Zelle P2P payments are gaining momentum as banks increase their efforts to compete with established person-to-person payment services such as Venmo and Cash App. By connecting customers through a bank-supported network, Zelle gives participating financial institutions a way to provide faster digital payments without requiring customers to move money through a separate fintech platform.
Growing transaction volume suggests that consumers are responding to the service. However, as Zelle usage expands, questions surrounding fraud and consumer expectations are also becoming an important part of the discussion, particularly when consumers use P2P payments to purchase goods from individuals they do not know.
An article in Business2Community makes the argument that the bank-based person- to- person payment solution Zelle is winning the P2P race:
The old adage “slow and steady wins the race” might be very apt for how banks have approached P2P payments. While Millennials were flocking to Venmo and the Cash App to split restaurant bills and pay one another back for other purchases, FIs were locked in their walled gardens, often limited to allowing P2P transfers within their own networks. But that began to change last year with the launch of Zelle.
Banks Increase Promotion as Zelle Usage Grows
The article also includes a collection of ads and other promotional materials that banks are using to promote Zelle, and notes the latest published statistics on Zelle usage:
At the end of April, Zelle announced that more than $25 billion moved through its network in Q1 2018 (an increase of >50% from Q1 2017) on 85 million transactions. Over a third of those transactions (29 million) were through Bank of America, which saw $9 billion in volume. Although more than 100 financial institutions are now partnering with Zelle, FI awareness is still ongoing, and so we are sure to see additional growth this year.
Zelle Growth Raises Questions About Fraud Protection
The article additionally repeats the points made in an article from the New York Times that discusses some of the fraud issues that occur with Zelle. These issues are real; consumers do believe that when they make a purchase from another consumer, they should be afforded the same rights as a card purchase from a vetted merchant. Some of the most provocative statements in the referenced NYT article have since been retracted, however. The retraction can be found here
Zelle’s increasing transaction volume demonstrates how quickly bank-supported P2P payments can gain traction when financial institutions actively promote them to existing customers. With more than 100 financial institutions partnering with the network, continued expansion could further strengthen Zelle’s position in the growing person-to-person payments market.
At the same time, greater adoption makes consumer education increasingly important. Customers may not always recognize the differences between protections associated with card purchases and those available when sending money through a P2P service. As Zelle P2P payments continue to grow, banks will need to balance convenience and speed with clear communication about how the service should be used and what protections consumers can expect.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
