The ongoing Covid-19 epidemic has made in-person banking much more difficult and as such has created many reluctant first-time users of digital banking. The growth is visible in every area of financial services, from e-commerce to wealth management, but peer-to-peer (P2P) payments has seen particularly strong growth, building off an increase that started before the pandemic.
P2P payments are nothing new. Two of the most active players, Venmo and Square SQ +4.5%, were founded over a decade ago. But the surging use, particularly among older customers, is something different. A March 2019 report from Zelle, the bank-owned P2P platform formerly known as clearXchange, noted that more than half of new users were aged 45 and over. With unemployment and food insecurity at astronomical levels, P2P payments has dramatically increased between family members as well. Major retailers are wanting a piece of the pie including CVS who announced it will add PayPal/Venmo functionality at its checkouts before the year is out adding to the larger shift towards contactless payments at the point-of-sale.
The surge in use has predictably led a to a windfall for the major fintech players and vendors of P2P services.
PayPal PYPL +1.5%, which owns Venmo, saw its strongest quarterly performance in company history in Q2 and Q3’s earnings were ahead of analysts expectations, adding 15.2 million net new active accounts in the third quarter. The company expects to end the year off strong, predicting 17% growth in Q4. To put that in context, PayPal stock has risen 78% in 2020, while the S&P grew at just 4%.
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