of the population in these markets lack access to checking and savings accounts.
  • While developed markets may see slower adoption rates of mobile P2P payment apps, we believe they still have real potential in the long-run. These services solve real pain points for consumers, allowing them to transfer money to friends, family, and acquaintances. Our high-end estimate is that mobile P2P transactions volume could reach $86 billion in the U.S. by 2018. 
  • Kenyan telecom Safaricom provides an excellent case study for the success of mobile P2P payments in emerging technology markets. The telecom has a product called M-Pesa, which allows its users to transfer money to one another via text message. Largely as a result of M-Pesa's success, an impressive 92% of Kenyans say they have used mobile P2P payments. 
  • We profile 10 companies' P2P services that we think are indicative of the breadth of services on offer. Because of the large number of companies entering the space, we see a lot of potential for consolidation in the next few years. As mobile P2P payments take off and become more popular, a few services will begin to dominate regionally, or even globally. 
  • Mobile P2P payment services are usually free or nearly free to use, which raises the question of how they will be monetized. Different services have experimented with fees and even advertising. But mainly, these services will serve as Trojan horses to gain user trust for mobile-based retail transactions. Once consumers begin using their phones to send money to friends, the P2P platforms will be able to become multipurpose mobile wallets and nudge their users [...]