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Digital Wallet Guide

Use a Digital Wallet to Drive More Business

Make and share highly secure payments, receive money, and strengthen bonds with customers and clients with digital cash.

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All the Payment Types You Need

A digital wallet can carry all your payment types. Add your credit card information, online payment details, and bank account numbers. When you’re ready to pay, simply choose the method that suits you best. 


You’ll always be able to pay the way you want when you want—for whatever you want.

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Fast, Hassle-Free Checkout

Give your business the easiest way to complete transactions. Let customers move from shopping through checkout with just a few clicks.


With payment details already entered into a digital wallet, buyers only have to authorize payments and enjoy their purchases. Digital wallets let sellers make more sales and take faster payments.

Safe, Private, and Secure

Digital wallets use the latest encryption and security technology to ensure that all financial information is stored safely and securely, and can only be accessed by the user.


No data is uploaded to third party servers and all information stays with the owner.


Buyers get all of the convenience of a modern payment system—as well as the privacy and security that the latest encryption technology can provide.

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Instant Peer-to-Peer Payment System

A digital wallet lets anyone pass funds directly from one person to another. Simply choose the recipient, enter the amount, and authorize the transaction. Within seconds, the funds can be debited from your account and reach the other person’s. It’s perfect for instant payments.


Digital Wallets are for Businesses, Friends, and Everyone Else


Use a digital wallet to take and make payments in stores, at stalls, and anywhere you buy or sell. Return loans, split restaurant bills, pay your share of ticket purchases, and give cash gifts. Digital wallets are for businesses, for friends, and for relatives. They’re for everyone.

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Table of Contents



Businesses looking to make payments to each other now have an abundance of excellent choices, each with their own advantages and disadvantages. From wire transfers and automated clearing houses to dedicated invoicing and payment platforms like, the frequent and often large payments that businesses need to make have become a powerhouse of opportunity for finance firms. Those important and considerable movements of money have encouraged companies to create channels to ease the process of making payments, keep the options secure and enable businesses to monitor the tracking of invoices and approvals. Without the help of finance firms, businesses would soon grind to a halt.


For individuals who owe money to other individuals however, the options set up and afforded to businesses are too big and too clumsy. No one is going to send a friend a wire transfer to reimburse them for their share of last night’s dinner tab. When siblings buy a pair of concert tickets, or purchase their mother flowers for Mother’s Day, they’re not going to set up an ACH account to split the costs. When a set of parents club together to buy the class teacher a present for Christmas, the head of the PTA isn’t going to open a joint bank account to which everyone has access.


The main methods of making those small payments between individuals have long been restricted to two options: check or cash…and cash was always easiest. If your friend wrote a check and you deposited it in your bank account and it “bounced,” well, you were out the money. Any other method for splitting bills meant instructing a bank or some other regulated operator, like Western Union, to send the money. The middleman would then have to ensure that the buyer had the funds they want to send, insure the payment, oversee the security of the transfer and notify the recipient that the funds are available. Needless to say, this process is expensive and can be quite slow. For people who are able to meet their debtors in person, cash has always been a better choice.


But in an economy in which payments are becoming both increasingly digital and international, cash isn’t always an option, and neither is sending a check. Individuals working in foreign countries want cheap, reliable and safe ways to send money back to relatives at home. People living in large countries from the U.S. to Indonesia, and in particular Africa, want to be able to receive payments from buyers and relatives on the other side of the nation, or world and even friends want to be able to repay small debts without having to go to the ATM and pull out notes late at night, (with the accompanying ATM fees). Now that money represents numbers in an account rather than paper in a wallet, there’s a need for services that allow anyone to transfer money, in a simple manner, from one person to another, ideally with no more than a swipe on their mobile phones. If it’s possible to pay for a coffee by waving a smartphone over a reader, there must be a way for two people with similar devices to send funds from one to the other quickly, easily and cheaply.


Services that allow these kinds of peer-to-peer payments have developed and evolved into substantial platforms which are providing individuals with the ease of transferring cash. According to Business Insider, the global market for peer-to-peer transfers and remittances is now worth well over $1 trillion. By 2018, the U.S. market alone for P2P payments could be worth as much as $86 billion.


In this guide, we’re going to explore how these payments are being made. We’ll take a close look at the leading methods of making P2P payments, we’ll assess the risks involved in using the available options, and we’ll discuss ways of keeping transfers safe when you’re entrusting a platform with your money.


We’ll start by assessing the different platforms with distinct preferences of enabling P2P payments. Obviously, services that took care of money and payments before used to be restricted to banks and registered money transfer firms. Now, these banking institutions face stiff competition from a range of companies both large and small. We’ll take a close look at the main companies offering P2P payments. We’ll talk about how traditional firms like Western Union now operate, how digital companies like PayPal came in like a wave, bringing a new kind of competition aimed initially at small business owners – but whose infrastructure can just as easily be used by individuals with debts to settle among friends and family. We’ll explore how social media firms such as Facebook and Snapchat are trying to turn their text messaging services into money transfer services, and why they’re struggling to take off. And, we’ll look at how cryptocurrencies like Bitcoin are enabling peer-to-peer transfers and raising the kinds of security we have been looking for in the P2P payment user market.


The ideal of being able to send money from one mobile phone to another has started to come true, and we’ll also be examining the best apps for making quick payments, even while both parties are still sitting in the club and dividing up the bill.


In the next chapter, we’ll look at the risks these new methods can raise. There is no completely safe way to send money from one person to another. Hand over cash, and you can be mugged at the ATM… or your friend can be robbed on their way home. Checks can be forged, changed and defrauded. And money sent through companies like Western Union can be lost or stolen en route or picked up by people for whom the money wasn’t intended.


The new methods of sending money between individuals all throw up their own security risks, from account hacks to stolen smartphones that leave access to payments when apps are left open, instead of logging off. We’ll explore these dangers and assess the degree to which they pose a threat to people who wish to send money to each other, and how you can guard against loss.


