Peer-to-peer (P2P) payments are digital transactions between two individuals, allowing funds to be transferred directly from one person’s bank account, checking account, credit or debit card, or payment app, to another person’s bank account or app. P2P payments are also known as money transfer apps, and they allow users to send and receive money from their mobile devices through a linked bank account or card. P2P payments are categorized on the basis of transfer, i.e., to an account within the bank or outside the bank. If the transfer is to an account within the bank, it is an internal transfer. A transfer to an account outside the bank is called a domestic transfer.

To use P2P payments, an account holder needs to connect a personal bank account to the service, typically through an online portal or mobile app. Different products have different rules for what kind of accounts can be linked to the P2P service. Some may allow customers to link a savings account to deduct payments from, while others don’t. Generally, these services are free and make splitting bills with friends and family painless. P2P payments can take anywhere from a few seconds to several days to go through to a user’s bank account. Some P2P services send funds directly to another user’s bank account, while others require the receiver to make an additional transfer of funds from the app to their bank account or debit card.

P2P payment platforms are increasingly popular and will continue to be utilized by businesses as a more convenient way to send and receive money. However, it’s important to compare the different providers before signing up for an account, as not all P2P payment platforms are created equal. Some have higher fees, while others have more features. While P2P payments may be a convenient option for small businesses serving consumers, they’re not ideal for those that deal with high payment volumes and large amounts. For starters, P2P payment apps impose limits on transaction volume and amounts.