The Peer to Peer (P2P) payments space is accelerating in the Fintech age. More and more companies are addressing the consumers' problems from multiple angles.

1. First, there are the traditional payment firms that are focused on tapping into a prominent pain area for banking customers. Venmo (now Paypal), Paypal, Dwolla, FiServ PopMoney, ClearXchange are some of the companies that have razor sharp focus on faciliating payments and making it as seamless as possible. Payments are now made by just specifying an email address or phone number of the recipient.

2. Then there are firms that faciliate payments and are garnering market share based on secondary effects of payments. For example, apps like Clink, Acorns and Digit (not yet) embed themselves into your daily payments and banking ecosystem and move a little money to appropriate investment accounts.

3. Banks too are finally  jumping into the fray with ClearXchange, a bank network that allows P2P payments between account holders of member banks. This mechanism is very similar to Dwolla and PopMoney, with the main difference being that the banks showcase this as "their" network. However, with the sale of the ClearXchange consortium to EarlyWarning, we should expect fees and other revenue generating mechanisms kick in soon.   

4. Finally, we might expect our non-fintech favorites Apple Pay, Google and Samsung Pay to make payments even more seamless than they have made already. A fingerprint is all it takes to transfer money in-context and without any annoying friction.

While exciting, all of this is only painfully and slowly moving towards solving the real problems for consumers and small businesses. In addition, each of these solutions continues to rely on the back end credit card payment mechanisms. Direct debit payments help reduce the fees built into the system, but fall short of massive customer adoption because of the customers loyalty that is tied to various types of card schemes (cash back, miles or points). 

That brings us to the other side of this payments conundrum. Loyalty and gratification. While there are many business loyalty programs, very few have come close to linking loyalty with payments. For example, Plenti is a program every one can subscribe to, but its limited in the sense that it approaches the problem from a big merchant perspective and competitors are obviously not allowed to join. In addition, it still relies on card network payments so has little appeal for communities and small businesses. There are many other loyalty programs such as Belly, Five Stars and others but they address only 1 side of the equation - loyalty and marketing for businesses. Plus they haven't reached the critical mass and maturity yet to link multiple facets of a consumers life. There are also obviously many sides to loyalty than just reward points and I wrote about that here.

So what would help P2P payments reach escape velocity? Getting both sides of the ecosystem - namely payments and loyalty - to come together seems to be a sure shot way. Its a gaping hole in the market today. What could this ecosystem look like from the perspective of multiple stakeholders:

1. Small business - relying on cash and cheques for most payments, and always looking to minimize intermediary fees when they can't avoid them, these payment mechanisms - especially ACH based ones - in my opinion will see immediate pick up. Especially when they have sticky mechanisms such as repeat visit discounts, promotions, refer-a-friend and other such features built in.   

2. Community banks - Caught in the middle of big banks, and now fintech enabled big banks, community banks need to be able to fulfil their real promise of being closer to the communities they serve. Technology and cookie cutter products have held them back for a long time, but a loyalty platform that mixes payments will help them break through the sameness, and offer customized programs that extend their reach beyond physical boundaries of their local communities.

3. Consumers -  While consumers love the rewards their cards provide them, the big pain point every body has is the paucity of contextual offers and relevant discounts they are actively looking for.  Most marketing programs by big and small business alike are based on guesswork and statistics today. An ecosystem that helps customers get the offers they are actively looking for will be far more attractive than weeding through irrelevant offers. For example, tapping into a single good offer may offset all the loyalty points earned in a week. 

The P2P payments and business loyalty space has opened up dramatically and progress is being made everyday.  Here's hoping that payments and loyalty will come together in a low fee and outcome based model. Its a complex marketplace with many knots that need to be untangled, but its a combination whose time has definitely come.