Wednesday , July 18, 2018

A Consumer Survey Yields More Indications That Zelle Is Catching Up to Venmo

Zelle’s gestation as a favored person-to-person payments service may be nearing fulfillment. A new survey from LendEDU finds that, nine months after its June 2017 debut, more consumers had become aware of the bank-backed service. In 2017, only 6.1% had heard of Zelle. By the time of the survey, that had grown to 29.1%, still behind PayPal Holdings Inc.’s Venmo, at 42.6%.

While Zelle still trails Venmo by some measurements, it is clearly gaining ground. Among the 1,000 U.S. consumers surveyed that used both Venmo and Zelle, 22.4% were more satisfied with Zelle, compared to 20.69% who liked Venmo more. Of those asked in 2018 if they would switch to Zelle, 35.9% said they would or already have.

As for what consumers like about each P2P payments service, LendEDU found that 53.9% liked that Zelle had no social aspect and kept their transactions private. That same percentage also liked that money sent via Zelle appeared in their bank accounts immediately. Most—61.5%—said Zelle felt more secure to use because of its bank backing. Respondents could choose more than one response.

A consumer makes a Venmo transaction. (Image credit: PayPal Holdings Inc.)

Venmo’s satisfaction centered on the inverse of many Zelle users, with 66.7% liking the social aspect. “Young people love Venmo because it lets them scope the transactions of everyone in their social circle,” Alexander Lowry, professor of finance at Wenham, Mass.-based Gordon College, said in a press release. “Payments have become a sharing experience on Venmo because they are tied to your social network. Venmo users open the app four or five times a week. But they only do transactions a couple of times a week. So they’re opening it to review the feed to see what their friends bought.​”

Many—58.3%—enjoy have a Venmo balance they can access without touching their bank accounts. Trust in the application ranked high for 33.3%, and 25% felt there was no compelling reason to switch to Zelle.

Zelle, however, appears to have larger average transaction sizes. For Zelle users, the average is $89.58, compared with $74.37 for Venmo users.

Zelle’s gains are thanks in part to the distribution reach of its bank partners and its massive investments in marketing and education, Jordan McKee, research director at 451 Research, tells Digital Transactions Newsin an email.

“While Zelle may not yet have the Millennial appeal of Venmo, its integration into banks’ mobile apps gives it immediate access to a broader swath of demographics,” McKee says. “Zelle is positioned particularly well to steal volume from Venmo on larger-ticket transactions, where consumers may feel more comfortable using their financial institution than a third party.”

Venmo also faces serious competition from Square Inc.’s Cash app, which claims 7 million active users, and Apple Inc.’s Apple Pay Cash. “Venmo is also getting squeezed by Square’s Cash app, which is targeting the same Millennial audience,” McKee says. “Square Cash has been aggressively working to evolve into a consumer-to-business payment option, as evidenced by recent enhancements such as Cash Boost.”

Cash Boost is a rewards program to receive instant cash back at participating merchants when a consumer uses Square’s Visa-branded Cash Card to make a purchase. The card is generating $1 billion in annual volume, according to Square.

The network operator behind Zelle is Scottsdale, Ariz.-based Early Warning Services LLC, a bank-owned company serving some 30 member institutions

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