We’ll then look at ways to reduce risks. Some of these methods to reduce risk have been talked about for years in the security world, and are straight forward, such as keeping passwords safe, not opening unsolicited attachments and shutting down phones as soon as they’re stolen. But as the methods of payment have become more complex, so the methods used by thieves have also become smarter and more dangerous. We’ll look at what people should be doing to keep their peer-to-peer payment programs safe, and what they should do when they believe they might have been hacked.

The History Of Peer-To-Peer Payment Systems

Let’s take a dive into the history of peer to peer payments. The process of passing money directly from one person to another predates banking. Merchants have always needed a way to pass money from buyer to seller across long distances. Hawala is mentioned in Islamic texts dating back to the eighth century. It was used to finance trade along the Silk Road, sometimes called the Silk Route during the early medieval period.

The system works without promissory notes. A customer will give money and passwords, or other identifier to a local hawala for remittance to someone not present. The local hawala broker will pass the information to another broker in the recipient’s city. The recipient, who knows the password, can then approach their local broker and receive the payment minus the broker’s commission. The first broker can then repay the second broker at some point in the future. A transaction that can take the form of an exchange of services, property ownership or other form of value. In addition to fees, the brokers can also earn profits based on the differences in exchange rates.


Who can use it?

So if a Pakistani taxi driver working in New York wanted to send money to his mother in a village in Sindh, he could leave the funds with a Pakistani broker in Manhattan. His mother would immediately receive a text on her phone in the village informing her that money was waiting for her with the broker’s local contact. Neither side needs a bank account and because no money actually moves, the transfer of funds is almost instantaneous.

It’s a system that relies on honor, trust and contacts more than on any legal framework. Traditionally, each broker keeps a running total of amounts owed to and by other brokers but records can be informal. That lack of formal paperwork, among other things, has made hawala an illegal system but it is popular with money launderers and other criminals, bringing attention from international law enforcement agencies. The brokers have responded by recording the identities of customers and checking them against databases of known criminals and terrorists. Transactions are now carefully recorded and customers will often have to undergo biometric tests and leave thumbprints. What started as an informal credit system has now evolved into an international business still used by millions of foreign workers around the world.


First money transfer

The first forms of money transfer used in the West look much clumsier in comparison, and arrived much later. The company that would become Western Union was formed in Rochester, New York, in the 1850s and was initially a telegraph company. Although it offered the first charge card to customers as early as 1914, it wasn’t until the 1980s that Western Union reinvented itself as “the fastest way to send money worldwide.” The company, together with its cheaper and more international competitor Moneygram, still represents one popular way of transferring money over long distances.

What really changed the playing field for peer-to-peer payments though was the rise of PayPal in 1999. For the first time it became possible for anyone to add funds to an online account and send them to a recipient—someone who might not even have an account and had only supplied their email address—without leaving their home or seeing a bank. The banks themselves followed with their own services but it took until 2011 for Bank of America, Capital One, JPMorgan Chase, US Bank, and Wells Fargo to come together to offer ClearXchange, a service that allows anyone with a bank account to send money to anyone with an email address.


Mobile phones

The growth of mobile phones, however, changed the financial industry (and everything else in our world). The mobile phone influence is growing, is convenient, and it appears to be here to stay. For many in the U.S., P2P payment platforms are a useful tool, and an easy way to solve a common problem. Elsewhere in the world, these P2P payments are vital.

In Africa, mobile peer-to-peer payments have transformed a continent with high cellphone penetration but limited banking services. In 2013, more than two-thirds of Kenya’s adult population was reported to have an account with M-Pesa, the country’s mobile payment system, allowing a worker in the capital Nairobi to easily send money back to his family in a remote village.

As much as a quarter of the country’s economy is said to flow through the service. Cheap mobile phones in Africa had already allowed farmers to gain a clearer understanding of the value of their produce; being able to call distant markets gave them a greater choice of buyers than only those in the nearest market. Additionally, family members could quickly send money from commercial centers, reducing inequality and increasing mobility and opportunity. According to one report adding ten mobile phones per 100 people in a developing country boosts GDP growth by 0.8 percent. The incomes of households in Kenya that use M-Pesa have increased by 5-30 percent.


Growth matters

So the growth of peer-to-peer payment systems matters. Students at American universities care as they wonder how to split the pizza bill between housemates in a dorm room. It matters to parents who want an easy way to send money to their children, and vice versa. It matters to developing countries where mobile payments have allowed even the poorest communities to skip the slow growth of banking services and be able to build financial connections with low costs and no middleman.

And the growth of mobile and peer-to-peer payments matters to entrepreneurs. Peer-to-peer offerings come in a wide range of different ways of moving money from one person to another.

Forms Of Peer-To-Peer Payments: Multiple Ways To Give Money To A Friend

Go back twenty years. It won’t take long to count the number of methods you could use to pass money from one to another. If you wanted the money to reach someone far away, you’d probably head for Western Union or Moneygram. Back then, they didn’t have any kinds of Peer-to-peer payments. If you’re sending large sums to another bank account, you might pay for a wire transfer. Let’s say you were content to take the risk of loss. You might trust a check or cash to the postal service, and hope it wasn’t lost or stolen. For grandparents who wanted to give their grandchildren money for their birthday, the traditional was always a banknote or check wrapped in a birthday card.

Each of those methods had flaws, and those flaws were serious. Western Union remains an expensive way to send money abroad or across the country. Although the amount of the fees varies depending on the service, it’s not unusual for the sender to have to pay as much as 7 percent of the transfer sum in fees.



