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.
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.