Lately, I’ve been getting a flood of press calls and inquiries about P2P payments. I wrote about the general topic in a link available to our clients, but something nagged at me: I hadn’t actually done a P2P payment myself. As luck would have it, on Thursday, April 8 I went out to lunch with some colleagues, and saw my chance. I paid the entire bill with my Amex card, and told my lunch companions I would send them a bill via PayPal. What follows is a chronology of my experience actually trying to do what many industry experts are saying is the next big frontier in payments.
Day 1 (April 8): Ran into my first issue when one of my colleagues opted out, preferring to give me cash, since he had it on him and did not want to be bothered with replying to a PayPal bill.
I ran into my second issue when I realized that I did not have my colleagues’ personal e-mail addresses, and that they would be unlikely to be willing to create new PayPal accounts with their work e-mails just for this one transaction. I e-mailed them to ask for their PayPal e-mail addresses. Of course I had to use my personal e-mail address, which is not my actual name (long story), so I had to also walk by and let them know to expect an e-mail from that address. After a short while, I had both e-mail addresses, and I logged into PayPal
I ran into my third issue when I discovered that I would be charged 2.9% + $0.30 for each payment, or 79 cents. If I was not doing this for research, I probably would have abandoned the effort at this point, but I wanted to continue the experiment, so I persisted.
I ran into my fourth issue when one of my colleagues chose her bank account as the source of funds, causing a 3-5 day delay in settlement. The other one chose his credit card, and I got the money that evening – $17, minus 79 cents, or $16.21.
I ran into my fifth issue when I went to deposit the $16.21 into my bank account. I discovered this would also take 3-5 days, depending on my bank’s policies.
Day 4: The $16.21 payment from my first colleague arrived in my bank account. Still nothing from the second one.
Day 11: Still no money in my PayPal account, so I went and asked my colleague what happened. She checked her PayPal account, and it turned out the money is still in there. Apparently, PayPal debited her checking account but then forgot to forward the money to me. Or perhaps she failed to respond to the payment request correctly (user error). She asked me to re-bill her, which I did, and the $16.21 arrived in my PayPal account an hour later. However, I was not done yet; I still needed to schedule another bank account deposit.
Day 13: The $16.21 arrived in my bank account (2 days, not bad actually), and the experiment was complete.
Final result: it took me 13 days and $1.58 to get $34 in reimbursements for lunch. I encountered 6 unexpected difficulties including a possible user error, costing me about an hour of work time in total to solve.
I’d love to hear if anyone else has tried to do P2P payments with PayPal, and how their experience was similar or different. After all, this is only one data point. However, it greatly concerns me that P2P payments seems to be the main use case on which so many emerging payments vendors are basing their futures. From my perspective, this was something I’d hesitate to do again, for the following reasons:
1. Too much time. The process was too complicated, and took 13 calendar days to complete, vs. the cash payment, which was instantaneous.
2. Too much money. The cash payment was free, and even though I had to wait an extra week to get my second colleague’s payment, since she used her bank account, I paid exactly the same amount in fees. I don’t think most consumers would be willing to pay $1.58 for this.
It is clear that this scenario would only work if both parties had money pre-loaded into their PayPal accounts. I’m not trying to pick on PayPal here; as far as I know, all the P2P services have this requirement. The problem is that they don’t make it clear up front that you have to do the pre-load, and if you have to plan ahead like that, you might as well visit an ATM.
What do you think? Is my experience atypical? Did I make an obvious mistake? Let me know.
