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Over the past two years we've talked a lot here about the burgeoning industry known as "fintech," a portmanteau of "financial technology," or how financial transactions are moving to digital platforms.
While fintech began as a way to describe how technology is being used to improve behind-the-scenes workings of financial institutions, this disruptive force is now changing everything from how we shop and how we bank to how we apply for credit – anything to do with money is ripe for fintech disruption.
It's even changing how we pay for dinner…
We've all been there – that awkward dance that occurs when the check comes. There are either too many credit cards, or not enough people with enough cash, or the restaurant refuses to split the bill, or no one can agree how to split it evenly…
In recent years, we've seen an explosion of smartphone apps that involve what's known as peer-to-peer (or P2P) payments. These allow anyone to connect a card or a bank account to the app and send payments instantaneously to anyone else on the app.
All of a sudden that awkward dinner bill – and thousands of situations just like it – get a whole lot easier.
Even social media giants have incorporated P2P payments into their interfaces. Any smartphone user with a credit card has at least five options to get a small sum to a peer almost instantly.
As of right now, none of these innovators have figured out how to monetize P2P payments. That's going to become increasingly important as the marketplace grows – and as investors line up to profit from one of the market's hottest trends.
A New Trend Today, a Booming Industry Tomorrow
The rise of P2P payments, from the birth of e-commerce to the hundreds of apps available today, is already impressive. The sliver of the industry that is conducted via mobile devices was valued at about $5 billion in 2013 – but it's about to explode to $86 billion by 2018. That's a massive compounded annual growth rate of 76.65% per year.
The potential here is staggering – companies are jockeying to efficiently and effectively monetize mobile P2P payments while appealing to the growing user base. Both will be crucial as new fintech innovations continue to disrupt the market.
We are already seeing the effects of speedy, informal transactions in e-commerce. Online marketplaces like Etsy and eBay, where anyone with a computer can sell to anyone else with a computer, prefer these types of payments over the dinosaur concept of mailing checks, as well as the expensive option of conducting credit card transactions.
P2P really started to take off with the advent of smartphone apps like Venmo, a leader in the industry. Venmo is growing at a rapid pace – after processing $7.5 billion in payments in 2015,…
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.