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What You Need to Know About Zelle, the New Player in Peer-to-Peer Payments


What You Need to Know About Zelle, the New Player in Peer-to-Peer Payments

There’s a new kid on the digital payment block. Zelle, a person-to-person payments network from bank-owned Early Warning Services, could give Venmo, a subsidiary of PayPal, and Apple Pay a run for their money.

This marks the start of Zelle’s year-long rollout to more than 86 million U.S. mobile banking customers at 30 financial institutions, small and big, including Bank of America, Wells Fargo and others. What’s the appeal? There’s no additional app to download. It’s fast. Money can be sent from one bank account to another in minutes, with merely the recipient’s email address or cell phone number. It’s being touted as safe, easier than hitting up the ATM to get cash, and makes you wonder once again why you need checks that seem to be edging toward extinction.

If you think this is a passing fad, the numbers tell a different story. A recent Javelin Strategy & Research report, Making Payments Faster: The $20 Trillion Opportunity, by Michael Moeser, showed significant growth in digital P2P payment use, from 62 million customers in 2013 to 84 million 2016. An estimated 129 million consumers will use P2P in 2021.

What’s the appeal? There’s no additional app to download. It’s fast. Money can be sent from one bank account to another in minutes, with merely the recipient’s email address or cell phone number.

According to the company’s prepared statements, in the first quarter of this year, more than 51 million transactions flowed through the Zelle Network, totaling more than $16 billion. The network, built on the foundation of the clearXchange Network, experienced 39% year-over-year growth in volume transaction volume. Last year, $55 billion in P2P payment transaction were processed by financial institutions participating in the Zelle Network. The numbers are only going to get bigger. On the horizon there’s a standalone Zelle app that millions of customers can use, including those at non-participating financial institutions.

Can you call Zelle a market disruptor? It’s too soon to say. Don’t expect competitors to lie down. Just recently Apple got the word out about its P2P money transfer function. The digital space is undoubtedly hot. What’s all this portend for consumers?

“I happen to like the idea of being able to transfer money directly and quickly to a friend.  I have used Square Cash with a friend in another city whereby he can quickly reimburse me for things I may have ordered for him online and paid for with my credit card,” says Edgar Dworsky, founder and editor of Consumer World.

The advantage of Zelle is speed. “Venmo can take a few days,” says Hamed Abbasi, CEO of Plooto, a digital payments platform for businesses.

For sure though, P2P is still a growing industry and working out the kinks. Then, some services only work with limited groups. “The new P2P service from Apple only works on Apple devices, for example. Ensure that you use a service that you and the recipient can easily access. In addition, not all services are equal when it comes to how they secure information. For that reason, it is best to seek out a service from a financial institution or ensure the service utilizes bank-grade security,” says Steve Shaw, vice president of strategic marketing, digital banking at Fiserv.

Dworsky wants to know a few things about Zelle. “Other services have dollar limits, Zelle is silent on their limits, as they are on their website about fees, though their old website clearXchange says no fees.” He points out that Zelle appears to check your credit when applying to use their service. “That could result in a ‘hard pull’ of your credit report. Too many inquiries can ding your credit score.”

Abbasi says Zelle has another limitation, “It’s only available between U.S. financial institutions.”

But what can be said -- Zelle wants to change the way money moves.

moneysaver   |     |   Comment #1
“Other services have dollar limits, Zelle is silent on their limits, as they are on their website about fees, though their old website clearXchange says no fees.”

If someone's going to take the time to write and post this kind of article, how difficult would it be to actually contact and ask the company involved just what their limits and fees are, and why they're not publicly disclosed on their current site??? Before posting the article!!!

