P2P Payment (Peer-to-Peer Payment) is a transfer of money from one individual to another through a banking app, payment app or digital wallet, usually addressed by phone number, email or account identifier instead of full bank details. In a closed-loop model, both people hold accounts with the same provider and the transfer is an instant internal ledger entry; in an open-loop model, the app sends a bank transfer over schemes such as SEPA Instant Credit Transfer or Faster Payments. The EU Instant Payments Regulation requires funds within 10 seconds and verification of payee. Instant transfers cannot be recalled, making P2P the main channel for authorised push payment scams, and UK reimbursement costs are split 50:50 between sending and receiving firms.
How do P2P payments work
There are two architectures. In a closed-loop model, both people hold accounts with the same provider, often an EMI holding e-money, and a transfer is simply a ledger entry moving balance from one customer to another. Settlement is instant and costs the provider almost nothing, but the recipient must join the same app.
In an open-loop model, the app sends a bank transfer over a domestic or regional scheme, which reaches any bank account. In Europe this is increasingly SEPA Instant Credit Transfer; in the UK it is Faster Payments. Proxy services map a phone number to an IBAN so the sender does not need it.
Instant P2P transfers in the EU
The Instant Payments Regulation (EU) 2024/886 made instant euro transfers the default capability. Euro-area payment providers that offer standard credit transfers had to be able to receive instant payments by 9 January 2025 and send them by 9 October 2025. The recipient's provider must make funds available within 10 seconds, and charges for instant transfers may not exceed those for standard transfers. If the payer's provider gets no confirmation within those 10 seconds, it must restore the payer's account to its previous state. From 9 October 2025 providers must also offer verification of payee, checking that the name entered matches the account holder before the payment is sent.
The same regulation let payment institutions and EMIs participate directly in designated payment systems, with member states required to implement the change by 9 April 2025, so non-bank P2P apps no longer need a sponsoring bank to reach the instant rails.
P2P payment fraud
Because instant payments cannot be recalled, P2P is the main channel for authorised push payment (APP) scams, where the victim is tricked into sending money. In the UK, the Payment Systems Regulator's reimbursement regime covers payments between UK accounts over Faster Payments and CHAPS, with the sending and receiving firms splitting reimbursement costs 50:50. A firm whose accounts receive scam proceeds therefore pays half the loss even though its own customer was the fraudster.
A worked example: an EMI whose customers receive £2 million of reported scam payments in a year would bear about £1 million in reimbursement costs, which makes inbound transaction monitoring a direct profit-and-loss item.
When buying a consumer payment app, due diligence looks at APP scam reimbursement history, mule-account detection rates, and whether the business model depends on free P2P transfers subsidised by other revenue.