The peer-to-peer payment platform had seen intense development in the United States before the COVID-19 crisis gave them new momentum. Services like Square Inc.’s SQ and PayPal Holdings Inc. Venmo, during the height of the pandemic, found new uses as people sought ways to tip service staff, make donations to causes and patronize businesses that had shifted to offer digital services during lockdowns. The facilities have allowed customers to directly deposit their stimulus payment across their sites, which enabled certain people to get their money faster and prompted more people to check out the Cash App, Venmo and PayPal.
Square revealed on its recent earnings call that direct deposit amounts on its provider have grown by three times in April as users switched to store over $1.3 billion in total balances over the month on the Cash app. The digital tailwinds probably gave yet another raise to peer-to-peer facilities that Ark Invest analyst Max Friedrich forecasts had already risen sharply than social-media providers did back in the US in the late 2000s and early 2010s.
Peer-to-peer payment services, like social media platforms, profit from network effects and become even more beneficial to customers as more people join their social circles. Unlike “good” social networking platforms, however, younger users have a motivation to get their family members on board their payment systems, helping to promote user growth, Friedrich said.
The network impact of peer-to-peer payments are offering PayPal and Square a legup on conventional banks as well as confronting banks such as Chime and Revolut, Friedrich said, leading to lower consumer acquisition costs as customers are bringing businesses to market.
Both PayPal and Square say their provider is familiar with unbanked and underbanked customers. Although Venmo is seen as more famous with coastal millennials, in the south and midwest, the Cash App has caught on. Square revealed that it had acquired Verse, a Spanish startup that allows customers to transfer money to each other.