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What Are P2P Transfers & How To Use Them

By Krystal Etienne · November 15, 2021 · 6 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

One of the most popular forms of electronic payment, peer-to-peer transfers (also known as P2P payments) give you the ability to send money to friends and family right from your mobile device. To make these payments, all you need is to download a money transfer app like Venmo or Paypal and then link your bank account or credit or debit card to it.

Here’s a closer look at exactly how these apps work, what fees may be involved, and how to use them safely.

What Is a P2P Payment?

Previously, if you wanted to share the cost of dinner with a friend or split bills with roommates, you would need to get cash at an ATM or write out a personal check, options that aren’t always quick or convenient.

With a P2P payment, you can send money to a friend with just a few clicks on your mobile device. For traditional P2P apps, both parties need to have an account with the transfer service in order to make the transaction.

For example, if you want to use Venmo to repay a friend for the coffee they bought you this morning, that person would also need to have a Venmo account to receive that payment.

Typically, a P2P account is attached to your bank account online. Some P2P platforms, however, allow customers to link their P2P accounts to a debit card or even a credit card, though it may involve additional fees.

Many traditional, commercial banks are also getting in on the online money transfer game, offering services like Zelle to make it easier for customers to transfer money to one another instantaneously.

Recommended: How to Transfer Money From One Bank to Another

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How Do P2P Transfers Work?

One of the biggest draws of P2P money transfers is how quickly and easily a payment can be initiated and transferred. These apps remove the need to share any personal financial information with the other party, and allow funds to be exchanged between different banks smoothly, often with no or very low fees.

Overview of the P2P Transfer Process

Say that you want to send money to your sister for your mother’s birthday present. Depending on the type of P2P service you use, you’ll follow some variation of these basic steps.

Creating a P2P Account. You will need to download a P2P app and then sign up for an account. In order to send money to your sister, you’ll both need to have an account with the same money transfer service.

Linking your bank account to your P2P account. Some P2P services have the ability to hold funds, but they generally must be linked to a primary bank account, credit card or a debit card in order to be fully operational. This is how the account will pull any funds needed to make a payment. To link your checking account, you may need your checking and routing number (which appear at the bottom of a check). Some P2P transfer services may only need your bank log-in information. Others may allow you to set up extra verification measures.

Searching for a user to transfer funds to. To send money to your sister, you’ll need to find her on the P2P platform. You can typically search by username, email address, or a phone number. Her photo may also appear within the profiles that you find, which will also help you ensure you’ve found the correct account. In most cases you will be able to add her account as a contact or “friend” in your account.

Initiating a transfer. Your sister can request a payment from you, or you can initiate the payment yourself. This requires choosing the option to send funds, entering a dollar amount, and then clicking submit. If you’ve enabled additional security measures on your account, you may need to enter a PIN that gets texted to you as well.

You may also have the option to add a description or “memo” to your transaction. Some P2P services, like PayPal, require this information so that they can charge a fee for business-related transactions. Others offer the option to act as a personal ledger should you need it in the future.

Waiting for the transfer to complete. 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, and your sister may receive any combination of text, email, or other alerts when the transfer is complete.

Transferring the funds into the payee’s bank account. When a transfer is complete, the funds may be deposited directly into your sister’s bank account. Or, they may go into an account created for her by the P2P service. Funds received into P2P user accounts can then be transferred into traditional bank accounts at little to no cost.

If your sister receives funds into her P2P account and decides to leave them in the account, she can use that account balance the next time she needs to pay someone. Depending on the vendor, she may also be able to use her P2P account to purchase your mom’s birthday gift.

How Long Do P2P Transfers Take?

The general rule of thumb for P2P services is to allow one to three business days for a transfer to complete. That’s because standard bank transfers use the ACH (or Automated Clearing House) system, which can take a day or two to complete.

Some apps offer instant transfers for a small fee, often around 1.5 percent of the overall transfer amount.

Are P2P Money Transfers Safe?

Any time your bank account, credit, or debit card information is online, there is a chance that someone can get a hold of it, and P2Ps are no different. While all major money transfer companies encrypt your financial information, no P2P system is totally impervious to hacks and scams.

The good news is that major financial services typically do all they can to keep information safe, and both the P2P services and your bank are likely adept at dealing with any issues of fraud. Still, it can be important to read each company’s security policy to make sure you’re comfortable with their tactics before agreeing to use that service.

There are also additional measures you can take to make sure that your account remains secure. For example, you may be able to set up two-factor authentication (which might involve typing in a unique pin number that is texted to your phone for each transaction) and also elect to receive notifications each time there’s a transaction posted on your account, enabling you to spot fraud right away if it were to happen.

You may also want to take care when you type in a recipient’s email address, phone number, or name. A typo could lead to the money going to the wrong person. It can be wise to always double-check your recipient’s information before you send a payment.

How Do Peer-to-Peer Transfer Companies Make Money?

P2P transactions are largely offered for free, which may beg the question of how the companies that offer these services stay in business. Here are two major ways they may generate income.

Account Fees

Typically, you can make P2P payments from a linked bank account or straight from the P2P account for free. If you want an instant transfer, or you are transferring money using a credit card or from depositing checks into your P2P account, there may be a fee involved.

Business Fees

P2P platforms aren’t just for consumers — they are used by businesses as well. Companies can create business profiles on P2P platforms and give their customers an additional payment option for their goods and services.

Compared to the free transactions that standard user profiles offer, business profiles are generally subject to a seller transaction fee for each customer purchase. Venmo, for instance, charges a fee of 1.9 percent, plus 10 cents for each transaction.

What Are the Benefits of P2P Money Transfers?

There are three main benefits to using online money transfer services.

•   They’re fast. Depending on the service, P2P money transfers can be deposited fairly quickly. Most service providers provide same-day transfers between user accounts, as well as bank transfers that take just a few business days.

•   They’re cheap. When exchanging money between friends and family, P2P money transfers are often free. There may be a small fee, however, If you want an instant bank transfer, are using a credit card instead of a bank account, are making a transfer above a certain dollar amount, are conducting a high volume of transfers, or are using the service for a business transaction.

•   They’re easy. P2P transfers eliminate the need to make trips to the ATM or a local bank branch to get cash. They also eliminate the need to get out your checkbook, write a check and then mail it to someone. 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.

Recommended: 8 Ways to Pay Your Friends Without Cash

The Takeaway

Peer to Peer (or P2P) payment apps facilitate mobile money transactions. You can use them in place of cash or writing a check when you want to give friends or family money, whether it’s to cover your portion of a dinner bill or split the cost of a vacation rental. Some businesses also accept this form of payment.

All you need to make a P2P transfer is a mobile device, an internet connection, and your P2P app, which you must link to your bank account or credit card. Typically, P2P transfer services require that both parties have accounts with their service in order to make a transaction.

Customers with a SoFi Checking and Savings® online bank account, however, not only pay no account fees, but can send money to any person, anywhere, even if that person doesn’t have a SoFi Checking and Savings account. If the person does happen to be a member of SoFi, the transfer will happen instantaneously.

Find out how quick and easy it is to make P2P transfers with an online bank account from SoFi.


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