Zelle and the P2P Payments Race

By Carol Gilhawley

In case you missed it, the real-time person-to-person (P2P) payments service for banks called Zelle is being rolled out by Early Warning Services, LLC. There have been some delays along the way, but the Zelle standalone app finally went live in the App Store and on Google Play on September 12, 2017. This means anyone with a Visa or Mastercard debit card can transact payments in real-time with participating Zelle Network banks and credit unions.

“This is a major milestone,” said Louise Clynes, group vice president, SunTrust Banks in Atlanta, an early adopter. “Send Money with Zelle” is available within the mobile banking apps of 15 banks, and 33 banks have become Zelle Network participants.


Built by banks.

Zelle was built by the banking industry for the banking industry—and directly competes with Venmo (owned by PayPal), Square Cash, Google Wallet, and Apple Pay. It connects financial institutions to make it easy, fast, and safe for consumers to send and receive money. Essentially, the money goes directly from one person’s bank account to the bank account of a recipient—all that’s required is for the sender to register with Zelle and a recipient’s email address or mobile phone number. One major benefit to Zelle is that it offers real-time instantaneous payment compared to a standard 24-hour waiting period.


“The main players in this space (Venmo and Square Cash) can’t interact in real-time with a bank account,” said Jeff Kaufman, president of digital banking and payments at First Bank in Lakewood, Colorado.  He also sits on an advisory committee at Zelle. “First Bank is up and running with both implementations: our online banking app since June 13, and since September 12 with the common mobile app—which is bank agnostic. Every bank customer, regardless of their bank, can get transactions using it.”

Internally, to create awareness of Zelle, First Bank organized fun events for its 2000+ employees. “If branch employees know a product, they’ll sell a product,” Kaufman said.

Then, within its online banking program, First Bank set up roadblocks upon log-in before and after the launch. “We announced person-to-person payments are here and payment can automatically flow in and out of your checking account in real-time,” he explained. The service has been well received so far. “We expect to see Zelle grow in size with the number of banks joining the network and the number of customers enrolled in the service,” Kaufman added.

Explosive growth in P2P.

Javelin Strategy & Research has reported explosive growth in digital (PC/laptop or mobile) P2P payment usage—from 62 million consumers in 2013 to 84 million in 2016. As consumers get increasingly comfortable using digital channels, they estimate 129 million consumers will use P2P services in 2021. Those financial institutions that are going live with Zelle include 86 million U.S. mobile banking consumers.

“I think there’s a lot of excitement around peer-to-peer payments because there’s a real use for them,” said Robert Morgan, vice president of emerging technologies at the ABA. “Offering them inside the banking system can give real value to consumers.”

He believes the biggest challenge banks face to encouraging adoption of Zelle is that the current system of swiping credit cards works so well. “Zelle improves on the customer experience because it is more secure,” Morgan said. “It is hosted within the bank’s secure environment, uses the bank’s protection, and gives customers real-time access to their funds that are held in an insured account.”


Venmo, in contrast, holds onto money in a Venmo account until the recipient chooses to transfer it to their bank account. “With Zelle, money goes from one account to another, and there’s no holding bay in between,” Morgan added. “If consumers can see the value in Zelle like its speed, security, and transparency, then they’ll adopt it.”

How’s it going so far?

Figures from Early Warning show that about 50,000 consumers are enrolling in Zelle daily and there have been 100 million transactions in the first half of 2017, totaling $33.6 billion.

Meanwhile, over at Venmo, spokesman Josh Criscoe said they processed $8 billion in payments in Q2 2017, and $25 billion in the past 12 months. “We hold funds in a user’s account to create a real-time payments experience,” he explained, “but the delay occurs when the user credits the money to their bank account and we’re using the ACH system, which settles it next day.”

By the end of this year, Venmo, in a partnership with Visa Direct, will introduce a feature to enable users to transfer funds instantly to their bank accounts using their debit cards at a cost of $0.25 a transaction. They charge a 3% fee for credit cards. “We feel we’re a partner to banks,” Criscoe said. “Any new entrant to the market is another way to help more people become familiar with digital payments. There’s enough room for multiple winners because this is not a winner takes all scenario.”

ClearXchange has become Zelle.

Banks originally got into the P2P space in 2011 when JPMorgan Chase, Wells Fargo, and Bank of America set up a digital payments network called ClearXchange. In early 2016, Early Warning—which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase, and Wells Fargo—acquired ClearXchange. It has now become Zelle.

