ANALYSIS: Comparing P2P Payment Services

Online payments (also called P2P) it is the emerging form of financial transactions.  The P2P (person to person payment) heavyweight currently is PayPal.   But it has some contenders who are aiming for a piece of that increasingly lucrative market. Among the leaders:  Square Cash, Apple Pay, Google Wallet and Venmo, Zelle and Dwolla.  And increasingly, most online banks are offering free transfers.  The biggest winner:  the consumer, as cash transfers and business payments get more affordable….or free!  The wonderful development is that online payments are getting simpler and cheaper. The not-as-wonderful part is that choosing among the options is complicated.   Your ultimate choice may depend upon the size and frequency of the payments you will make, how quickly they need to be transferred and your financial relationship with the receipient.

Why use online payments to send money to friends, family or retailers?   It is fast and convenient not having to write a check, run to the bank or ATM whenever you owe money.  If you and a buddy share a cab home after a night out, you can pay your share with a few taps on your keyboard.  Also, electronic payments are far more secure than cash. Nearly every major electronic payment service encrypts transactions, and there’s no need to worry about the money getting lost or stolen, which is a problem with cash.

PayPal – The Market Leader?

PayPal was the elephant in the U.S. payment service zoo.   But while it is big, it is no longer dominating this space.   PayPal has morphed into a full-service payment company helping people with personal money transfers, online purchases and e-commerce. It’s P2P service allows for peer-to-peer money transfer service where individuals can send money to each other.  Users can send money with a debit card, a credit card, a bank account, PayPal balance and PayPal Credit.   Among the P2P services, PayPal is also the most expensive.   That’s why we recommend that you explore some of the other P2P services.

Venmo – PayPal’s Millenial P2P Entry

Venmo is popular among the college-age and young adult demographics and is limited to mobile transactions.   Payments from your bank account, Venmo balance, and most debit cards (presumably from larger banks) are free. Payments from credit cards cost 3% of the transaction total.  Users have the option of attaching a tweet-length comment or message along with it. They can then watch the messages of their Venmo-using friends flow by on a Twitter-esque feed….something we don’t recommend that you do.    It is mobile-only and designed to use in social networks — these are positives for some customers but negatives to others,  especially those who prefer to do payments on their desktop computers and are concerned about privacy. The upside is that you can maintain a balance in your Venmo account and not have to use a credit card or bank transfer.    Venmo doesn’t charge users to send money using their Venmo balance or linked bank account, debit card or prepaid card. But if you want to send money using a credit card, be prepared to pay a 3% fee.

Zelle –  The Banks Strike Back

Back in 2017, the nation’s largest banks saw PayPal moving into their territory and they took action to preserve their territory.  They created Zelle to be a mobile banking feature for banks participating in the network.  Zelle allows users to make peer-to-peer transactions, either requesting or sending money, using email addresses or mobile phone numbers. The P2P company moves money directly between the bank accounts of senders and recipients.   It’s free to use Venmo with a debit card. It will still cost you 2.9% to use a credit card, but if you’re not too fond of linking a service to your bank account, it might be nice for you to not have to pay a fee for each transaction. You can download the Zelle app or you can sign up through your bank’s mobile app.  The most attractive feature about Zelle is that it won’t charge you to send or receive money, and your bank or credit union may not charge a fee either.   The downside is that it can’t be used for international transactions or with credit cards.

Google Pay – Google Joins The Party

Google Pay entered the fray in 2018 largely as a means by which retailers could facilitate electronic transactions with their customers.  It is a direct competition with Apple Pay and is one of the cheapest P2P offerings.  What really sets Google Pay apart is its integration with other Google services. In Gmail, for instance, you can request money simply by pressing the little dollar sign in the toolbar under a message. You can even send money through Android Messages, the default texting service on most Android phones, and it will show up in Google Pay. If you have a Google Home, you can ask it to send over money to a friend through Google Pay.  If you just want to send money to friends and family, you can check out Google Pay Send, which only offers peer-to-peer transactions.   Google has done an admirable job of connecting all of the financial dots.   And in 2020, it plans to start offering checking accounts!   The banking community is nervous.

Square –  Is More Than a Credit Card Swipe Service

Square is one of the larger companies that you’ve used but never heard of.  It is a  heavyweight in the e-merchant space with its free iPad, iPhone and Android card readers, as well as its cheap merchant fees.  To complete in the P2P market, it created an app called Square Cash.   It has entirely vanquished transfer fees for debit card accounts.   The service is completely free and remarkably easy to use.   Where it differs from other P2P services is that you don’t have to set up an account.  You can just email the person that owes you money, enter how much is owed in the subject field, and then CC the email to  An important aspect of Square Cash transactions is that they can be canceled and disputed.   In the event that you don’t receive the service or product that you purchased or are, for some reason, unsatisfied then you appear to have recourse.  At the Square Cash website, you can elect to cancel a Square Cash transaction if it hasn’t been redeemed, with a refund to your account within 14 days.  It also offers a process by which you can dispute a transaction.   The biggest drawbacks with Square Cash are the $250 per week limit and the email-only customer service.

Apple Pay

Apple introduced its “Pay” service in September 2014.   It coordinated with financial giants Citigroup and American Express, as well as merchants such as McDonald’s, to offer a digital payment system. Instead of working with PayPal on the development of its payments system, Apple struck a deal with start-up Stripe. To make a payment, a person swipes an iPhone at the checkout counter and confirms the transaction by using the fingerprint scanner on their iPhone.   The best that can be said about Apple Pay is that it is fully integrated into the Apple ecosystem.   So it is an attractive option for Apple owners…..and not really anyone else.

Dwolla – The Zelle Wanna-be

Dwolla is a service specifically designed for bank transfers.  Transfers under $10 are free, with anything over that mark pegged at $0.25.  So the low rates are very attractive, but funds must be pulled from your bank account.    However, Dwolla is not a card-processing service, so it only works with ACH bank transactions.


1 reply
  1. Jessika
    Jessika says:

    Appreciating the persistence you put into your blog and in depth information you provide. It’s good to come across a blog every once in a while that isn’t the same out of date rehashed information. A really wonderful read!


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