What Are Peer-to-Peer Payments?

Peer-to-peer payment systems — also known as P2P payments or money transfer apps, like Venmo, PayPal and Cash App — allow users to send one another money from their mobile devices through a linked bank account or card. They make splitting bills with friends and family painless.

Here’s what to know about how they work, how to choose a service and how to use them safely.

Already have an app in mind? Skip ahead to a few of our picks.

How P2P payments work

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, 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? Find out how to send money to an individual

Which one should you use?

Paying friends and family by phone or computer was first popularized by PayPal, and 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 want to join the P2P club, it really comes down to which service your friends and family already use. That will make exchanging money more convenient.

But if you're the one making the choice, check out a few of our favorite payment services.

Are P2P payments safe?

Though all of the major P2P systems encrypt, or shield, your financial information, some have been subjected to hacks and scams. But many apps have fraud monitoring and support teams to help resolve unauthorized transactions. Review a provider’s security procedures and fraud policies before signing up.

You can help P2P services keep your money safe by:

How fast are P2P payments? What do they cost?

Keep these things in mind when you use peer-to-peer payments.

You have to wait for the money. Although transaction notifications are sent right away, the money itself may take one to three business days to arrive in your linked account if you choose to transfer it out of the app. Some providers are faster, and some also offer instant transfers for a fee.

Paying might cost you. 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.