How many times have you heard the words, “I’ll get you next time,” only to never be paid back? Whether you’re out for drinks with friends, picking up sandwiches for an outing or making a game night snack run, divvying up shared costs can be tricky and awkward. But thanks to the growing popularity of bill-splitting and peer-to-peer payment apps, splitting the bill has never been simpler. And in some cases, it can even help you keep better track of your money.
“These tools can provide accountability and transparency for a lot of people. That’s not to say that a friend handling a dinner bill is trying to overcharge their other friends, but when you’re figuring out the bill with these tools you can create a record to easily remind people who they need to trade money with,” says Lisa Rowan, writer and savings expert at The Penny Hoarder, one of the largest personal finance websites in the U.S. “It helps keep you accountable to who you owe, while also helping to lessen time spent chasing down your money.”
Cashing in—and breaking even
According to a recent survey conducted by LendEDU, a marketplace for student and other loans, 65 percent of millennials use at least one form of mobile payment app. Out of that group, 68 percent use Venmo, one of the most popular social payment apps, most often.
In fact, Venmo processed $8 billion in transactions in the second quarter of 2017, growing 103 percent over the same period in 2016, according to a report from parent company PayPal.
“Anything that’s primarily web based, like PayPal, is a more user friendly experience for a wider range of ages. I think for millennials, they’re using [the apps] to split rent or utilities because that generation doesn’t write checks anymore. Now it’s a much more streamlined process — you can see your transactions in the app and track where the money goes,” Rowan says.
While there are dozens of similar apps on the market, each caters to a different need. Venmo lets users request and make payments to other users in a public, social media-like interface. Splitwise lets friends track and manage expenses over time, keeping a running total so friends can pay each other back all at once or slowly over time. Tab is specific to dining out, and lets users take a photo of a check and calculates the total, including tax and tip, for each diner.
Cashing out—and saving cash
In the obvious sense, mobile payment apps help users better track their money because they can actually see where it’s going, as opposed to paying with cash or swiping a credit card. (Though credit card mobile apps make it easy to monitor transactions, many users don’t consistently check until it’s time to pay the monthly bill.) But there have been unanticipated benefits, too.
If you’ve ever gotten a new credit card that came with an airline mile bonus, then you know the desire to reach the spending limit in order to land the bonus. Mobile payment apps help facilitate that.
Grant Sabatier, the founder of the popular website Millennial Money, explains: “I think one of the greatest drivers of the popularity of [these apps] was travel hacking. When I go out with my friends, everyone wants to put their card down so they can accrue miles, knowing they’ll be repaid through these apps. Paying a friend back becomes like a professional service transaction; it has a huge convenience factor.”
Another bonus of being repaid via an app? Users can quickly accrue a sort of forced savings. When a friend pays you back in Venmo, for instance, the money doesn’t automatically get sent back to your checking account the app is linked to. It gets stored in the app, acting as a sort of well from which you can make future Venmo payments. But for users who utilize the app more for accepting payments than making payments, that well can quickly turn into an untapped source of found money. “If you can live without putting that money back into your bank account for a while, having it stashed in your Venmo account for a rainy day isn’t a bad idea,” says Rowan.
The savings expert does, however, caution users to remember that no matter which way they’re spending and receiving money, it still comes down to dollars and cents. “With various banks and credit card companies getting into the game of mobile payment apps, it adds another layer of awareness that the consumer needs to have,” Rowan says. “We’re going to see features that go beyond mobile — like tap systems, smart watches, fob payments and more — but the consumer has to remember that even as these newfangled ways to pay or exchange money pop up, at the end of the day it’s still about money in and money out.”