| Summary Person-to-Person payments requoire an online mini bank account and are available at a very small cost. They can be used to pay other individuals or online retailers and are widely used on auction sites. They can be effective but are time consuming and purchases require a two transaction process. |
These methods rely on individuals setting up effectively what is an online mini bank account. This can be charges using either credit, debit or direct bank transfer with appropriate associated costs. Once this money is in the individuals’ account it can be used for several purposes:
- Paying other individuals – via their own account (must be the same P2P service) – commonly used on sites such as E-Bay
- Paying online retailers – via a business account
For either method, funds can be withdrawn at the other end of the transaction back to a regular bank account.
Advantages
- Free to set up apart from a nominal and variable charge (for example 32p) that is levied to check that that individual is the owner of a particular bank account or credit card.
- Charges are relatively low 99p - 2.9% per transaction
- Fixed low costs for withdrawals to external bank accounts
- Micro businesses can dip their toe in the water of e-commerce for almost nil outlay
Disadvantages
- An account has to be set up with the provider, this can be lengthy and awkward
- The account has to be charged manually to make a transaction. This makes purchasing an item a two-transaction process
- This is a “clunky” method for any but the smallest retailers or micro businesses
This type of payment solution still accounts for a vast quantity of auction type transactions over the web. Don’t ignore person-to-person payments as they exemplify the granular nature of individuals or small traders over the web and represent an estimated market value of £600 million in the UK during 2003 (source: Datamonitor, Sep 2001).