Two friends holding their phones next to each other while making a mobile app payment
Technology & Security

The Pros and Cons of Peer-to-Peer App Usage

Peer-to-peer app usage has been on the rise for several years. In 2020, usage exploded as people needed a means to transfer funds, but couldn’t necessarily swap cash or write checks in-person. Nerdwallet reports that roughly 79% of Americans use one of the main peer-to-peer payment services like Venmo, Paypal, Cash app, and the like. But not all payment apps are the same when it comes to features and security. Take a look at the pros and cons of peer-to-peer app usage to make sure you’re getting the best benefits of these useful tools.

What are Peer-to-Peer Apps?

To better understand the pros and cons of peer-to-peer app usage, it’s helpful to know what they are. Peer-to-peer payment services allow you to pay or request payment from individuals through a mobile phone app. Typically, you link a credit or debit card, or a bank account as a form of payment.

Why is this useful? When eating out with friends was a regular occurrence, splitting the bill could get tricky if the restaurant didn’t want to run multiple cards. But with the availability of a peer-to-peer app, one person could put the whole bill on their card and then the rest of the group could reimburse that person immediately with a few swipes of their finger.

When you receive payment via a peer-to-peer app, you often have the choice of keeping a balance in the app itself, or transferring it back to a connected bank account. This is a neat feature of peer-to-peer app usage. The app could almost serve as a pseudo “fun money” account that’s kept separate from your regular accounts.

Pros of Peer-to-Peer App Usage

There are many pros to using peer-to-peer apps, the greatest, of course, is its simplicity. Enjoy the ease of paying people for goods or services without a trip to the ATM or dusting off your checkbook, which will save you time and energy. This also gives you the ability to send money to friends and family members that you may not be able to see in person.

In addition to being a simple way of sending money, it’s often quick too. Whether it’s to family, a friend, or even your landlord, they can usually receive money instantly in the app. And to make it even better, peer-to-peer app usage is typically free.

Another pro is that they are so widely used now. Many Banks and credit unions have partnered with various apps or have their own peer-to-peer money transfers. With about 79% adoption using these apps, you’re bound to find a way to pay someone without pulling out your wallet.

Cons of Using Peer-to-Peer Apps

It’s hard to argue against peer-to-peer app usage, but as mentioned, they aren’t all created equal, and there are some downfalls to consider.

To start, with many of the apps, if you want the money to actually appear in your bank account, you typically have to wait one to three business days. Certain providers, like Zelle, get you the money faster. Others offer the ability to do so – if you pay a fee. Consider these features as you make your peer-to-peer app selection.

In addition, depending on which form of payment you link to your peer-to-peer app, you could be charged fees. For example, most providers allow you to link a bank account or pay directly from your app account balance for free. But, if you instead choose to link a credit or debit card, it could cost you 2% or 3% to process payments drawn from those cards.

Another con of peer-to-peer app usage comes down to user error. If you don’t enter payment data carefully, you could end up paying the wrong person. In that case, depending on the person, they may not be willing to reimburse your funds.

As another warning, not everyone you know is necessarily on the same app as you. For example, you might wish to pay one of your contacts via the Venmo app. The app allows you to do so by entering that person’s email or mobile phone number. But paying a person that way when they don’t have their own Venmo account means the money will land in a sort of Venmo purgatory; forcing the payee to create an account if they want to retrieve those funds.

Luckily, most of these apps build fail-safes into the payment process, but it’s especially important to ensure you’re truly paying the right person. As a general rule of thumb: don’t pay someone through the app unless you know them. And you should never pay a stranger for goods or services via the app until after you’ve received them. This will help you to avoid scams.

Selecting the Peer-to-Peer App That’s Right for You

The right peer-to-peer apps are often going to be the ones your friends and family already use. It doesn't hurt to choose a few common options and set them up in advance of needing to actually pay someone. The reason being: connecting your bank account to the app usually takes a few days for authenticity to be confirmed. This is a security measure put in place to protect you from fraud. Having a linked bank account also protects you in instances where you pay the wrong person. It gives you better recourse than if you just paid from the app itself.

Speaking of security, while most of the major peer-to-peer apps encrypt your data, you can further protect your information by setting up peer-to-peer app usage notifications and creating a confirmation PIN for transactions.

Something else to consider: the availability of a real-time money transfer - something you get for free with Zelle because of the app’s connection with many banks and credit unions. PayPal, Venmo (which is owned by PayPal), and the CashApp are other common options with widespread usage and desirable features, but their real-time money transfers come at a cost.

You can also look to your own banking institution for peer-to-peer app options. Did you know Orange County’s Credit Union gives you the ability to securely transfer money to others through the mobile banking app? Learn more about your peer-to-peer app usage options on our website.

Orange County's Credit Union does not endorse any product or service provider described in this article. Refer to each app’s Terms of Use for complete details regarding legal rights and obligations:

Venmo User Agreement
PayPal Legal Agreements
Cash App Terms of Service
Zelle Terms of Use