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Person-to-Person (P2P) Payments Via E-mail

(from Jesse Berst's AnchorDesk article on the subject)

How It Works
In general, here's how you get started and what takes place:

  • You sign up online for free.
  • You supply your banking information -- credit card or account number.
  • You transmit funds to anyone with an e-mail address. (The recipient does not  have to sign up too.)
  • The recipient gets an e-mail saying the money is waiting and how to deposit it into their bank account.
  • The payment service makes money on the float time between your payment and the recipient's collection of the payment into their bank account as well as transaction fees on larger amounts.

The Players
Companies offering some flavor of the service include:

The Pros and Cons
There are many things to like about P2P. No paper checks involved. No snail mail. No credit card numbers. No service fees (with a few exceptions). Transactions are encrypted, and some services offer insurance against unauthorized withdrawals and protection against fraud. And, of course, there's the convenience. You can send money from a PC or even from a handheld.

What's not to like? Encryption isn't a guarantee of safety. Click for more. Sometimes a recipient must wait a week or more to get funds if the sender doesn't have a checking account. Sometimes you encounter spending limits: PayPal, for instance, won't let you send more than $500 until verification of your e-mail and bank account is complete. And then there are the occasional service fees. For example, eMoneyMail charges a dollar per transaction. So read the fine print.

P2P is still a nascent market, but it's gaining. PayPal, with over 3 million users in its first year, is clearly offering something consumers like.