There’s no shortage of exciting and convenient payments technologies these days, but none are as buzzworthy as P2P payments. When cash used to be king, people exchanged cash or paper checks to settle debts. But times have changed. Whether paying the babysitter, splitting the rent with a roommate or sending a birthday card to the grandchildren, electronic forms of payment are increasingly used instead of cash or check. And one of the most popular electronic forms of payment is person-to-person (P2P) payments that allow funds to move from one person’s bank account (payer) to another person’s bank account (payee). P2P payments work as follows; you create an account with a P2P solution like Touch n Go, link your credit or debit card or bank account, and you’re all set to go. The next time you borrow RM20 from your best friend or want to split your family’s dinner tab, you can do so just by transferring funds from your account to theirs in just a click or two.

So, before you start transferring money to your friends and family, or accept them as a business owner, security is always top-of-mind. Here are the advantages and risks of P2P payments.

 

Advantages

Hands down the main advantage with P2P payments is the convenience, speed, and ease-of-use. As mentioned earlier, transferring funds from one person to another can be accomplished through a click of a button. P2P payment capabilities are convenient, easy to use and offer fast transactions when the recipient is registered with the network. They are popular among consumers needing to split a lunch bill, share the cost of a ride, or pool together on a co-worker’s gift.

Another perk is the costs involved. Unlike many other payment solutions that involve several middlemen, P2P payments, especially cryptocurrencies like bitcoin, are between two parties. This means that you don’t have to pay for expensive transaction, processing, or service fees. In fact, most solutions don’t charge users when they receive money.

 

Risks

Despite the awesome advantages that I just listed, there are some risks involved with P2P payments.

For starters, refunds are hard, and possibly non-existent to initiate, since there isn’t a middleman involved, such as a credit card processor or regulatory body. This means if you paid a merchant via P2P and the product was defective, it’s up to the merchant to issue the refund

Some other considerations are transactions may still take one to three business days, transactions fees around 2 percent and human error like sending money to the wrong email address.

However, the biggest concerns involving P2P payments are fraud and security. While P2P payments are secure, they’re not infallible. For example, news reported several Venmo users have had their funds disappear without explanation and platforms like Dwolla have been hit with a $100,000 fine by the Consumer Financial Protection Bureau the service “did not adopt or implement reasonable and appropriate data-security policies and procedures governing the collection, maintenance, or storage of consumers’ personal information.”

Nowadays, if companies do not take proper precautions against fraud, they will be hit with fines. The hope is that this can close the gap better on loss from fraud. Companies will have to stay ahead of the fraudsters who will always be ever present everywhere.

If you have your bank account connected to your account, you could be putting your personal data in danger and may want to consider un-linking these two accounts.