To P2P or Not to P2P: Questions to Ask Your Vendor

Amy Donaghue

By: Jennifer Kline, AAP, APRP, NCP, Director, Audit Services

Faster payments is the name of the game and consumers want it now. Consumers are looking for fast, safe and easy ways to pay other people. No longer is writing a check or having cash the standard as mobile apps now make everything easier. While some financial institutions have implemented Person to Person (P2P) transfers for their consumer’s needs, others are still deciding if offering P2P is the right move. Has your financial institution made the leap or are you still on the fence? Before you make the leap into P2P payments, it’s important to ensure your risks are covered and asking the right questions will help.

You may be tempted to run with the P2P solution offered by your core processer or another well-known solution provider for the sake of simplicity. Although this may seem like the easiest option, it’s important to do some due diligence. Here are some questions to ask potential vendors to help mitigate your risks and make sure the company is the best solution for your unique needs.

What payment systems will be used by the P2P solution? Will the P2P solution transmit Entries only through the ACH Network, a mixture of debit card network and ACH or a newer payment system like The Clearing House’s Real-Time Payments channel?

Multiple networks and channels are currently available. And, as they grow, P2P payments are evolving. A P2P solution could use the debit card network to pull a debit from one account and push a credit through ACH to another account. Having a good understanding of how the transactions will be processed will help you stay on top of your game. Ultimately, Regulation E will protect your consumers, but you’ll need to know which network rules will apply to protect yourself.

Who are the players in the transfer of funds, especially when using the ACH Network?

Some vendors, or Third-Party Service Providers, use their own Originating Depository Financial Institution (ODFI) to send ACH WEB credit Entries. In this scenario, you will have very little control of the P2P transfer. In other cases, vendors may make ACH Files of the WEB credit Entries available for your daily processing to the ACH Operator, making your financial institution the ODFI. Remember, the risk and related warranties and liabilities are on the ODFI of P2P Entries.

Where will consumers call if there is fraud or a dispute?

When the P2P product is rolled out, how will you address consumer issues? How can you retrieve funds back if there is an issue? Do you call the receiving financial institution or your processor to ask for the funds or to generate a reversal or refund? You’ll want to ask your processor what options will be available for you to work through any consumer issues. If you are unable to manage consumer complaints related to the P2P solution, your financial institution will suffer reputation risk.

How are controls established on the P2P product?

Dollar amount and transfer limitations are a must to protect both the consumers and your financial institution. Ask the vendor what P2P limits are available for use, ensure controls are established to meet the needs of all involved. Then, talk to the vendor about tools, reports and alerts staff can use to manage those controls.

Some additional good questions to ask may be:

  • What tools or reports will be made available?
  • How often will settlement take place?
  • What training is made available for staff on updates?

Periodic review and updates from the vendor are necessary. The list of questions goes on and on, but the main point to remember is that you, and not your vendor, will be handling consumers issues and questions. Create written procedures, introduce the product to all staff and create a Frequently Asked Questions for reference. Being proactive in managing risks related to your P2P product will lead to a successful implementation and satisfied consumers.

Implementing a new service can be intimidating, and our payments experts are here to help. Reach out to us at advisory@epcor.org to book an Advisory Service today!