Electronic and social media payments provider Ribbon is building a person to person payment service, joining a market that's small yet fiercely competitive, analysts say, adding that Ribbon will be pressured to pair P2P with other products.
The P2P payment market is dwarfed by the retail point of sale market, the major prize in digital payments, says Richard Crone, a payments consultant, who has estimated the P2P market is about $1.2 billion, whereas the physical point of sale market is about $6.2 trillion.
"But the point of sale is hard to do because it requires a bunch of integration," Crone says. "So companies turn to person to person because it's easy. Just because it's easy doesn't mean there's a market there."
Ribbon plans to build on its offering over time, using P2P as a foundation.
"We think P2P payments is often the first step and therefore potentially has links to future innovations in other areas, which includes retail POS," said Hany Rashwan, co-founder and CEO of Ribbon, in an email to PaymentsSource.
Ribbon expects to launch its service by next year and will support Visa, MasterCard, Discover and American Express payments. It is a potential competitor to Square's Square Cash and Braintree's Venmo (eBay is in the process of buying Braintree and integrating it with PayPal).
Square is "excited about customer adoption" of Square Cash and plans to further support P2P payments, said Square spokesperson Katie Baynes in an email to PaymentsSource. Square did not provide further comment, and PayPal did not respond to a request for comment by deadline.
Ribbon's P2P service will enable users to make online and mobile payments without having to set up an account, though the company has not released further details on the underlying technology. Ribbon currently enables payments between websites, blogs and social networking sites. It has about 10,000 merchants, including Target, which has used Ribbon as part of a Facebook campaign.
In pursuing online and mobile P2P, Ribbon is beginning with a limited user base. "In terms of total market for payments, the mobile person to person is pretty small," says Gareth Lodge, a senior analyst at Celent. "The oft used example of splitting a dinner check is actually pretty unusual. How often have you been required to give money to another individual? It's a market worth going after, absolutely, but a fraction of business-to-consumer or consumer-to-business, or even in-person or e-commerce payments."
Canada is the largest P2P electronic payments market in terms of fee income, with about $1 million in annual fee income for payment providers, Crone says, adding that in the U.S., fee income is much less. "[$1 million] is nothing, and Canada is the leading market. The fee income is low because nobody charges for it."
P2P is best deployed as part of a menu of services, says Phil Philliou, a payments consultant, was less bearish on P2P. Venmo, for example offers mobile wallet capabilities and PayPal also offers a variety of services in addition to P2Pand is pursuing the retail point of sale market.
"I believe that market opportunity for P2P money transfer is enormousI just paid a vendor using Venmo yesterday," Philliou says. "However, on its own, I don't believe that P2P is lucrative product offering. P2P married with other services could be lucrative."