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What you should know about person-to-person (P2P) payments

What you should know about person-to-person (P2P) payments July 13, 2022 print friendly version

In today’s world of electronic banking, the movement away from carrying cash, contactless payments and the expectation for things to move quickly, many people are opting to use a person-to-person (P2P) payment solution.  Whether you are paying your rent, splitting the dinner bill or sending a birthday gift, this method of payment continues to grow as one of the most convenient methods of payment.  Rarely will you see a check written with this option readily available.

Person-to-person payments serve as a method to transfer funds online from your bank account to another person via the internet or with a mobile device.  These payments can be sent using the recipients email address or mobile phone number.  You do not need the recipients account number.  Some P2P payments are in real time which means that the payment is made available to the recipient within minutes.  Others take a couple of days for the money to be sent.

There are two different approaches to utilize this type of service.  The first option is using a service provided by your financial institution.  You can access this service through Online Banking or Mobile Banking.  The recipient of the funds would receive a notification either by email or text that would direct them to the online interface to input their bank information to accept the transfer.  Using this method, the recipient does not need to have an account with your financial institution.

The second and more common approach is by establishing an account with a third-party vendor.  These venders include companies like Venmo, Zelle and Apple Pay.  Both you and the recipient must establish an account with the vendor for the transfer to be completed.  To do so, both you and the recipient would provide your bank account information to the vendor.  Transfers are completed through the third-party app or website.

When you establish a P2P payment with your account number the payment is sent through the ACH (Automated Clearing House) Network.  This means that your transaction is processed similar to the way an automatic debit or direct deposit is processed.

When you establish a P2P payment using your debit card number the payment is sent using the debit card network.  By using a debit card your transaction is processed as a debit card transaction.  This means that you are subject to debit card daily purchase limits, debit card high risk blocked areas and travel restrictions when purchases are made out of your area.

Choosing the P2P option that best suits your needs is a personal decision.  Whatever service you choose, make sure you understand the terms and conditions for that vendor and keep an eye on your account.

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