What Are Peer-to-Peer Payments?

Peer-to-peer payment services let you use a bank account or a credit or debit card to pay friends or family from your phone.
Reviewed by Kathleen Burns Kingsbury

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Peer-to-peer payments, or P2P payments, let you send money directly to another person. P2P payment systems — also known as money transfer apps, like Venmo, PayPal and Cash App — allow users to send and receive money from their mobile devices through a linked bank account or card

Federal Reserve Bank of St. Louis. Peer-to-Peer (P2P) Payment Services. Accessed Jun 3, 2022.
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Here’s what to know about how P2P payments work, how to choose a service, and how to use a service safely.

» Already have a P2P app in mind? Skip ahead to read more about a few of our favorites

How P2P payments work

With P2P payments, users can quickly send funds while keeping their bank account details private. All that’s required to send a payment is the recipient’s email address or phone number; you can use one of those pieces of information to add someone as a contact within the app. Generally, these services are free and make splitting bills with friends and family painless.

Say you’re out to dinner with your cousin Charlie and want to split the check. Instead of fumbling around for bills and coins, Charlie pays using his card. You take out your phone and open your app of choice, pick Charlie from your contact list (or add him using his email or phone number), type the amount you want to send, and voilà — you've paid Charlie back. If you have a PIN set up, depending on the app you’re using, you’ll need to enter it to open the app or to complete the payment.

Once Charlie receives the money, he can leave it in his P2P account for the next time it’s his turn to pay, or he can transfer it to his bank account. Different services may have different steps or requirements, but most work something like this.

» Want to explore your options? See the best ways to send money to an individual in the U.S. or abroad

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3.00%

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Which P2P service should you use?

Choose a service that your friends and family already use. That will make exchanging money more convenient. There are plenty of P2P apps to choose from these days. Paying friends and family by phone or computer was first popularized by PayPal

Federal Reserve Bank of St. Louis. Peer-to-Peer (P2P) Payment Services. Accessed Jun 3, 2022.
. Google, Venmo (which is owned by PayPal) and others now offer similar services. P2P payments are also available through banks and credit unions, and on social media networks, including Facebook.

If you're the one choosing the payment service for your friends and family, check out a quick summary of our favorites below or read our more in-depth overview of top peer-to-peer payment apps.

Venmo

(see review)

  • Can spend Venmo balance with an optional free Venmo debit card.

  • Social feed for payments.

Zelle

(see review)

  • Receive money in minutes.

  • Partners with banks and credit unions.

Google Pay

  • Recipient gets money in minutes when you pay with a Google Pay balance.

  • Synchronizes with Gmail.

PayPal

(see review)

  • Can send money globally, even if the recipient doesn’t have PayPal.

  • More than 429 million active account holders worldwide.

  • Can spend PayPal balance with an optional free debit card.

Cash App

(see review)

  • Personalized $cashtag for each user.

  • Can spend Cash App balance with optional free debit card.

Are P2P payments safe?

Though all of the major P2P systems encrypt, or shield, your financial information, some have been hacked or used by scammers

Federal Trade Commission. Mobile Payment Apps: How To Avoid a Scam When You Use One. Accessed Jun 3, 2022.
. Review a provider’s security procedures and fraud policies before signing up, and take precautions when using P2P payment services, because once you’ve authorized a payment, you might not be able to get your money back. Banks and credit unions aren’t responsible for money lost from P2P scams.

Here’s what you can do to help P2P services keep your money safe:

Many platforms let you create a PIN and require that you enter it to complete transactions. For even stronger protection, set up a PIN for unlocking your phone, too.

Some platforms do this automatically, but if yours doesn’t, check your settings for the option to get an email or text anytime there’s a transaction on your account.

Don’t pay strangers with P2P. Because you’re authorizing transactions yourself when you use a P2P payment service, banks and credit unions aren’t responsible for money sent as part of a scam.

If you mistype a recipient’s email address, phone number or name, the money could go to the wrong person. Double check your recipient’s information before you send a payment. Again, because you’re authorizing transactions yourself, banks and credit unions aren’t responsible for money you send to the wrong person.

» Learn how to protect yourself: Find out how to avoid P2P scams and what to do if you can’t

How quickly do P2P payments post to the recipient's account?

Transaction notifications are sent right away, and you can immediately use the money you receive within a P2P app to send money to someone else within the app. But if you choose to transfer your money out of the app, those funds may take one to three business days to arrive in your linked bank account. Some providers are faster (funds from Zelle transfers are available in your bank account within minutes), and some also offer instant transfers for a fee.

What do P2P payments cost?

Generally speaking, you can make P2P payments from a linked bank account or straight from the P2P account for free. But some providers charge fees — 2% or 3% to process payments drawn from a credit or debit card, for example — for other payment methods.

» Want to send money on social media apps? Read about social media money transfers

Frequently asked questions

“P2P” stands for peer-to-peer and means that you’re sending money directly to another person.

A P2P payment is a payment you make directly to another person using a P2P payment service. With P2P payments, users can quickly send funds while keeping their account details private; all that’s required to send a payment is the recipient’s email address or phone number.

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