Or, perhaps, the company's fees and transfer limits aren't part of, to quote the article's headline, "What You Need to Know About Zelle."
Marylou   |     |   Comment #19
Each bank will set their own fee and limits for P2P.
rhutnik   |     |   Comment #2
The only detractor that I can see of other P2P apps is that they hold a balance that must be transferred into the account. Usually these transfers happen by the next business day, which is fine for me. However, holding a balance in the account can also be viewed as a positive if you pay and receive money frequently using your mobile device. Also, I don't like the idea of a credit pull to use Zelle, and not everybody has compatible banks that currently are aligned with the Zelle system.
Martin   |     |   Comment #3
There are always some kind of fees to cover the cost. If the fees are in adds or giving personal info to Zelle or make you expose your financial info to third parties, does not makes difference. Yes, there are limits set by SEC, FDIC, the underlined transfer (holding) bank or your own account type.
I think this service is Government controlled to expose many illegal activities and or the government to pursue your money for easy forfeiture. Please read this bill:
S. 1241 — 115th Congress: Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017

Bozo   |     |   Comment #4
I need three things from any P2P outfit: (1) FDIC or NCUA insurance,  (2) an interest rate greater than 1.5% (annual), and (3) immediate liquidity.. Too many of these disruptors just seem to muck up their chances by clouding the skies with page after page of fine-print.

So, here's the deal. Let's assume I have (fill in the blank) thousands of dollars sitting somewhere at 1.05%. It's NCUA insured. It's liquid. If I need it tomorrow, I can get it tomorrow. Can you beat that by 45 bps?

I seem to recall, several years back, when P2P was all the rage. Then, the issue of "who bears the risk of default" raised its ugly head.
Bozo   |     |   Comment #5
Default is a huge issue, and one P2P outfits try to dance around. For example, if you lend a bank or credit union "X" thousands of dollars, and their loan department makes a bad loan, the borrower defaults,, it's their problem, not yours. You still get paid, even if they don't, In P2P, it gets fuzzy.

When P2P lending first got started, I chuckled at the pitches. Folks would post their pictures, their life histories, you name it. See, I'm a nice guy. Lend me money at (fill in the blank) %. I promise to pay you back. Yeah, right.

That said, if a website with folks with access to cash (DA) can marry with a website with folks who need same (Lending Tree), that's a different situation. Lending Tree can vet prospective borrowers, just like any bank or CU.

Am I ready to P2P? I suspect you know the answer.
Ann   |     |   Comment #13
I don't think this is intended for that kind of situation, just for giving money to people you already know when you don't carry checks or enough cash to do so (e.g. splitting dinner) or aren't in the same place (e.g. sending money to adult children).
Martin   |     |   Comment #6
Bozo #4, you wrote:
"It's liquid. If I need it tomorrow, I can get it tomorrow." I guess the answer is maybe. If you can claim that, you have not read the disclosure of availabilities of your funds in any bank or CU.
They all state in the disclosure as: "....we may disallow any withdrawal without prior notice or in certain circumstance when we get disputes against that account or by Government notices of pending action against the account holder....and so on..."
I have a list of hundreds excuses by the bank not to allow you the money back at your own will. If there is fraud at management level, it may be months or years before you see the money. FDIC does not cover fraud losses.
Bozo   |     |   Comment #7
Martin, your points, while technically valid, verge on paranoia.

I am 70 years old. I have had bank accounts since I was 8 years old. That's 62 years. Never, ever, over the course of 62 years was I ever denied access to my money.

The most rational alternative to a bank is money under the mattress. Problem being, after a few years of serious saving, the mattress gets a bit lumpy, you can't sleep, you lose your job, and start harvesting the mattress money. So, the mattress gets flatter, you begin to sleep again.

