Social payments, Peer-to-peer payments, or P2P Payments for small business is the new player on the field. While these services are best known for exchanging money between friends for things like splitting the bill for dinner, you may also take payment for on-the-go small business transactions.
All Teed Up
It’s effortless to take payments via P2P payments. All you need to receive money from a customer is an email address or a phone number. But, of course, it’s nice if you both have the app downloaded and ready to go, and if you do, a couple of contactless clicks and you’re paid. People also love the emojis you can send along with payment, so go ahead and send that smiley face with the poop pile.
While the convenience and mobility of P2P payments seem attractive, there are drawbacks. Services like Venmo and CashApp cannot generate monthly statements. You’ll have to do all credit card accounting and reconciliation through the app. Having said that, If you receive more than $600 over a year for goods and services, you’ll receive a Form 1099-K for tax purposes.
Get the Ball Rolling
If you want to collect payment via P2P, you’ll want to use a popular service to make the transaction fast. You don’t want to ask every customer to download your favorite yet obscure P2P service app to receive payment, which adds extra time to each transaction. Venmo, Zelle, and Google are popular choices.
While P2P uses end-to-end encryption for transactions, the safest bet for sending money, you need to be careful about clicking the send button. If you accidentally send money to the wrong person, it’s nearly impossible to reverse the transaction because there is no intermediary. You’re left to ask the person to return the money from their goodwill.
How Soon Will I Get My Money?
P2P transactions happen instantly for a 1.5 percent fee (Venmo, Cash App) or three business days for free. However, transferring those funds from your P2P account into your business checking account could take an additional three business days.
Taking payments with the peer-to-peer method is free from account to account; however, using a credit card through the service will charge the payer (not the payee) a fee. You are still responsible for the processing fee of any credit card used through the service.
While using a P2P service seems convenient, and fun (lookin’ at emojis), the lack of accounting statements and direct funds to your business checking account can be cumbersome. P2P services will work best if you are a small, one or two-person company that is out and about; however, it can still be an asset for periodic payments for a more significant operation when you need a pinch hitter.
So, who wins the credit card processor game? Every business is at a different growth stage and has different styles of playing the game. Now the ball is in your court to decide on the layup and slam dunk!
Click here for the second installment of this series: Payment Service Providers or PSPs.
Retrieved from How to Use Google Pay for Business: https://smallbiztrends.com/2021/05/google-pay-for-business.html
Apple Cash. (2022). Retrieved from https://applecash.greendot.com/termsconditions/
Venmo. (2022). Retrieved from https://venmo.com/signup/