Like Western Union, wire transfers have the benefit of being relatively secure. The financial institutions are middlemen, ensuring security of the transfer and that the sender has the money they’re transferring. Though the system is getting somewhat better, the process has been difficult. Both sender and receiver need to own a bank account. The sender also needs to know the recipient’s account details. Fees as high as $30 per transfer mean that wires were better used for high payments. The fees have been considered rather high to settle small debts between friends. While the transfer of checks and cash can avoid those high fees, the loss of protections makes these choices fundamentally insecure, with few if any safeguards against theft, loss or fraud.

New payment systems attempt to provide security, reduce fees and deliver greater convenience by moving money instantly through devices as common and familiar as our mobile phones. By using a decentralized distributed ledger, cryptographic protocols and peer-to-peer networks, mobile phones are able to record transactions across a network of computers instead of centrally, cutting out the (expensive) middleman. Because a mobile payment system doesn’t require the sender to know sensitive information such as account numbers and sort codes, payments can’t be replicated, and they can’t be reversed, so the recipients can be certain that they’ve received the funds they’re owed.



The new world of peer-to-peer payments should make all payments between individuals. This is whether they’re sitting together or on opposite sides of the world – quicker, safer and cheaper.

But the range of the services is now also much broader. Once, people hoping to send money had a limited choice of weak options. Now we’re spoiled with so many choices among multiple options, each with its own weaknesses and strengths. In this chapter, we’re going to look at the most important of those options, explore how they work and explain the differences between them.


Western Union

Western Union, together with its rival Moneygram, is the grandparent of peer-to-peer payment systems. Midway through its second century, the one-time telegraph company might have long abandoned the use of the telegraph wires and regular dots and dashes but its methods of sending money to all corners of the world now look no less antiquated.

To send money through Western Union, the sender normally visits a Western Union office, provides their own name and address, presents the funds, and gives the recipient’s name and payment destination. The company gives the sender a Money Transfer Control Number that the sender forwards to the recipient. The recipient can then visit a Western Union office in their own location, present the MTCN and ID, and receive the funds in cash. Sometimes, if the recipient doesn’t have an ID, they can use a password supplied by the sender.

If that sounds like the traditional Hawala method, it’s because the two are fundamentally the same. The difference is that instead of using a network of independent brokers who trust each other, Western Union is a single company with thousands of outlets scattered around the world.



It is now possible to send money without physically visiting a Western Union store by using the company’s website or mobile. But the process isn’t straightforward and requires the use of a debit or credit card. Fees can also vary; typically senders can expect to pay as much 7 percent for an international transfer.

The biggest benefit of Western Union is its international offices; many of the new peer-to-peer payment platforms have yet to break out of the United States. Companies like Western Union and Moneygram enable recipients around the world to receive funds in cash. They don’t need a bank account or even a mobile phone. As long as they have the MTCN, they’ll find money waiting for them at their local branch of Western Union.



MoneyGram is a direct competitor of Western Union, and works in a similar way. You can send money from one of its outlets, which can be located in pharmacies, post offices and convenience stores as well as dedicated offices, and you also send funds online using a debit or credit card. Fees are usually a flat $12 for transfers within the U.S. Depending on the destination country the money can be available as quickly as ten minutes after placing the money order. More typically, though, the funds will be available either later the same the day or, when sending money abroad, on the following day. The fee for international transfers can vary considerably too. Some commonly used destinations, such as Mexico, typically have a flat fee of around $10 but sending $500 from the U.S. to Ireland will cost $35.

MoneyGram’s biggest strength is in its network of locations for recipients. With hundreds of thousands of locations around the world, it’s possible to get money to someone in almost every corner of the globe.

On the other hand, if you’re picking up the cash in person from either a Western Union or a Moneygram site, you’ll only able to collect the funds during office hours. That’s something to bear in mind when someone far away needs money fast in the middle of the night.



The launch of PayPal in 1999 changed everything… at least for ecommerce. Internet sites that sold online now had an easy way to accept payments. With just a click and a form, visitors could place and pay for an order, allowing sellers to convert clicks directly into cash. The value the service offered for sellers became clear three years later when it had its IPO and was quickly snapped up by eBay. The separation of PayPal from eBay in 2015 freed the service to team up with the auction firm’s rivals, spreading its influence further. Being able to work with companies such as Amazon and Alibaba, (the most popular retail site in Asia), should begin to increase competition, reducing fees and improving services for customers and sellers alike.

The service works like a simple bank account. Opening an account is free, and funds can be added using a credit or debit card, by writing an echeck or by receiving funds from other users. With 173 million users in 2015 and revenues of $9.24 billion, PayPal is large enough to make it likely that both senders and recipients will already have accounts. If a recipient doesn’t have an account, however, it’s still possible to send the money to their email address; the funds will be waiting for them when they open an account using that address. Users can even bank the funds in their account and earn interest on their deposits.


Growth of Paypal

Since its launch, PayPal has set the standard for top digital wallet payments.

The company has had its critics though PayPal has worked to incentivize options to its customers. Recipients typically pay 2.9 percent of the amount sent plus 30 cents. While that’s comparable to the amounts charged by credit card companies, PayPal doesn’t provide credit or a float, has no risk and fewer hardware overheads. If a customers sums are continually higher than $1,000, wire transfers may be more attractive.

PayPal is stronger in personal payments. Send money from one PayPal account to the account of a friend or family, and as long as the sender doesn’t use a credit or debit card, there are no fees at all. However, that requires funds already present in the account and as the service is really aimed at small business owners or online merchants, these business may opt for larger amounts held in their accounts for sending payments.

PayPal seems to be a good way for e-tailers to take money from website visitors and is becoming a friendlier way to make peer-to-peer payments.


Square Cash

Many entrepreneurs are content to lead one successful business. Those businessmen and women who have managed to create more than one successful business generally launch one, develop it, and sometimes sell the business move on to develop the next progression. Jack Dorsey is currently the chief executive of two giant firms. Part of the team that founded Twitter, he is now the social media firm’s chief executive, a role he had held until 2008 when he was fired. Away from Twitter, he launch Square, a mobile payments firm that created a small credit card reader.

