Person-to-person payments systems are maturing into a business tool.
For years, these systems have been pitched as the ideal way to split a dinner check or send money for mom's birthday — a solution in search of a problem, many said. But there was a problem out there for this technology to solve. It wasn't paying mom; it was paying the landlord.
Vendors have woken up to this fact and have been building new features that would allow landlords and other small merchants to use P-to-P systems for sending invoices to customers and payments to suppliers.
"The true consumer-to-consumer volume of this has still been so low," said Ron Shevlin, a senior analyst with the Boston research firm Aite Group LLC. "The … opportunity is still more on the business side than it is on the consumer side."
Fiserv Inc. is gearing up to release new features by the middle of 2011 for users of ZashPay, a P-to-P service it began offering to consumers and banks in 2010. CashEdge Inc. is rolling out similar features for its Popmoney P-to-P service this month.
Fiserv plans to make it possible for a consumer to electronically pay small merchants using their banks' online bill-payment system, a method that has typically been available only to large billers.
Small merchants paid through online bill pay typically receive those funds as mailed checks today, and Fiserv predicts that those merchants would welcome a switch to electronic payments, particularly if it can tie into the already popular online bill-pay interface.
"For small businesses to get compelling value out of a service like ours, they don't need to ask their … customers to do anything all that different from what they're doing today," said Erich Litch, senior vice president and general manager of consumer services at Fiserv.
The Brookfield, Wis., company has about 200 banks and credit unions that are offering ZashPay to their online banking customers. It expected that number to reach more than 400 by the end of 2010, Litch said.
"We're just constantly adding into the queue," he said.
Small businesses, particularly very small ones, can use a P-to-P system to convert cash and check payments they receive from their customers and vendors to electronic payments, which typically are faster, Litch said.
"Every month we send out 9 million paper checks to small businesses," he said. "You get a sense for how many payments we can impact through an initiative like this."
In addition to being able to receive electronic payments from consumers via a bank's online bill-pay system, small businesses could also use Fiserv's added features to send an invoice to request money from a consumer.
Businesses that enroll to receive payments through ZashPay can use various identifiers to make it easier for customers to locate them, including their mobile phone number, e-mail address and physical address.
CashEdge is planning to allow small businesses to use its Popmoney service to send invoices to consumers or other businesses, said Catherine Palmieri, global head of product and marketing at the New York vendor.
"It's all recognized back within the online banking" site, she said.
Under CashEdge's system, small merchants would be able to offer discounts for paying early as well as penalties for late payers. Businesses also would be able to create customized invoices with their logos and use the service to track payments to multiple recipients for merchants operating more than one business.
"Because it's completely integrated within your bank … when you receive a payment it directly goes into your bank account," Palmieri said.
The small-business market represents a ripe opportunity for a system like Popmoney given merchants' high level of online banking activity and the fact that existing invoicing and payments systems have mostly been out of their grasp, built for large companies, she said.
"There are 30 million small businesses in the U.S. today and over 60% of them bank online," Palmieri said. "They are interested in electronic services. They are willing to subscribe to fee-based services. Of course it is a revenue opportunity for banks."
More than 175 banks are set up to initiate payments with Popmoney, Palmieri said. Payments have been picked up at more than 3,700 financial institutions, she said. A consumer does not need to bank at a financial institution that offers Popmoney to receive funds through the service, as it can also be accessed through a website CashEdge maintains.
CashEdge is looking at adding other business services to the P-to-P system as well, including batch invoicing, the ability to do credit memos and refunds and enhanced receivables tracking.