But, oops, you still don't have a job.
Martin   |     |   Comment #8
Bozo #7 reply, My next door neighbor got suit by a passer by who fell on his property and injured himself. He had no idea when and by whom the lawsuit was filed in court, but all his bank accounts were frozen by a Lis Pendens order by the court.
He has over $300K in the banks, but can not touch them. It has been 6 months since then and still all his accounts are frozen by the order. He filed complain that he was never served by the court, but the service marshal stated that he left the papers on the front door.
The litigation may be frivolous, but it shows what can happen to a good person and his money out of nothing.
The suing party wants compensated for the injury, but both sides attorneys will reap the benefits. I do not believe that he will ever see his money back.
Same thing can happen while driving on the road, there are opportunistic persons who will drive their bicycle onto you or pedestrians who jump on the hood of your car and so on. They have an attorney number in their pocket, and while you are trying to help, they take picture of you and claim they were knacked on the ground by you, while injured and calling for help.
Next morning you hear from a law firm of many attorneys filing lawsuits and getting info of your assets and bank accounts. If you withdraw the money after the fact, you admit that you are trying to abscond and allude which makes you criminal in any court of law for trying to protect yourself from the injured party.
There could be many, many cases like this one, my caution of advise is, people should not get ****y and think I have money and I'm untouchable, the poor house is just one staged lawsuit.
Bozo   |     |   Comment #9
Martin, "lis pendens" was abolished years ago, at least here. Where are you reading this stuff? What state has "lis pendens" these days?

Mind you, as a retired attorney, I feel your pain. Many lawyers game the system, of that there is no doubt.

Many others do a fine job, represent clients well, uphold their oaths. The trick, as always, is finding the honest lawyer. Last I checked, I could find no webpages for "honest lawyers".
Bozo   |     |   Comment #10
PS: as I recall, as a bit of trivia, "lis pendens" was French, for the concept of pending lien. It would give the right of a person claiming damages, without further proof, a lien (a "lis pendens") on the person being sued. As I remember, this concept of extra-judicial confiscation was found unconstitutional.

 By the way purists will note "lis" is pronounced "leee", en francais.
Martin   |     |   Comment #11
Bozo, comment #9, from the legal dictionary definition:
"Lis pendens is Latin for "suit pending".[1] This may refer to any pending lawsuit or to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded. This notice secures a plaintiff's claim on the property so that a sale, mortgage, or encumbrance of the property will not diminish plaintiff's rights to the property, should the plaintiff prevail in its case. In some jurisdictions, when the notice is properly recorded, lis pendens is considered constructive notice to other litigants or other unrecorded or subordinate lienholders.

The recording office will record a lis pendens upon request of anyone who claims to be entitled to do so (e.g. because he has filed a lawsuit). If someone else with an interest in the property (e.g. the owner) believes the lis pendens is not proper, he can then file suit to have it expunged.

Some states' lis pendens statutes require the filer of the notice, in the event of a challenge to the notice, to establish that it has probable cause or a reasonable likelihood of success on the merits of its case in the underlying lawsuit. Other states do not have such a requirement.[2]"

The state rules are irrelevant when a lawsuit is files in a US district court. It has precedence over any local or state statutes.
Martin   |     |   Comment #14
Bozo, in your comment #9 you wrote:
("Martin, "lis pendens" was abolished years ago, at least here. Where are you reading this stuff? What state has "lis pendens" these days?")
I spoke with an attorney in Palo Alto, CA and he confirmed that Lis Pendens is live and still being used by many cleaver attorneys in California. I did some statute research and found that:

"The purpose of the Lis Pendens is to give constructive notice to the public at large that this property has a lawsuit pending that could affect whether or not the owner of record has the right to sell it, lease it, put it up as collateral for a loan or otherwise transfer it. The technical aspects of filing and recording Notice of Pendency of Action are enumerated under §§405–405.6 of the California Code of Civil Procedure.