The reader plugs into the earphone socket of mobile phone and can be used to swipe a credit card and take digital payments. For owners of stand-up stores, sellers at art fairs and for vendors at farmers’ markets, the device has been a wonderfully simple solution to the difficulty of accepting non-cash payments in places that lacked permanent infrastructure.

Dorsey returned to Twitter as executive chairman in 2011 and became chief executive in 2015 but he also retains control over Square which has now branched out beyond the offer of a simple solution to occasional sellers who want to turn their mobile phones into credit card readers. Square also has an option for personal use. “Whether splitting a dinner bill with friends or paying your landlord for the month’s rent, Square Cash is the easiest way to send money,” the company boasts.


Square Recommendations

Square recommends that users who have business accounts open separate personal accounts and their Square accounts. It is good advice for any business to keep business and personal money separate. Square Cash, which uses, a different URL from Square’s, are different type accounts. Recipients can choose to keep payments in their “Cash Drawer” (on the app, in other words) or the money can be sent directly to the bank account associated with their debit card. This is a difference from PayPal which requires users to withdraw their funds manually (on their phone or computer) from their PayPal accounts, a process that can take a few minutes to a few days depending on the amount. Money sent to someone using Square Cash can arrive on the app or in the user’s bank account within minutes.

Personal payments cost nothing when the money is drawn from the Cash Drawer or made through a debit card but are charged at 3 percent when the payments are made with a credit card.

Free, personal payments made directly to a friend’s bank account using an app on a mobile phone makes Square Cash an attractive tool for people who want to make peer-to-peer payments. One limitation though is geographic location. Square Cash is limited to residents of the United States, located in the country and over the age of 18. It’s not a competitor to the international peer-to-peer services offered by companies such as Western Union and MoneyGram.



Founded in 2009 by a pair of Penn University roommates, and sold three years later for $26.2 million to a company later bought by PayPal, Venmo is now the closest to a standard in smartphone-based peer-to-peer payments. The service is so popular with millennials, who use it to pay friends back for concert tickets, drinks and even rent shares, that you can often hear students promising “to Venmo” each other some money.

It helps that Venmo is entirely free, provided that payments aren’t made through a credit card. (Those payments cost 3 percent.) When setting up a Venmo account, users have to choose their funding source. This can be their U.S. bank account, their Venmo balance, or a credit/debit card. Payments are made by choosing the recipient, adding the amount of the payment and indicating the reason for the transfer. Recipients then receive a notification that looks like the kind of Facebook message stream familiar to the service’s mostly young users. Under the contact’s icon, a message explains why they’ve just sent some money. It’s also possible to request payments (and issue reminders).

Unlike Square Cash, the money remains in the Venmo account until it’s transferred to a bank account. Venmo also limits payments to $299.99 a week until the user’s identity has been confirmed. It then rises to $2,999.99 per week.

It’s simple

Venmo’s simplicity, familiar design and non-existent pricing have made it a hit. In 2014, the company processed transactions worth $2.4 billion. That rose to $7.5 billion in 2015. In January 2016 alone, more than $1 billion passed through the system.

Although Paypal is expanding Venmo to merchants, the company does not appear to have any plans to move the service outside the United States. The service is best seen as working like a kind of digital check. Hitting the “Pay” button doesn’t actually transfer the funds; it only sends a notification that money is on the way. That gap leaves time for senders to cancel the payment. And if you’ve joined Venmo through Facebook then payments are shared by default with the members of your Facebook network. The ‘sharing’ option needs to be changed in settings, so as not to be a risk to privacy and security.

For the most part though, Venmo has done a good job filling a niche -supplying a need to send digital funds through smartphones between individuals.


Google Wallet

In 2008, Google started negotiating with PayPal with the aim of integrating a payment system on Android-based mobile devices. The talks dragged until, according to a lawsuit filed by PayPal against Google and two of its own former employees, Google suddenly backed off and hired PayPal’s negotiator, Osama Bedier. Bedier, said PayPal, brought with him confidential information, including PayPal’s plans for mobile payments and an analysis of Google’s weaknesses in phone-based payments. The launch of Google Wallet in 2011 replaced Google Checkout, which had been the company’s PayPal rival since 2006. Development on Checkout ended completely in 2013.

The first iteration of Google Wallet, however, was widely seen as a mess. The app wasn’t just a peer-to-peer payment system, like Venmo, or even a tool for merchants, like PayPal. It was both of them… and also an NFC-payment system that allowed users to pay for goods in stores by waving their phones over an NFC station.


The past

In September 2015, Google finally brought order to the chaos. The NFC and online payments were placed in a separate app called Android Pay, only available to Android users and competing directly with Apple Pay. Google Wallet would be usable on Android, iOS and through Gmail, and would focus entirely on peer-to-peer payments. Instead of competing with PayPal, Google is now competing directly with PayPal’s property, Venmo.

The service works in much the same way. Download the app to your phone, link it to your bank using your account details or your credit or debit card, and you’ll be able to send funds directly to other people using their Gmail address or phone number. Transfers are “usually instant” and limits are higher than those applied to Venmo and Paypal: transactions are restricted to $9,999 each and $50,000 over five days. (Floridians can send and receive $3,000 every 24 hours.) The funds remain in the Google Wallet account until withdrawn. There are no fees for sending or receiving funds but usage is limited to U.S. residents, although users in the UK can email each other funds. There are currently no international transfers.

The app launched without the ability to send funds through SMS, a service provided by both Venmo and Square Cash but Gmail has since filled that gap. When you send money through a text message, the recipient receives a text with a secure link. Having tapped the link, they can log into Google and enter their bank details to transfer the funds to their bank account.



