CHICAGO — If banks want to be in the forefront of future mobile payments, or at least capable players, they must first understand mobile person-to-person payments and offer that service to customers.

P2P payments represent a relatively simplistic mobile pay method that can provide a framework for advancement into other mobile areas in the future, says Paul Grill, partner with First Annapolis Consulting.

Banks’ role in mobile payment development and product offerings was a hot topic Oct. 23 during the annual Chicago Payments Symposium at the Federal Reserve Bank of Chicago.

P2P is an important battleground as to who will provide consumer services in future payments with mobile devices,” says Grill, whose company helps financial institutions understand the P2P landscape. 

Banks can make progress with P2P because customers can relate to a process in which family members transfer money to pay allowances, roommates transfer money when sharing rent payments, or friends borrow from or repay money to friends, Grill says.

“Banks are in a position to enhance P2P because they already have [online] bill-paying services in place,” Grill says. “P2P is just an extension of that.”

Admittedly, the economics of P2P payments are not attractive for financial institutions because consumers would expect it to be a free service, Grill adds.

The investment in developing a P2P service for customers would ultimately pay off in advanced mobile pay services, or other offerings delivered through mobile devices, Grill says.

Steve Mott, CEO of BetterBuyDesign, says banks could charge fees for P2P if those services move money in real time.

Mobile P2P could quickly appeal to all age groups, a transition that some of the mobile wallets at point-of-sale could have difficulty accomplishing, he says.

“If the 18 to 24 age group adopts something, it is becoming a fact that their parents will eventually adopt it because the kids come in and show them how to use it,” Mott says.

Compared to other mobile-pay systems, which are not as focused on the needs of consumers, P2P “permeates and touches on all that we know about banking and moving money around,” Mott says.

In an example of how P2P payments could lead to bigger products for banks, Tim Murphy, chief product officer for MasterCard Inc., suggested that banks might leverage P2P payments with prepaid programs.

Russia provides an interesting case study for the potential of P2P payments because Russian consumers receive payroll cards and use P2P to fund those prepaid cards and to activate merchant loyalty programs, Murphy says. “Consumers in that country make their own money loop system, and it shows the value of P2P.”

John Feldman, general manager of the bank-based P2P payment venture clearXchange, says consumers want to get to a situation in which they don’t have to carry cash. 

“P2P fits in with today’s lifestyles of ‘my pace and my routine,’ ” Feldman says.

The industry has just begun to scratch the surface of mobile payments, but it is clear that the P2P platform can be turned into something much more powerful than a way for one person to pay another, Feldman says.

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