P2P is a hot commodity in today's financial services industryand PayPal's massive P2P network and instant recognition areleading the charge. Just like Facebook and its 500 million friends,PayPal's 90 million users have massive clout in the payments world.More and more credit unions, which are looking for increasinglyinnovative ways to serve their members amidst stiff competition,will likely turn to PayPal's powerful and proven brand to deploypayment solutions into their online and mobile bankingplatforms.

The primary reason for PayPal's dominance of the P2P space:Integration with PayPal allows users to quickly send money toalmost anyone with a mobile phone or email address. By leveragingPayPal's global network to send money, the sender needs only tologon to online banking, enter the destination email address ormobile phone number, and transfer the money. If the recipient isone of the 90 million PayPal users, the funds will be depositedinstantly for verified accounts. If the recipient does not have aPayPal account, prompts lead them to create one.

For a P2P system to be readily accepted, the recipients of thepayments must have some recognition of the payment mechanism andthe brand. PayPal has this recognition in spades, and also has theexisting accounts to boot. Because of this recognition factor,there is a trust factor built into the PayPal name. This trustfactor makes sender and recipient adoption much easier since manyalready use PayPal. That's why many competing third party providerswill have a steep hill to climb to make any headway in today's P2Psector.

For third party providers trying to make a dent in PayPal'sdominance, I think the fact that I have never even heard of many ofthem is indicative of the overall lack of market traction theyhave. If you stand before a room full of credit union people andask how many have PayPal accounts, most of the people will likelyraise their hands. No one else comes remotely close to the namerecognition and the sheer number of end-points PayPal already hasglobally. The eBay phenomenon helped propel this in a meteoricway.

PayPal has also been in the P2P game a long time (PayPal is theresult of a March 2000 merger between Confinity and X.com. InOctober 2002, PayPal was acquired by eBay for $1.5 billion). ItseBay-borne marketing muscle and brand recognition are legendary inthe payments world. Integration with the PayPal brand canalso help with adoption within the credit union sphere since most,if not all, credit unions already understand the PayPal brand andits capability

It will be interesting to see what happens with P2P. At themoment, it is a very “hip” topic. The one thing that competesagainst P2P, however, is that I can have my online bill paysolution send anybody a printed check for free. So why wouldn't Ijust do that and save the fee? Everybody in the P2P business is upagainst this scenario. If I were the credit union, I would giveaway P2P to help kill off the cost of the check – which is higherin most cases. Within the payment recipient messages, the creditunion can also send the payment recipient an invitation to join thecredit union.

Also, since we are increasingly living in a global village, Imight need to pay you in Ireland. Working in 27 countries today,PayPal handles all of the mechanics of this process, including OFACand other international stuff that most PayPal competitors are notable to handle effectively. Perhaps the biggest reason people willuse PayPal is that it can move money faster.

But there's always that remote chance that giants like PayPalcan fall hard and quick. Who would have predicted the day whenApple would again make more money than Microsoft? Who would haveguessed Facebook would be bigger than MySpace? And going back intime a bit: Who would've imagined Japanese automobile manufacturersoutdoing U.S. auto manufacturers? I also see this slow turnhappening to Mastercard and Visa. Never underestimate theleviathans, however. They can “buy up” or “buy into” whateverthreatens their old model and make it theirs.

The payments world is evolving rapidly. I never hand out mycredit card online anymore and all of my online purchases utilizeeither Amazon or PayPal. This fact alone is what scares so manyfinancial institutions about these kinds of viral paymentmechanisms. I can use PayPal like a mini-bank. It's that versatile.PayPal is used to store and send money to your kids in college,help pay the rent to your landlord, pay household bills, or simplysend a friend some funds. Even businesses leverage the company'spayment network.

With more than 90 million users–and growing, a proven brand, andhighly rated customer service, PayPal is the “hands down” providerfor P2P payments – for now. Credit unions venturing down thepayments road to improve their member services ought to take aneducated look at PayPal alongside its competitors. No doubt, P2P ishere to stay. The evolution of P2P in the credit union arena willbe interesting to watch.

Robert Broadwell is general manager of S1 Corp. subsidiaryPM Systems Corp. in Chapin,S.C.