While the privacy ramifications of text payments apply to Venmo and Square Cash as much as they do to Google Wallet (a text message suggesting that someone “clicks here for free cash” then asks them to enter their bank details looks a lot like a phishing scam) Google has other issues to face. The company might not make money from its transfers, any more than it does when an email is sent, but it does pick up information about purchases and relationships. So far there’s no sign that Google is using that data to target its advertising but users might want to think hard about the amount of purchase information they’re giving to a company that’s also capable of reading their emails and tracking their Internet browsing habits.

Both Google Wallet and Venmo allows users to send each other money by email.



The demo video for Facebook’s payment system lasted just twenty seconds. That’s because there’s so little to explain. The platform is integrated into the company’s Messenger app, so there isn’t even a special app to download and use. Anyone in the U.S. already using Messenger when the service launched in March 2015 would have been able to send money to friends and contacts directly using an app on their mobile phone.

In addition to the icons at the bottom of the app that allow users to add images and emojis, a new $ icon lets them add funds. The first time a sender taps the icon, Facebook asks them to add their Visa or Mastercard debit card information. (In order to avoid charging fees, the company isn’t using credit cards.) The sender can then enter the dollar amount, and hit “Pay.” The funds will immediately be drawn from the debit account and be made available to the recipient. If that recipient has already added their debit card, the money will pass straight into their debit account; if they haven’t, Facebook will prompt them to enter their debit card details.


It’s for users and advertisers

The system has been built entirely by Facebook, which adapted the payments platform it uses for advertisers. The transactions are free and like Google Wallet, Venmo, and Square Cash, remain limited to the U.S. The motivation for the service, however, may be different. Venmo and Square Cash are both dedicated payment services. Facebook is less interested in earning income from peer-to-peer payments than it is in keeping people on its own property. In an interview with TechCrunch Facebook’s payment product manager, Steve Davis, noted that as people talk about nights out and Uber fees, “conversations about money are already happening on Messenger… What we want to do is make it easy to finish the conversation in the same place you started. You don’t have to switch to another app.”

For Facebook’s users who want to send money to their friend’s contacts on the platform, the company’s payment’s feature can look like a useful service from a trusted brand, and one already baked into their regular mobile phone use.



What Facebook does in twenty seconds, its one-time purchase target takes two minutes to do in what must be the strangest launch video ever made for a piece of technology. Costumed performers toe-tap their way through a song-and-dance routine to explain how to use a social media app to transfer money. It’s not just strange, it’s also unnecessary; the process is remarkably simple. And coming from Snapchat, there’s no surprise that it can also be dramatic.

The service, which launched in November 2014, provides two ways to make payments. The first is to start typing a dollar amount in a message to a contact. As soon as the sender presses the dollar key, the send button becomes a dollar sign. Enter the amount and press that dollar key, and money will be transferred from the sender’s debit card to the card registered by the contact on Snapchat.

The second method is a bit more fun. Type three dollar signs in a row, and the screen displays a dollar bill. Swipe and the bills appear to fly off the screen. Once the sender is finished, they’ll be prompted to confirm the amount and money will be sent.

Whichever method is used, the recipient is notified by an animation showing dollar bills raining from the top of the screen. It’s all fun stuff that’s meant to turn the transfer of payments between friends into an event as much as a chore.


Who is this available to?

The service is only available to U.S. members over age 18. It can’t be used internationally, even on U.S. military bases abroad, and the only cards the service will accept are debit cards issued by Visa and Mastercard. Snap Cash has an initial limit of $250 per week which can be raised to $2,500 once the user’s identity has been verified. The service is free.

While Facebook adapted its advertising payment system to create its own peer-to-peer platform, Snapchat has instead turned to Square. The company created a mock-up, presented it to Jack Dorsey’s firm and formed a partnership. Users with complaints about the payments system are directed to contact Square’s customer support.

That suggests Snapchat has less interest in creating a for-profit payment platform that can rival Venmo so much as (like Facebook) keeping its members on a service that now generates almost as many daily video views a day as its social media rival. The pair shown in the launch video are youths splitting the cost of a gift purchase, and that demographic matches Snapchat’s user base, which is still mostly aged between 13 and 25.

While Venmo has successfully managed to penetrate the student market, Snapchat may be able to conquer teens. The question for both platforms is what happens as the users of each app age? Snapchat has successfully shifted its content from short-lived images of the sort users wouldn’t want their parents to see – to videos created by professionals who build stories and create personal brands. If that trend continues, Venmo, Snapchat and Facebook will all be engaged in strong competition for casual peer-to-peer cash transfers.



Venmo is a upstart. Facebook and Snapchat are more worried about their members leaving their apps for a few minutes. Popmoney is now owned by Fiserve, a company that supplies payment platforms to banks and financial institutions. While the service promises to replicate much of the functionality of Venmo and Paypal, allowing anyone to send money to a recipient using nothing more than an email address, mobile phone number or bank account number, it mostly operates through banks as a simple and free way for U.S. customers to send each other money. Recipients receive a text message informing them that they have received money and explaining how they can transfer it to their own accounts.


The mobile app

Popmoney has a mobile app. However, the iOS version has received little more than 150 reviews and an overall two-star rating. Users have complained of the need to enroll from a desktop instead of a phone, of money returned because the amount was too high or because the recipient failed to enter the right bank account details.

By aligning with banks, Popmoney appears to be trying to meet a need to transfer higher payments than the restaurant bills and shared tickets usually sent through Venmo. A number of the complaints about the app were made by people using Popmoney to pay rent. One user was told that her $1,100 rent money was too large for the system to transfer. Meanwhile, a landlord had his payment refused because he had registered his savings account instead of his current account.

Despite its limitations and its low functionality, Popmoney may have exposed a gap in the market. Much of the new peer-to-peer service has focused on replacing checks and cash for instant, low payments. But there is still a need to replace the checks and transfers needed for large payments such as rent.