As recently as 2004, the California Supreme Court concluded that Code of Civil Procedure section 405.20 provides that, “a lis pendens may be filed by any party in any action who asserts a ‘real property claim’ (Kirkeby v. The Superior Court of Orange County (2004) 33 Cal.4th 642.) In that particular case, the plaintiffs had alleged a fraudulent transfer of the property had occurred."
Some counties like Alameda county and San Francisco county make their court documents and all Lis Pendens available Online for instant access and without charge. However, most counties in California do not have such a service and it is very easy to overlook a Lis Pendens document has been filed.
As an attorney I hope you may know that, but a little reminder now and then will serves us well.
cumulus   |     |   Comment #12
FWIW, this month (June) CapitalOne is switching its' P2P payments (from clearXchange) to Zelle.
Marylou   |     |   Comment #18
clearXchange changed their name to Zelle
TRUST EXPERTS!   |     |   Comment #16
Yes, I see...
Yes, I see...   |     |   Comment #20
john sweney
john sweney   |     |   Comment #21
Indeed, banks appear to set their own limits. I have Zelle on my personal Bank of America account, and the limits are BURIED in the fine print of their Terms & Conditions. For BoA, this is what they say: "Consumers participating in the Email/Mobile Transfer Network Service may send up to 10 transfers with an aggregate dollar limit of $2,500 and receive up to 10 transfers with an aggregate dollar limit of $5,000 during any 24-hour period, and may not send or receive in excess of 30 transfers with an aggregate dollar amount of $20,000 in any 30-day period. If you are a U.S. Trust or Merrill Lynch Wealth Management client you may have higher limits for this type of transfer. Please contact your advisor for more information on your limits. Small business customers may receive up to 10 transfers with an aggregate dollar limit of $25,000 during any 24-hour period and 30 transfers with an aggregate dollar amount of $100,000 in any 30-day period. Receiver limits may not apply to transfers from customers of other banks participating in the ZelleSM network. The minimum transfer amount under the Email/Mobile Transfer Service is $1.00."
dds   |     |   Comment #22
check out their BBB rating. It's terrible.

ksk   |     |   Comment #23
do they charge service fee/transaction fee if we transfer form one bank to other ?
wazntme   |     |   Comment #24
Just finished reading the 10-pages of legaleez re Zelle and I gotta tell you, I'm running for the hills. Just know the consumer has NO rights, NO control, NO opting out, you give up your rights to a jury trial as well as your right to enter class-action lawsuits (interestingly, this following the 2007 lawsuit and the 2011 hacking job - both through FIS - their stated software standard. And, they don't have to tell you anything - they can arbitrarily deny or stop whatever they choose, you of course have to give up all your information as well as for those you do business with, and, if they deem something might be illegal, abusive, unwelcome, etc., they stop the transfer of funds. This includes a consumer asking another consumer for child support, alimony payments, or other court-ordered payments. Don't even think of trying to repay a loan shark! Long story short, this took six years involving over 30 financial institutions and countless lawyers, AND THE GOVERNMENT to come up with this in order to sniff out money-laundering schemes. Unfortunately, it's costing the consumers even more in the end.
Nothing   |     |   Comment #25
For those mere folks that have ONLY a checking with a financial firm...pull your credit report and see if/when it looked at your credit report. Why, if you are the creditor to the bank, that is what you are since it is the debtor in the checking account relationship, then why is a credit report being pulled? Especially if no overdraft, opt out of all promotions, etc. Complain to the local bank manager in a letter, you will find that they don't know what to do! When they finally respond note the time for them to act. You can then escalate if you want but for this thread the issue is...you spotted someone on your report that purports to be your bank...but you don't know for sure since you opted out, etc. i.e. why would your bank, in fact, do that. It could be Wells all over! The bank manager will normally not know what to do...but note the response time...weeks. That time frame is what "you" get when you suspect fraud and they did nothing! You shouldn't be prejudice if...later you report, as it turns out, actual fraud b/c they do nothing and their response time should be the same as you! They set the norm in their delay/inaction!
Mike   |     |   Comment #26
Tried sending money to my daughters BOA account with Zelle - didn't work - she received the text but the click through to receive the funds on the BOA app - simply didn't function. Need to work on this fast as I cancelled the transfer today after two fruitless days trying to solve this issue.
Teresa   |     |   Comment #27
I just signed up for Zelle through Wells Fargo, and a friend sent me some money a few minutes later (through Chase). I wasn't sure what I would have to do to receive the money, but 10 minutes later, I logged onto my Wells Fargo account and the money was already in my account.
Nothing   |     |   Comment #28
Trust and verify!
Consumerage   |     |   Comment #29
Zelle zucks. Don't use it. Boycott the bogusness. It isn't simple and a 3rd party controls your money. Just try getting it back.