“Finally, all banks are getting behind a common brand,” said Clynes. “It gives a greater sense of security because payments are moving from bank to bank. Real-time payment is the most exciting feature so people can send and receive money instantly between banks in the Zelle network.”

How SunTrust is making it happen.

Up until now, SunTrust has been offering Popmoney in its online banking program. Fiserv developed Popmoney in 2012. It has 700 financial institutions in the Popmoney network, and 600 offering Popmoney through mobile. Zelle is replacing Popmoney and expanding to mobile.

“We’re well on our way to implementing Zelle in the fourth quarter,” said Clynes. “Basically we’re connecting our services to the new service and rebranding it. Instant payment is a big benefit, in addition to its ease of use and convenience,” she explained. She expects it to be used for gift giving, splitting utilities, rent, and paying for kids’ activities.

SunTrust is introducing it in a three-step process:

  1. Online Banking – SunTrust will upgrade Popmoney to Zelle. All consumers who use Popmoney will see their transaction history and contacts being saved.
  2. At the back-end, SunTrust will be installing technology to support the mobile channel.
  3. The mobile app will become live in the fourth quarter so clients can start to use it.

“This is ground-breaking stuff,” Clynes said. “We’re learning a lot as we go. We’re proud to be leading the pack of banks out-front with Zelle.”

SunTrust will tell clients Zelle is coming soon, and they’ve organized a host of marketing communications around it. These focus on creating brand awareness and the name change from Popmoney to Zelle. Clynes said, “We’ll grow our user base substantially by introducing it online and in our mobile banking channels as a faster way to make payments through a streamlined interface and secure service.”


Bank of America’s nod to friends with money.

Bank of America has launched a marketing campaign, #FriendsAgain, that highlights the simplicity, security, and speed of Zelle within its mobile banking app. “The campaign centers on a simple insight, that friendships end over money—even very small amounts of money—and we’re going all in on the idea to, ‘Pay them back. Be friends again’,” said Kelly Fredrickson, creative, brand & advertising executive at Bank of America. “The work highlights the benefits of mobile and digital capabilities as safe, reliable, and easy-to-use for our clients. It gives us the opportunity to showcase how the three features of Zelle included in our mobile banking app—Send, Request and Split—allow people to settle old debts and improve their relationships in no time.”

On September 7, Bank of America launched “Exchange Moments,” a series of videos that feature stories of friends, family members and coworkers addressing old debts. These videos appear on TV, online and in social media.

What’s next?

Member banks are joining the Zelle network at different times because technology updates and implementation schedules vary. Some effort and programming is required to interface Zelle’s applications with the bank’s systems. Pricing for Zelle is at the discretion of the participating financial institution, but most will offer it at no charge.

The big news for many banks is that the big-three core processors that service most U.S. banks (FIS, Fiserv, and Jack Henry & Associates) have integrated Zelle into their platforms, so increasingly, banks can offer Zelle through the normal bank website/mobile app rather than trying to get customers to sign up for a separate app.

“Zelle is necessary to make payments more secure and to keep people in the banking system,” said Julie Thurlow, president and CEO of Reading Cooperative Bank (RCB) in Reading, MA. “Users are giving a software company like Venmo their account information. But, it’s not held to the same standards of security that banks are—and these payments are happening outside of the banking industry. I think it’s great the largest banks have developed Zelle for the industry because it meets our security requirements.”

RCB’s core provider, COCC Inc., will have Zelle available next year and it’s hoping to be among of the early banks to launch it.

There’s no doubt competition can lead to innovation.

“I’m seeing more fintech companies are recognizing the need to have conversations with banks to have better products,” Thurlow said. “Venmo caught everybody unawares, and they’ve created something pretty cool.”

RCB’s goal is to have Zelle inside their mobile app and protected by a biometric and multifactor authentication. “We’re in the queue and waiting for them to tell us they’re ready to add us,” she said.

They’ll then promote it to their customers by email, advertisements within the app, and on their online banking login page. “I think it will have tremendous adoption once word gets out,” Thurlow concluded.

Joshua Rowland, CEO of Lead Bank, Kansas City, MO, believes there’s a need for a safe, effective payment system for consumers. “I’m confident that if we look to the future 10 years out, we’ll see that cashless transactions have become the rule rather than an experimental technology,” he said. “It’s hard to believe that things will remain as they are today. It is imperative that community banks become part of—and gain access to—a safe, frictionless, universally enabled peer-to-peer electronic payments mechanism.”

Carol Gilhawley is a business and financial industry journalist based in the Greater New York City area.