In October 2015, the chief executives of Bank of America, BB&T, Capital One, JPMorgan Chase, US Bank and Wells Fargo issued a joint statement announcing the acquisition of the bank-owned digital payments network ClearXchange by Early Warning, a risk management service also owned by banks. “Our customers want the ability to make payments to anyone, in real-time, making funds instantly available in the recipient’s bank account,” the banks said in a press release. “With this acquisition, Early Warning is bringing together immediate funds availability, integrated authentication and fraud management capabilities into a single platform. The resulting security, reliability and consistency among financial institution payment services will provide a required catalyst to advance real-time payments.”

Senders can log in to either, or use their bank’s website or app. They choose the amount they wish to send, and transfer the funds to the recipient’s email or phone number. Recipients receive a text informing them that they’ve received a payment. They  can then sign up at their bank or at to receive the money directly into their bank account. The service only works at U.S. banks, and it’s free.


It’s not a payment platform

ClearXchange itself isn’t actually a payment platform. It describes itself as a, “real time message platform between financial institutions”. It informs banks of a request from one bank customer to send money to another bank customer. When a sender transfers money, the bank informs ClearXchange who passes the request to the recipient’s bank. The bank sends the funds and the recipient is informed.

The service’s website gives three examples of the sorts of payments that could be made using ClearXchange. Roommates can use it to pay the rent; insurance companies may decide to use it to send claim payments. Friends can use it to share the cost of “some great Thai food”. Even that last case study, shows older folk enjoying a meal rather than students who are targeted by Venmo.

ClearXchange doesn’t have an app of its own. It relies on the banks that own this offering in their own apps. Because of this, it requires users to plough through services available on banking apps to find P2P payment option. It’s less user-friendly because the transfers are performed through a branded portal familiar to users. It may also begin to win more trust among a demographic less familiar with the latest app offerings.

Popmoney might have tried to meet a demand for higher peer-to-peer payments. However, ClearXchange’s bank-based system has already created a network that has trust and security built-in.



Much of the competition over peer-to-peer payments is taking place on mobile devices, inside social media applications, and inside banks. These banks have teamed up to stop customers from going outside their own infrastructure.

Bitcoin is in a class of its own. A digital currency not backed by any national bank as of yet, bitcoin attempts to remove all intermediaries in transactions. It’s much more complex than any of the other peer-to-peer payment options. Users first have to obtain bitcoins in the same way that they might obtain a foreign currency. They can buy them on one of a number of dedicated bitcoin exchanges. They can also mine them. Mining is a process that requires buying dedicated hardware, downloading special software and joining with other bitcoin miners. Buying them or earning them by selling something in return for bitcoin is much easier.


Special digital wallet

The bitcoins have to be held in a special digital wallet. This wallet can be used to send and receive funds and transferring bitcoins is always free. There are no intermediaries and no banks. In all actuality, banks are easy to hack — but there are a number of safeguards in any blockchain. If you borrow money or make a transaction at a bank, the transaction is recorded once. In the blockchain ledger the transaction shows up on thousands of different computers — making the transaction near impossible to break.

The number of bitcoins available is controlled by the blockchain. The distributed ledger that ensures bitcoins aren’t copied or forged. Bitcoin exchanges may charge fees of around 1 percent for exchanging bitcoin into or from local currency. The value of bitcoin in relation to the dollar has also been highly volatile in the past. Coming to the end of April 2016, bitcoin has settled in and remains about a consistent $465. Bitcoin is still usable and exchanges well in other currencies, as well.

Of course, technology geeks, millennials, and early adopters have been in love with Bitcoin from the beginning. Now, other people are becoming comfortable with the system. For those who already use bitcoins, using an exchange to make peer-to-peer payments will be simple, free and painless. For anyone not currently using bitcoin, the process of creating a wallet is much like creating other “wallet” systems. Joining an exchange and learning the ropes of the system may take a minimal amount of time. However, its value can make bitcoin a practical, safe option.



Businesses and banks have spotted the demand for P2P platforms that will let anyone send money to anyone else. Users can now choose from a wide range of very different options. Deciding which options to use will depend not just on the features or ease of use of each platform. I will also depend on its popularity: the sender’s choice of platform often has to match the recipient’s. Currently, much of the choices are demographic. Teens are likely to begin with the use of Snapchat or Facebook, to send each other small amounts of cash.

For older folks, Due appears to be the current app of choice. What about for digital nomads and eCommerce workers? PayPal still appears to be the default option since these customers got used to PayPal years ago. For older folks, their banks’ may well be the P2P platform they didn’t know they were using.

But perhaps the most important factors of these payment systems shouldn’t be popularity, ease-of-use or price – but security. Just as in banking, peer-to-peer payments can leave funds vulnerable to thieves, hackers and crooks. Thankfully the gap is closing and platforms are taking security seriously. But, security will always be something that must be looked at. All financial operations will have a need to stay current on security measures and ahead of the hackers. We’ll look at security in the next chapter.

Know The Risks When Using Peer To Peer Payments

Like many people, Mohsin Charania (a famous poker player) used Venmo to make and accept payments between friends. He allowed the money to build up in the app, rarely transferring the sums to his bank account. But according to a report on ABC News, when the professional poker player from Chicago tried to use the app to send a payment to a friend he received a message saying that his account had been closed and the money removed. He hadn’t used Venmo for a week… and his account a week earlier had contained $2,000. This was in 2014.

“There was no notification on my phone saying, ‘$2,000 on your Venmo account has been cashed out’ or that your account has been shut down,” he told the news service. “I was kind of dumbfounded that something like that could happen.”

Venmo seems doubly vulnerable. First, by default, it automatically notifies a user’s Facebook friends whenever that user receives funds. In effect, it announces to potentially thousands of people, not all of whom are friends, that someone has money. Stealing that money would require little more than the ability to guess the email address and password used on Venmo by a Facebook contact.

But Venmo also didn’t notify users when changes were made to their accounts, a weakness it’s since corrected. So when hackers broke their way into Charania’s account and stole his money, he knew nothing about it. And when he did discover the hack, the only way Charania could notify Venmo was by using an online form. The company had no phone or live support.

