By Peter Lucas
If banks are to gain the upper hand in the hotly contested person-to-person payments market, the Zelle network, which launched earlier this week, must make good on its promise of real-time payments while allowing consumers to complete P2P payments in the most intuitive way possible, payments experts say.
Delivering that one-two punch will attract consumers in droves to Zelle, which is operated by bank-owned Early Warning Services LLC, these experts say.
“Real-time delivery of funds is the holy grail of P2P, and an engaging, user-friendly experience greatly influences adoption,” says Aaron McPherson, an independent mobile-payments analyst. “If Zelle can make that happen, it will be in a strong position to compete against non-bank P2P players.”
One advantage Zelle has over popular non-bank P2P networks, such as PayPal Holdings Inc.’s Venmo, is that it has direct connections to member banks, which is the cornerstone of real-time transactions. Competing providers like Venmo connect to a consumer’s bank account through the automated clearing house network, an indirect route that stretches out the time to clear and settle payments.
“It can take a couple of days to complete a Venmo transaction,” says Steve Mott, chief executive for digital-payments consultancy BetterBuyDesign. “Speed of payments is a value proposition that can differentiate Zelle.”
Offering a captivating user experience is also critical because most consumers choose a P2P network on recommendations from so-called influencers within their circle of family and friends. For a lot of millennials so far, that has meant using Venmo, according to McPherson.
“To get influencers to embrace Zelle, banks need to deliver a consistent, user-friendly experience,” he adds.
That won’t be a slam dunk, since each member bank will be responsible for integrating Zelle into its mobile-banking application. That means the user experience for Zelle could differ significantly from bank to bank.
“If Zelle is not easy to find or use in a bank’s app, consumers may not want it,” McPherson says. “It all comes down to execution by each Zelle member on what Zelle looks like, and how easy it is to use within their mobile-banking apps.”
Banks are betting they are up to the challenge. “Zelle will be embedded directly into our mobile-banking experience and that means no downloads and no hassle,” says Karen Larrimer, head of retail banking and chief customer officer at Pittsburgh-based PNC Bank. “Zelle will be easy to access and navigate, with an intuitive and consistent user experience.”
Scottsdale, Ariz.-based Early Warning will be rolling out Zelle to its 30 member banks over the next 12 months. Those members serve more than 86 million consumers. Participating financial institutions, which run the gamut from large national and regional banks, to community banks and credit unions, include Charlotte-based Bank of America, New York-based JP Morgan Chase, Cleveland-based KeyBank, San Antonio-based Frost Bank, and San Jose-based Star One Credit Union.
Although Zelle officially launched this week, the network got off to a fast start with a soft launch in 2016 that saw Zelle members process $55 billion in P2P payments. During the first quarter of 2017, consumers initiated more than $16 billion in transaction volume through the network.
Early Warning has also struck partnerships with Mastercard Inc. and Visa Inc. to allow consumers to send money and receive money using a debit card through participating Zelle members.
And, to expand Zelle’s reach to consumers through community banks and credit unions, Early Warning has struck partnerships with processors Co-Op Financial Services, Fidelity National Information Services (FIS), Fiserv, and Jack Henry and Associates.
Non-bank tech titans continue to vie for P2P dominance. Last week, for example, Apple Inc. said it will introduce later this year a P2P service that will work with Apple Pay and Apple’s Messages app. But Early Warning is confident consumers will feel more comfortable initiating a P2P transaction through Zelle.
“Zelle enables consumers to send money directly from one deposit account to another, with funds available for use within minutes … without sharing bank-account details with a third party,” says Melissa Lowry, vice president of marketing and brand at Early Warning.
Certainly, banks start with an advantage. They control 83% of P2P volume. Now, time will tell if Zelle has what it takes to tip the scales in its favor, McPherson says.