Lose your luggage on a flight from San Francisco to New York City? No problem. You’ll be reimbursed, says insurance giant Berkshire Hathaway Travel Protection. Normally you’d have to wait months for a check to arrive through the mail. Now claims for money for extra clothes, toothpaste, and shoes can be deposited in your bank account before you leave baggage claim. Peer-to-peer payments technology, which enables people to send money to each other in minutes using a mobile application, is growing in popularity as a tool for businesses to reimburse consumers.
Forrester Research estimates that the total P2P payments market will reach $17 billion in transaction volume by 2019. Facebook
, Snapchat, Square
, and PayPal-owned Venmo
all offer peer-to-peer payment services to consumers. But none of them generate much revenue. Preferring adoption to profits, providers have resisted charging people fees to send money to each other.
But sending money to and from a business? That’s a different story. Charging fees to corporate customers will enable P2P payment providers to make money off the billions of dollars moving through their networks and subsidize consumer-to-consumer activity.
“This has the ability to change the dynamic between a business and a consumer,” says Barbara King, head of global personal payments at MasterCard
. “It’s resetting expectations around how people get paid.”
MasterCard doesn’t offer a consumer P2P payment service, but it is selling the technology to businesses. It’s charging customers like Berkshire Hathaway
and FreeShipping.com an undisclosed fee to add peer-to-peer payments to their own businesses. Berkshire Hathaway Travel Protection’s Dean Sivley says those fees cost the company less money than printing out and mailing checks or wiring money. The insurer developed a mobile app based on MasterCard’s tech to enable its policyholders to submit a claim and receive a decision and payment in minutes. Rival Allstate
offers a similar service powered by ClearXchange, which is co-owned by Bank of America
, Capital One
, J.P. Morgan Chase
, and Wells Fargo
For some merchants, peer-to-peer payment technology offers more than speed. Venmo, which is popular among millennials, will soon enable its millions of users to pay for items like food and transportation using its app. “Merchants are very excited about this because Venmo users post their transactions to their friends in the app, so it’s essentially a form of social advertising,” says Joanna Lambert, PayPal’s vice president of consumer product and engineering. Businesses that accept Venmo will be charged fees similar to those of PayPal merchants: 2.9% of each transaction plus a 30¢ charge. The revenue potential is sizable: Venmo processed $2.1 billion in the third quarter of 2015.
And then there’s the elephant in the room: Apple
. The company is said to be developing its own peer-to-peer payment system for iPhone users—perhaps the best sign that there’s gold in P2P’s hills.
A version of this article appears in the January 1, 2016 issue of Fortune with the headline “Money for Nothing.”