Charania was able to get his funds back but only after writing about his experience on Twitter and using his social media network to retweet his experience.



A Reddit user called “tantalizer” was less fortunate. Writing on the forum in 2015 he explained that he had sold a couple of iPhones through Craigslist, and asked the buyer to reimburse him through Venmo. “I used Venmo because they claimed that ‘Venmo payments are completed instantly and cannot be cancelled,’” he wrote.

Three days after the money appeared in his account, it was gone. This time though, the party responsible wasn’t a hacker. It was Venmo itself. The company had refunded the buyer and frozen the seller’s account on the grounds that Venmo does not allow business transactions. “We don’t offer any buyer/seller protections or merchant dispute resolution services at this point, though we’re hoping to provide these services in the future,” the company said. It also failed to notify the recipient that it was canceling the payment.

The buyer promised to resend the money but stopped responding once he found that he was in possession of two iPhones and the refunded amount.

Even if they hadn’t refunded the buyer, “tantalizer’s” trust in the peer-to-peer payment platform would still have been misplaced. A September 2015 article in Time magazine argued that, like “tantalizer,” “many people seem to think Venmo cash transfers happen instantly. They don’t.”



In fact, the magazine continues, the payments are more like checks. The notification that Venmo users receive only tells them that funds are on the way, not that the funds have already arrived and can’t be charged back. Like checks the payments allow time—in this case until the next business day—to cancel the transfer. It’s one of the reasons that Venmo is still unwilling to allow business payments to be made using the service.

It’s not Paypal’s property—or PayPal itself for that matter. Dwolla, a PayPal rival that launched in 2010, was fined $100,000 in March 2016 by the Consumer Financial Protection Bureau. The government agency said that 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” until September 2012.


P2P Systems

These stories demonstrate the biggest risks of peer-to-peer payment systems. That’s the idea that an account secured by little more than a username and password can be easily hacked; that companies are storing large amounts of personal financial data in ways that may not be secure; and that funds held in a payments system may not be as accessible or as safe as the user believes.

But the direction in which peer-to-peer payment systems have developed adds a number of new challenges. For users of bitcoin, a currency with no safeguards and no way to reverse transactions, the risks are particularly high. Bitcoin crimes have traditionally had a fraudulent high-yield, but with new safety features such as blockchain, P2P payments, investment plans, and more are saving the venture. In February 2014, after complaints about slow withdrawals, the now defunct Mt. Gox, based in Tokyo, Japan had the biggest bitcoin exchange. The Mt. Gox problems are also what gave Bitcoin a bad name in the beginning. It was assumed that hackers had gotten into the system, when the facts have now born out that the CEO was responsible for embezzling funds which led to the collapse. Stringent safety measure had to be implemented to insure the survival of the bitcoin. Blockchain has aided this implementation.


Casual users

For more casual users of peer-to-peer payment systems, the risks are simpler. In 2016 the amount of lost and stolen phones has declined significantly, however, in 2014, some 2.1 million smartphones were stolen in the US, and another 3.1 million were lost. Those losses are bad enough but when payment platforms now consist of apps on mobile devices, they make it very easy for a thief to add to his take by sending himself money with the victim’s Facebook account or by emptying out their PayPal account. The time between the victim losing their device and realizing its loss, is time enough for a smart thief to attempt to break into any number of app-based payment systems. Snapchat and Facebook don’t even require passwords to make transfers.

And despite the need to confirm payments, it’s still too simple to make a typing mistake and send $50 instead of $5 to a friend. In April 2016, a bitcoin user made a similar mistake that was far more costly. Instead of sending 291.241 bitcoins with a 0.0001 miner fee, he did the opposite. The mistake meant that he paid about $132,000 instead of five cents. When even a geekish user of bitcoin can make payment errors, the young users of Snapchat and Facebook must learn to be more vigilant in entering amounts in their smartphones, or they are also likely to find themselves transferring the wrong amounts to the wrong people and then trying to ask the recipients for their money back.

Mistakes aside, the main risks for users of peer-to-peer payments systems can be placed in two categories:


1. Fraud

Peer-to-peer payment systems have to balance ease of use for their customers with security for their customers’ assets. Too often, the balance has fallen too heavily on ease of use. Venmo was late to use two-factor verification. Venmo also didn’t inform users when their accounts were compromised.

More worryingly, the new platforms have little experience of coping with fraud complaints. In 2015, an article on described what happened when Chris Grey, a 30-year-old Web developer in New York, discovered a pending transaction in his bank account for $2,850. The transaction was a debit made from his Venmo account. When he tried to access Venmo, his password failed and he found that his email address had been changed. The text described the transaction as being “for about time.”

With no way to call Venmo, Gray sent emails to the company to report fraudulent use of his account. After 24 hours he was still waiting for a reply. His bank was faster. Because he had linked his Venmo account to his routing number rather than through a debit card, the bank told him that his account was compromised and needed to be closed. But it did help Grey through the process, recover the stolen funds and replace the money. As Slate noted: “Dealing with fraud is something banks are very good at. They have fraud departments to handle problems like Grey’s, and dedicated hotlines for customers to call if something happens.” Mobile apps, the website implied, did not.

As new peer-to-peer payment platforms proliferate and experiment, they need to be ready both to minimize the risks of fraud and cope with the complaints when they inevitably arrive.


2. Personal Data

The loss of funds will always be a concern. Each transaction also gives information to the company that built that platform. Venmo’s decision to link transactions to social media prioritized its own desire to grow over its customers’ desire for privacy. The spread of peer-to-peer payments onto social media platforms awards large amounts of additional information to companies that already know a great deal about people, their preferences and the nature of their relationships.

And while companies like Facebook are experienced at handling large amounts of personal data, other firms need to know how to keep customer bank accounts and transaction histories private, confidential and secure from hackers.

