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What Are P2P Transfers & How To Use Them

February 19, 2019 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What Are P2P Transfers & How To Use Them

Dinners with a large group of friends: Excellent in theory, but kind of terrible in practice. No matter how much fun was had, everyone seems to break into a sweat the moment the bill needs to be split.

Not only must intricate calculations be made (Susan didn’t drink, Javier only had an appetizer), but splitting a tab in 15-odd ways creates a ton of work for the poor server, who is probably already stressed.

Peer-to-Peer transfers—the ability to send money to friends and family using an app on a mobile device—are rapidly growing in popularity. Can they single handedly save group dining? Have they already?

It certainly seems to be that way. Group dinners just got about 100x more tolerable.

There’s no denying that P2P transfers are an easy, fast, and cheap way to move money between friends and loved ones. And while online money transfers have been used by some businesses for a while now (like eBay), the convenience factor is leading more businesses to accept P2P transfers as payment.

For those of you who are new to P2P transfers, we’ll answer the questions, “What is a P2P money transfer?” and “How does P2P transfer work?” as well as discuss the benefits of P2P transfers.

What Is A P2P Money Transfer?

Previously, if you wanted to split a gift with a friend or pay your roommate for rent, you would need cash or a check. Well, both of these options required a trip to the bank, and checks often cost money. In an era where phones are making everything more convenient, this was a space just waiting for an upgrade.

With a P2P transfer, people are able to send money to one another through a linked account that is accessed through an app on a mobile device or by logging into an account online. For traditional P2P money transfers, both parties need access to the P2P transfer service.

For example, if you want to send a friend a Venmo for the coffee they bought you this morning, they would also need the Venmo app.

It is most common to set up a P2P account attached to a bank account. To sign up, you may need your bank’s checking and routing number—those numbers you can find at the bottom of a check. Some P2P transfer services may only need your bank log-in information. Others may require extra verification.

Some of the P2P companies allow customers to attach an account to a debit card or even a credit card, but this generally comes with an additional fee.

Many traditional, commercial banks are also getting in on the online money transfer game, making it easier for customers at the same bank to transfer money to one another instantaneously.

How Do P2P Money Transfers Work?

Say that you want to send money to your cousin for your grandma’s birthday present. She can request a payment, or you can initiate the payment yourself. To find your cousin on that particular online transfer service, you search for her via some sort of signifier, usually an email, phone number, or a “handle.”

Next, enter in the amount that you’d like to send to her, indicate what the transfer is for, and click send. If you’ve opted into additional security measures on your account, you may need to enter a PIN. The exact steps you’ll take to send money will depend on the service provider, but that’s the general gist of it.

Do you always have to indicate what the transfer is for? It depends on the P2P transfer service you’re using. Some services, like PayPal, want to know if a transaction is business-related so that they can charge a fee. Others simply request that information so that it acts as a personal ledger for the customer.

Depending on the service provider, the transfer may be instantaneous or it may take a few days. Once the money arrives in its new account, your cousin can let it just hang out there, or they can transfer it to their bank account.

If they leave it in the account, they can use that balance the next time they need to pay someone. If they’d prefer to move the money into their bank account, they can initiate a transfer. A transfer to a bank account will generally take several business days.

When money is sent from one customer to another, it moves in the form of an electronic package safeguarded with multiple layers of data encryption. This makes it hard for hackers to access the data within the transfer while it is in motion. Similarly, data encryption keeps your money and account information safe. Once the data set reaches its destination, it is decoded and deposited as currency.

Are P2P Money Transfers Safe?

Any time your bank account or credit or debit card information is online, there is a chance that someone can get ahold of it, but that’s not unique to P2P transfer companies. All of the major online money transfer companies encrypt all of you financial information, yes, but no P2P system is totally impervious to hacks and scams. Similarly, no online bank or really online anything can be totally free from risk.

The good news is, the major services are doing what they can to keep information safe, and both the services and your banks should be adept at dealing with any issues of fraud. Still, it is important to read each company’s security policy to make sure you’re comfortable before agreeing to use that service.

Then, there are often additional measures you can take to make sure that your account remains secure. For example, they may recommend using a PIN number or receiving notifications each time there’s a transaction on your account. It’s a smart idea to take any extra precautions to protect your information.

What Are the Benefits of P2P Money Transfers?

Online money transfers have several main benefits. They are:

Fast: Depending on your service, P2P money transfers happen quickly. Most service providers provide same-day transfers for users of their service, as well as bank transfers that take a few business days.

Cheap: When exchanging money between friends and family, P2P money transfers are generally free.

It isn’t always free, though. If you are using a service for business transactions, some P2P services will charge a fee. Other services may charge to use a credit card instead of a bank account, for transfers exceeding a certain dollar amount, or for a high volume of transfers in a day, week, or month.

Easy: No more trips to the ATM or a bank branch to get cash, writing checks to your friends, family, and roommates, and no more spending $25 on a book of checks. A P2P transfer online makes moving money within your network as easy as can be. All you need is a mobile device, the app, and cell service or WiFi.

Excitingly, P2P transfers are only getting easier and faster. While most P2P transfer companies currently require both parties to have access to that app or have an established account to exchange money, other companies have designed the technology that allows you to send money to anyone, regardless if they have the app.

Customers with a SoFi Money™ cash management account can send money to any person, anywhere, no SoFi Money account necessary. If they do happen to have SoFi Money, then the transfer happens instantaneously.

Even better, SoFi Money accounts act as more than just a P2P transfer service. It is a cash management account where you can use it like a debit account, complete with a debit card.

There is no minimum to start a SoFi Money account, and there are no account fees. SoFi Money was designed with the tech-savvy customer in mind, with easy P2P transfers, weekly spending tracking, and access to your money right at the palm of your hand. Best of all, opening account takes 2 minutes.

Ready for free, easy money transfers to anyone in your network? Open up a SoFi Money account today.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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