Zelle Makes Its Debut

In October 2016,  Zelle announced its plans to launch a real-time bank account to bank account, person-to-person (P2P) mobile payments platform that would compete directly with the likes of PayPal, Square Cash and Venmo.

Yesterday, June 12,  Zelle officially announced that it was open for business for the pool of some 86 million consumers in the U.S. who use their bank’s mobile banking services.

According to latest news released by Early Warning Services, the money transfer service will soon be live for some 30 participating financial institutions and allow for funds to be sent from one person’s bank account to another in minutes, using only a recipient’s email address or mobile number.

The U.S. banks taking part in the new P2P platform include Ally Bank, Bank of America, Bank of Hawaii, Bank of the West, BB&T, BECU, Capital One, Citi, Citizens Bank, Comerica Bank, ConnectOne Bank, Dollar Bank, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, First Tennessee Bank, First National Bank, Frederick County Bank, Frost Bank, HomeStreet Bank, JP Morgan Chase, KeyBank, M&T Bank, MB Financial Bank, Morgan Stanley, PNC Bank, SchoolsFirst Federal Credit Union, Star One Credit Union, SunTrust Bank, TD Bank, USAA, U.S. Bank and Wells Fargo.

According to Lou Anne Alexander, group president, payments, at Early Warning — who spoke to Karen Webster immediately after the launch was announced — by June’s end, 12 of those 30 partners will go live for the mobile banking users of those FIs, enabling funds to be sent between friends and family from one bank account to another in real time.

Alexander further noted that Zelle will also be launching toward the end of 2017 as a stand-alone mobile app, to further broaden the reach of the service.

Because, she noted, the goal for Zelle is to open their P2P tent as widely as possible and to make it as inclusive for as many consumers as possible.

“I think we have heard consumers say, ‘I chose these kinds of P2P services because of where my friends and family are already.’ I think the goal for everyone who is participating in this space is to build an ubiquitous network where all consumers can be interactive and participate.”

Building that ubiquitous network is Zelle’s heavy lift. Depending on who you ask, the U.S. has 13,000 FI’s — and ubiquity means reaching every single last one of them.

Alexander noted that challenges are, in fact, formidable, but that the unique structure of the Zelle network itself means that scalability needs have been factored in from the ground up.

“The interest level is very high among financial institutions … the question is often do they want to integrate directly with Zelle or work through a processor? They are really key partners in bringing this to the marketplace and making it simple for financial institutions that don’t have the same level of technical resources as the largest players to connect directly — and who we encourage them to [integrate] through their processor because it is a faster pass to the network.”

Unpacking Zelle’s Three-In-One Model

Zelle, Alexander explained, is three things at the same time. First and foremost, she noted, it is “the network itself” — the real-time linkage between the financial institutions that was once the clearXchange network and enables P2P bank transfers today. In Q1 of 2017, the Zelle Network reported that it processed some 51 million transactions, representing some $16 billion in value. The Zelle Network, with the launch of its mobile banking capabilities, will now also include the partners that will enable the connection to the Zelle Network — CO-OP Financial Services, FIS, Fiserv and Jack Henry and Associates — as well as Visa and Mastercard, who enable connections among consumers via debit cards. Alexander said that leveraging those relationships is how Zelle plans to garner network ubiquity.

Zelle is the consumer brand — the Venmo, Square Cash and Pay P2P equivalents. Alexander said that they want Zelle to stand for the instant and secure transmission of funds from bank to bank.

Zelle is also, Alexander said, the app itself — which she described as a stopgap measure to provide for broad participation. Zelle, the app, will leverage Visa and Mastercard’s debit rails to connect consumers with banks that go beyond the initial 30 — until the Zelle Network includes a direct, real time connection to all 13,000 FIs.

From Millennials To Mainstream

P2P payments is a crowded field — and getting more so by the day. Just about a week before Zelle announced this big roll out, Apple announced the launch of its own P2P service, enabled in Messenger (and for Apple product users only).

But Alexander said that, competition aside, there is a bigger picture to see.

“I would say it is a really good time to be in P2P. There is a lot of interest, and I think mobile adoption is propelling that interest.”

The goal now, she said, is to move that interest out more broadly — and make the P2P payment a tool that is ready to work more broadly in the marketplace.

“We are educating a whole new generation of consumers on how they might be able to pay the dog sitter, or the babysitter, or to collect money for the soccer team t-shirts, or to plan that family reunion and share the cost of the beach house and the buffet. What we are focused on is … those last hold-out places where we still write checks — and then showing how Zelle can displace that with something that is more convenient for the consumers, less costly for the institutions and more secure for everyone involved.”

Early Warning CEO Paul Finch echoed Alexander’s comments in their press release announcing the launch of Zelle: “Fragmentation has been frustrating for consumers. Inconsistent experiences have made it difficult to send and receive money between banks. Zelle unites the financial community behind a single, real-time P2P payments experience for millions of consumers. Together, we are removing friction from finance, allowing money to move seamlessly between accounts in minutes. This revolution in money movement will create for consumers a viable alternative to checks and cash.”

Alexander said that the average P2P payment on the network is $400, higher than the average on rival platforms — and bumped largely, Alexander noted, by the number of customers who use the service to split rent and utility payments.