P2P payments volume remains low

P2P payments volume remains low

Pure Internet person-to-person payments have yet to prove viable as a sole business channel, according to new research from TowerGroup.

A new report reveals P2P providers are having to adapt their Internet payment offerings to other types of markets such as business or government if they are to generate the fee income necessary to support viable businesses.

TowerGroup predicts P2P-associated payments services will generate a total of more than 100 million transactions in 2002 but only nine million of these will represent true person-to-person consumer volume. Instead, companies such as PayPal will generate transaction volume via payments to business accounts, says the report.

Online auctions remain one of the most robust opportunities for P2P payments. Approximately one-third of auctions are now settled using a P2P-type online payment service. However, according to TowerGroup, the majority of these auction payments are consumer-to-business rather than person-to-person in nature.

International payments including international auctions, immigrant remittances and EU cross-border payments also offer substantial opportunities for P2P players, as do charitable donation services and services developed for individuals with no established banking relationships.

Beth Robertson, TowerGroup e-banking senior analyst and author of the research, says: "The ability of many providers' P2P infrastructures to become multi-purpose has driven their growth into areas like international payments and even charitable donation services. Ultimately, P2P should not be viewed as a stand-alone service, but one that is enhanced by other related services and functions."

TowerGroup warns that financial institutions must avoid playing a passive role as the utility-level processor of payments generated by online activity. Instead, they must assume a leadership position in introducing and adding value to new payment-related services to safeguard their existing payment franchises.

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