Should you accept P2P payments in your business?
In the world of PayPal and Venmo, it’s likely that you use P2P payments in your personal life.
Maybe you send your share of the restaurant bill via PayPal. Or perhaps you send transfers to a family member who banks at the same institution via their P2P payment platform. Perhaps, like me, you use Venmo to pay for your portion of the rent.
Since P2P payments aren’t going anywhere, the question then becomes, should you start accepting P2P payments in your business? Many services are moving in this direction. But does it actually work when trying to conduct business?
The Pros of P2P Payments for Business
We all use P2P payments in our personal lives, but does it also provide the same advantages for business?
The most obvious advantages of accepting P2P payments in your business are that it’s convenient. You may also pay fewer fees. Some companies are also moving into allowing businesses to take P2P payments straight from their websites.
P2P payments allow you to accept payment right from your smartphone. Since there’s no middle man, that also means fewer fees. However, fees will depend on the merchant.
You can also argue that there’s an added level of security because the client or customer wouldn’t be giving the service provider their financial information. Instead, they give it to the P2P payment provider and they take care of the rest.
Of course, then you’d better hope the P2P platform is doing their due diligence in keeping sensitive information safe
The Cons for Business
Despite it’s convenience and popularity, there are still some cons to using P2P payments for business. At the very least, there may be some kinks that need to be sorted out before your accountant tells you to jump on board.
- B2B payments. In order for P2P to work for business, the payment provider needs to allow for business to business payments. This means the platform would have to allow for non-individual accounts and have some way to support accounts for business use. Some P2P platforms already have the option for companies to accept payments from individuals, but there still may not be a way for a company to pay another company.
- Paying contractors. P2P payments could lead to some extra headaches for paying contractors because it’s essentially like paying people with cash. This means you’ll have to watch it like a hawk in order to send a 1099-MISC with the right amount. And forget about paying employees via P2P because there’s no way to account for things like taxes.
- Fees, fees, fees. The reality is when it comes to P2P payments, fees are all over the place — even for transactions among individuals.
- Delays in receiving payment. Notifications of transactions are sent immediately, but that doesn’t mean the money hits your bank account right away. This again depends on the service you use. Some P2P payment companies act like more of a middle man which could lead to extra delays in getting your money.
- Forget about auto-billing. One of the beautiful things about merchant accounts is they can make it easier for you to get paid in the form of auto-billing or automatic payments. For example, all of my coaching clients sign up to pay me automatically once a month. They’ve given their information and signed off on allowing the business to automatically charge for the service each month. Unfortunately, you can’t really do this with P2P payments which can make it more difficult for businesses to get paid.
- Refunds can be difficult. Trying to send a refund via a P2P payment platform is not easy, and as a business owner, you need to know you can issue refunds if need be.
- Errors are more likely. Because you’re dealing with person to person and not B2B, errors are more likely to occur. That means someone could send a payment to the wrong email address. Again, this is just too risky for merchants.
Social Media and P2P Payments
The social media aspect of P2P payments for business is a bit of a toss up. When consumers pay a company, it shows up in their feed. Whether or not this bothers people is a matter of personal preference, but businesses may not want all that information out there.
On the other hand, some businesses may want the social proof as a way to stand out from the rest. If your customers are sharing with their friends that they paid you, that’s basically free advertisement.
The Future of P2P Payments for Business
While there are still some kinks to sort out for accepting P2P payments for business, it’s not like platforms haven’t noticed the major opportunity for merchants to use P2P.
Merchants Accepting P2P
The LA Times recently reported on all the changes going on in the P2P payments industry as they move toward becoming more merchant friendly. Right now P2P platforms like Venmo are focusing on targeting companies with more of a social aspect — like buying tickets to a game or restaurants.
Companies Paying Employees and Customers With P2P
Additionally, insurance companies may be getting in on the game and using P2P platforms to disperse payments to customers. The article notes how this could save insurance companies time and money in the long run.
Big banks are also moving in the direction of allowing their corporate clients to send money to customers and employees.
So the good news is that although P2P platforms may not be great for merchants as of yet, changes are being made to move in that direction. With the amount of money in the industry and the ease from a compliance standpoint, there are several advantages for businesses and P2P platforms know it.
How long it takes for P2P platforms to roll out features for merchants is up in the air, but there’s a good chance it’s happening sooner rather than later.
That means that as a business owner, you’ll want to keep an eye on when these features become available. Because, at the end of the day, your job is to make it easy for people to pay you.