New Person-to-Person Payment Methods: Have Checks Met Their Match?

Abstract

During the last decade, both demand-side and supply-side factors have contributed to a surge in new methods of making person-to-person (P2P) payments. On the demand side, the driving factors have been the emergence of new forums for commerce such as online auctions and the increasing desire by consumers to monitor and control payments. On the supply side, the main factors have been technological advancements such as faster Internet speeds, increased computing power and smartphones. Despite the surge in new P2P payment methods, studies show that consumers in the United States still prefer to make payments to other people with checks and cash. In fact, P2P payments by check are the only type of check payment that is still increasing. If consumers could be induced to use a digital alternative to P2P payments by cash and check, the efficiency and safety of the U.S. payments system might be enhanced. Three distinct models for P2P payments have emerged. In the nonbank-centric model, an individual instructs a nonbank intermediary such as PayPal to transfer funds to another consumer. In the bankcentric model, the individual interacts directly with a bank to request Terri Bradford is a payments system research specialist and William R. Keeton was an assistant vice president and economist in the Payments System Research Department of

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