Peer-to-peer payments is one of the key elements of next generation payment platforms. There's a huge pent up demand for the ability to make frictionless, immediate payments from person to person. Whenever a group of friends are out having a good time, the last thing they want is an awkward moment that interrupts the fun. It really hit home for me a couple of weeks ago when I went out to dinner with some friends.
I had decided to bring the lady that I'm fond of to meet my friend and his brother for a nice meal. As we were ready to leave, the waiter brought us a check that was split in half. I was happy to pay for myself and the lady I was with. My friends, on the other hand, didn't have it so easy. They were inconvenienced with trying to figure out how they were going to split their share of the payment.
We decided to go barhopping after we finished dinner. All the while, the two brothers were trying to get a running figure of their costs. We went to several different places as the night went on. The situation got even more complicated once we had a few friends join us for a drink or two. Of course, the bar staff had no idea who had ordered which items. We were just presented with a single check. It would have been extremely convenient if we could send a message to a friend saying, "Your drink cost $10. Please send me the money because I'm taking care of the tab.
At the end of the evening, one of the brothers ended up paying his share of the cost by performing an overnight bank transfer. I found the whole situation hilarious. While my friends were all quite happy to transfer the money, they wanted the process to be frictionless. They didn't want to have to remember exact amounts or go through several unnecessarily complicated steps. There's clearly a need for a convenient way to handle real-time, peer-to-peer transactions quickly.
We're currently witnessing various stages of peer-to-peer technology rollout across the globe. Bear in mind, real-time payments are typically a prerequisite. Institutions in some geographies have written their own mobile apps to make peer-to-peer payments a reality. There's also a big push to adopt real-time payments and peer-to-peer payments in fast moving markets. Australia is on track to launch NPP in 2017, and real-time/peer-to-peer payments are part of the definition of that framework.
The only players currently in this space are confined to individual banking systems. The actual transaction isn't even real-time under the hood. It's actually overnight batch processing where the bank is self-insured. Many different jurisdictions have even made such a system impossible. There's now a legal requirement stating that real-time payments have to actually be real-time and not an overnight batch process. That's definitely the case in the emerging markets of Australia and the UK where real-time and peer-to-peer payment capabilities are being brought online in the next few years.
