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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.
Aug. 28, 2018
Banking, Checking Accounts
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Peer-to-peer payments make splitting tabs and bills with friends and family convenient.

Quick and easy to use, peer-to-peer payment systems — also known as P2P payments or money transfer apps — like Venmo, PayPal and Square Cash allow users to send one another money from their mobile devices through a linked funding source.

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

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

How P2P payments work

Paying friends and family by phone or computer was first popularized by PayPal, and Google, Venmo (which is owned by PayPal), Square and others now offer similar services. P2P payments are also available through banks and credit unions, and on social media networks, including Facebook.

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 puts down his card and you take out your phone. Open your app of choice, pick Charlie from your contact list, tap out the amount you want to send and your PIN (if you have one), and voilà — Charlie gets a notification saying the money’s been sent.

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

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. Security policies vary, but many apps have fraud monitoring and support teams to help resolve unauthorized transactions. Read and understand a provider’s security procedures and fraud policies before signing up.

You can help P2P services keep your money safe by doing the following:

Many platforms allow you to create a PIN and require it to complete transactions. For added protection, set one up on your mobile device, too.
Some platforms do this automatically, but if yours doesn’t, dig into your settings so that you get an email or text any time there’s a transaction on your account.
Don’t pay strangers with P2P.
The FDIC recommends linking a bank account or a credit or debit card when using peer-to-peer payment services. Why? If money is misdirected, you can have the error resolved by federal law. If you use funds kept in the P2P account, you are subject to state laws and the provider’s own policies, which can vary.

How fast is it, and what does it 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 transactions themselves may take one to three business days. Some providers are faster, and some also provide 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 small fees — 2% or 3% to process payments drawn from a credit or debit card, for example — for other payment methods. Check a platform’s fee policy thoroughly.

Enter your data carefully. 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.

Which one should you use?

Square Cash, Venmo, Popmoney — the world is flush with peer-to-peer payment services with snappy names. But if you want to join the P2P club, it really comes down to which service your friends and family already use. That will make splitting bills and sending money more convenient.

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


at Venmo


  • Great for mobile
  • Social feed for payments

at Zelle


  • Receive money in minutes
  • Partners with banks and credit unions
Google Pay

at Google Pay

Google Pay Send

  • Receive money in minutes
  • Synchronizes with Gmail

at PayPal


  • Wide reach
  • More than 200 million active accountholders worldwide

There are other factors that might matter to you and influence your decision. For more, check out our roundup of the best ways to send money.

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