No form of payment is ever entirely secure. Checks can be altered, cash can be stolen, and credit card numbers can be used in card-not-present transactions. Bank accounts can now be accessed with no more than an email address and a password. Sometimes, transfers can even be made just by entering a sum into a messaging service. As ease of payment has increased, so have the risks.

How To Stay Safe When Making Peer-To-Peer Payments

Safe Peer-to-peer payment systems are aware of the security risks that their services create, and are working to minimize them. They state that they use “bank grade” encryption during transactions, use SSL connections to protect identities, salt and hash passwords, and keep data encrypted to reduce the chances that a hacker could obtain bank account information and transaction histories. Writing on, a website about banking security, Linda McGlasson described the security measures the Boeing Employees Credit Union (BECU) and First Hawaiian Bank took when they integrated Popmoney, the P2P payment system made by CashEdge.

Both organizations performed due diligence and security assessments. First Hawaiian’s customers were made to log into the bank’s secure website before they could make transactions. BECU limited the amount that could be made in each transaction and monitored new accounts during their 90-day demo periods. BECU also implemented “out of wallet” security questions.

So there are certainly steps that institutions can, must and for the most part are implementing to keep their customers and their customers’ funds secure. But there are also things that customers themselves can do to reduce the risks that they face.


1. Use Two-Factor Authentication

The advantages of apps like Venmo and Snap Cash may be their convenience and simplicity. Simply whip out a phone, log in, enter the amount and the money is on its way. Two-factor authentication makes that process slower and less convenient. After logging into an account, the service sends a unique code by text message to the user’s phone. Only after entering that code can the user send funds.

While it doesn’t prevent phone thieves or the finders of lost phones from sending money, it does block hackers who have managed to figure out an account-holder’s username and password.

P2P payment users should prefer services that offer two-factor authentication, despite the extra hassle when they want to send money, and they should choose to use it whenever its available. Google Wallet, for example, is one service that allows users to set up “2-Step Verification.”


2. Keep Your Device Safe

All payment systems are now automatically protected by two layers of security: access to the device; and access to the app or website on which the payment system is located. Two-factor authentication will prevent thieves from accessing the app or website but securing the device will prevent them from being able to reach the app or website in the first place.

Entering a PIN to open a phone or having to swipe a thumb over a fingerprint reader may be inconvenient, but if you’re using your phone or computer to make financial transactions then those extra barriers are a necessary additional security layer.


3. Link Apps To Credit Cards

The hack that affected Chris Grey was serious because he had linked his Venmo account directly to his bank account. That allowed the hacker the opportunity to make endless withdrawals, and required Chris Grey to close his account and open a new one. His bank was helpful but if he had connected his Venmo account to his credit card, he would also have had zero liability. He would have had to pay a charge for each transaction but the protection accorded to his credit card would have covered the payment platform too.

Using a credit card to make peer-to-peer payments will add an expense but if you’re only making occasional payments, you can consider that expense the cost of securing your assets.


4. Receive Notifications Of All Account Changes

Receiving an email informing you that you’ve completed a transaction that you know you just performed may seem unnecessary; you don’t need to be told what you’ve just done. But it is an essential security feature. As soon as anyone tries to hack your account or seize control over it, you’ll know and can block their attempts.

Make sure that any peer-to-peer payment platform you use sends notifications of all account changes and transactions… and make sure too that you’re receiving them. If they’re falling into your spam filter then fish them out and flag them as “not spam.” They may not be the most interesting piece of email you’ll ever receive but if one of them turns out to be illegitimate, they could be the most important piece of email you’ll ever receive.


5. Know Where You’re Sending The Money

Mistakes will always happen. Anyone can hit the wrong key and send the money to the wrong recipient. You may have lots of “john” and “janes” in your contact list, tired eyes or a fat thumb. Any one of them are enough to pay half a dinner bill to someone you haven’t seen in years.

Check that you’re not making a mistake before you hit that Send button, and check too that someone isn’t masquerading as your friend’s username and asking for money. A 2014 MIT study cited “social engineering attacks” as one of the vulnerabilities of peer-to-peer payment apps.


In 2014, a survey by Nielsen found that 49 percent of consumers aged 18 or over had used a peer-to-peer payment app to pay for dinners. They had also used it to pay for gifts and entertainment, and even to pay household bills. Sixty percent of those users said they relied on their P2P service as their primary method of payment. Other surveys have founded similar levels of usage.



It’s changed banking in developing countries, and it’s now changing the way people locally cover their small debts. It’s a remarkable change that has occurred in a very short space of time; a period during which payment platforms have sometimes struggled to balance their desire for growth against the need to supply security. As take-up has increased so the larger numbers of users has attracted fraudsters. They made inevitable the occurrence of eye-catching thefts from bank and platform accounts.

Gradually, many of the gaps that provoked the biggest concerns have been filled. Fraud is now harder to commit on peer-to-peer payment systems than it used to be. However, it is still a risk. Users have become savvier about the ways to lower the risk. As phones have become more secure so they too have become less attractive items to steal. Thefts of smartphones declined by as much as 50 percent following the introduction of kill switches, lowering the occurrence of one way for thieves to empty P2P payment accounts.


In practice

In practice, very few users of P2P payment systems have reported being victims of crime. While everyone should be choosing payment platforms based on security controls and privacy protections, it’s more likely that the choice of platform depends on the app or service already in use by a customer’s network. If all your friends are using Venmo, then there’s little point in preferring to use Google Wallet or ClearXChange, however much you might admire those services.

That makes the broad choice of platforms now available smaller than it might appear. Platforms that can sweep up a critical mass of users will have a large advantage. At the moment, some users are turning to Venmo while older users, who grew up with eBay, staying either with PayPal or with their banks. As Venmo’s users age and earn more disposable income though, other peer-to-peer payment systems, from social media apps to search giants will have to work hard to pry away their customer base through tighter security and a friendlier service.

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