PayPal has revamped its approach to person-to-person (P2P) money transfers with a mobile-first service called PayPal.me. This is a messaging-based service designed to provide a simpler, more contextually relevant take on P2P transfers. Riding a growing wave of OTT messaging applications, PayPal.me will find itself competing with P2P transfer capabilities offered by an increasing number of OTT messaging providers.
PayPal.me alleviates the awkwardness of IOUs – as long as you’re not in an emerging market
PayPal.me is linked to a personalized URL (i.e. paypal.me/username) that owners can use to request a payment via OTT messaging, SMS, email, group messaging, IM, and so on. Recipients click on the link, log on to PayPal, enter the amount, and press send. PayPal.me requires users to have a PayPal account. Primarily a “friends and family” service, PayPal.me is free of charge for domestic use, provided funds are linked to a debit card, bank account, or PayPal balance. Fees kick in when payments involve credit cards, currency conversions, or international transfers.
Research shows that many people feel too awkward to recall casual loans/IOUs from friends and family. A PayPal survey in the UK found that one in five people did not ask for their money back. PayPal.me is meant to alleviate this awkwardness by providing an easy way to request and make a payment, in the context of a message.
Ovum’s 2014 Consumer Insights Survey found that P2P transfers are an increasingly popular type of payment application. Of 15,244 respondents, 23% used P2P payments at least once a month. OTT messaging applications such as WeChat, Line, and Facebook Messenger are experiencing strong growth. Ovum’s OTT Communications Tracker: 4Q14 projects that WeChat will have 862.5 million registered users at end-2015 and Line will have 927.7 million registered users.
PayPal.me is looking to leverage OTT messaging applications such as WeChat and Line, which both have their own P2P payment capabilities. Google has added P2P payment functionality to Gmail and we expect Apple to do the same for its iMessage service. PayPal will compete with P2P transfers offered by mobile operators and dedicated P2P payment apps such as Pingit, Paym, Square Cash, and PayPal-owned Venmo.
PayPal.me launched on September 1, 2015 across 18 markets, none of which were in Asia, Latin America, or Africa. Many people in emerging markets are unbanked, which excludes them from using the PayPal.me service. Moreover, mobile operator mobile money services support users with accounts linked to their mobile subscription and agent networks for cash in and out rather than debit and credit cards. Many Asian markets already have popular homegrown online and OTT players that offer mobile payment and transfer services. Alipay (Alibaba) and WeChat (Tencent) in China are examples. It will be difficult for PayPal.me to compete with these companies.
OTT Communications Tracker: 4Q14, TE0003-000845 (March 2015)
Eden Zoller, Principal Analyst, Consumer Services and Payments