Google and Square have both announced the addition of email-based person to person (P2P) capabilities to their existing mobile payments businesses. Google will accomplish this by integrating Google Wallet into Gmail, while Square has launched a new service called Square Cash.
Although these services are clearly aimed at taking market share from PayPal, the market leader in the P2P space, they may also be aimed at the payments industry as a whole. The challenge with P2P — and with mobile payments in general — is one of ownership as the bank, the mobile network provider, and the wallet provider are all vying to own the customer relationship. Card networks will also strive for ownership, depending on the funding source.
Presumably, these new P2P functions will be linked to deposit accounts to keep transaction costs low — Square has already announced it will charge $.50 to send funds, while receiving funds will be free. For banks, there is the direct threat of both disintermediation and revenue reduction as these transactions may be funded over ACH rather than through the debit and credit networks — turning the banks into low-cost funding sources rather than long-term providers of products and value.
What remains to be seen is whether these services will be offered to banks. Google Wallet already works with banks on the card side of the business, and banks have offered Square readers to their customers in the past. So, it’s reasonable to believe that these services will be at least somewhat bank friendly. However, it’s also good to have a P2P strategy that focuses on bank-friendly vendors — just in case.