Many credit unions held off on directly offering peer-to-peer payments in recent years because member demand was low, even as transaction volume for services such as Venmo, Zelle and Square’s Cash App steadily grew.
The reluctance also stemmed from the cost for a service that doesn’t typically generate revenue for the financial institution since transfers are usually free or carry a relatively low fee for consumers. There were added
But as the pandemic accelerated use of P2P for urgent funds-transfers for people unable to physically exchange cash or checks, banking platform provider
The Cromwell, Connecticut, firm on Tuesday announced a proprietary real-time P2P payments service leveraging credit unions’ existing debit card rails that is an alternative to Zelle and other apps, according to Marcell King, chief innovation officer at Payveris.
The service enables credit unions using Payveris’ MoveMoney platform to send money to anyone with a U.S. account using the recipient’s mobile phone number or email without downloading a separate app.
There’s a catch: To verify identity, the sender must contact the recipient separately and provide a mutually agreed-upon secret code word.
"Users must contact the recipient and tell them to expect a text and to use any code word like 'Redwood,' and they input that when they get the text to receive the funds," King explained.
When the recipient inputs the correct secret word, funds arrive in their account instantly, King said.
Payveris risks a hit to user experience by requiring extra authentication, but the company claims the move is less expensive than other methods, making the lack of revenue generation less of a concern. The firm can also offer savings by limiting its marketing spend and using a proprietary engine over an app, King added.
App-based P2P services like Venmo, Zelle and Cash App don't require extra authentication, but King said that many credit unions and users during a recent pilot program rated the process as relatively low-friction.
Mainstream P2P services such as Venmo, Square Cash and Zelle have grown substantially over the past two years and play a role in financial services diversification strategies at Venmo parent PayPal and Square, which use the enrolled P2P credentials to build financial services
King says there is a niche for P2P that's designed for credit unions and smaller community banks.
“Venmo and Zelle have their own networks and apps, but when any recipient of those services isn’t already connected to one of the major P2P apps they have to fall back on lower-tech approaches," King said. "Credit union users so far feel comfortable and secure confirming each transfer with a code word.”
Payveris’s cost for providing real-time P2P service for credit unions includes a one-time implementation fee, monthly maintenance and transaction fees and a real-time transaction fee for each P2P payment that travels on Visa or Mastercard debit card rails. The total expense of the new service comes to about 60 to 70 cents per transaction. Zelle did not comment on its cost structure.
Payveris, which previously offered slower P2P services via ACH, developed a proprietary approach for real-time P2P by connecting directly to other institutions through the major credit card networks’ debit push payment rails, King said.
KeyPoint Credit Union in Santa Clara, California, has been testing the Payveris real-time P2P service in the past several months.
“We saw a big uptick in demand for P2P during the pandemic, with more members asking for expanded support,” Victor Smilgys, vice president of digital services at the $1.5 billion-asset KeyPoint, said by email.
The six-branch, 60,000-member credit union has seen healthy use of the new P2P approach during the pilot, Smilgys said.
Cost and fraud concerns were one of the reasons KeyPoint had held off on offering P2P services previously, he said. In cases of suspected fraud, KeyPoint suspends transactions until the credit union can directly verify the transfer with the sender, Smilgys said.
Payveris, which competes with Volante and Jack Henry & Associates in providing credit union services through its cloud-based platform, expects about 80% of the 300 financial institutions it supports to offer its real-time P2P services to consumers.
