In a recent interview with Bank Systems & Technology on the future of peer-to-peer payments Arkady Fridman, head of business development at PayPal's Financial Innovations, talked about the advantages of the company's partnerships with financial institutions on mobile payments. PayPal's Financial Innovations team works specifically to partner with financial institutions to offer P2P services.
"We are now working more closely with banks. We bring the best of our assets together with the financial institution's assets to find solutions," Fridman says. "We look at transactions and we find an overlap in the customer base [of PayPal and the financial institution]. We have a mutual customer."
As a payments company looking to drive transaction volume, Arkady says that these overlaps provide opportunities for PayPal and the partner financial institution by improving customer experience and digitizing costly paper transactions with peer-to-peer services. PayPal has partnered with banks in the past such as USAA to offer electronic P2P payments and continues to roll out new initiatives designed for financial institutions that it partners with.
One such initiative introduced last fall has been providing new account funding through PayPal's mobile wallet. Banks who partner with PayPal will be able to offer its customers the ability to open up a new checking account with funding for the account coming from the customer's PayPal wallet. PayPal cites research from Javelin Strategy and Research released last year that says that nearly half of online applicants for basic checking accounts don't succeed in opening and funding an account, leaving the bank to take on the cost of creating and maintaining the account. And a recent survey on mobile payments by IDC Financial Insights found that of those respondents who use mobile payments, 56 percent of them use PayPal.
PayPal has tried to tailor its P2P offerings for financial institutions in a number of other ways. For instance, they have removed the need for the customer to have a PayPal account to use its services; customers simply use their email address and their phone number to sign up for the service with their financial institution. And PayPal's P2P services for financial institutions are designed to work across online, mobile and ATM channels, Fridman says.
Although PayPal's solutions are designed with API's to work across multiple channels, mobile is where PayPal is seeing the most growth in P2P payments. Fridman says that the volume of PayPal's mobile payments has increased from $4 billion last year to a projected $7 billion this year.
As we note in an upcoming article on P2P payments in our August digital issue, there are an increasing number of new players in the P2P market that PayPal will have to compete with. CashEdge, a subsidiary of Fiserv, combined its Popmoney P2P service with Zashpay a few months ago. And Bank of America, Wells Fargo and JPMorgan Chase customers will soon be able to make P2P payments to each other with a new service called clearXchange that the three big banks just recently rolled out. The P2P market is starting to get more crowded and how PayPal will perform in this changing landscape remains to be seen.
But Fridman says that PayPal's advantages of a global customer base and 14 years of experience in P2P payments will help keep it competitive. And a little competition never hurt anyone, says Arkady: "As competition increases, it just makes everybody better."
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio