Here’s how a consortium of U.S. banks developed an alternative to third-party mobile payment services like Venmo, Square Cash and PayPal. Originally called ClearXchange, now known as Zelle, the company claims that nearly 100,000 consumers per day sign up for the service, with more than 60 financial institutions on board; it processed over 247 million payments in 2017, totaling $75 billion in peer-to-peer payments.
Zelle, U.S. banks’ answer to mobile payment services like PayPal and Venmo, claims that nearly 100,000 consumers, on average, are signing up for its service per day. The company also painted a picture of growing traction, noting it processed over 247 million payments in 2017, an increase of over 45 percent year-over-year, totalling $75 billion in peer-to-peer payments, up from $55 billion the year prior.
However, in 2016, Zelle was not “Zelle.”
The service was previously called clearXchange, having grown out of consortium of top banks, Bank of America, Wells Fargo, and JPMorgan Chase, and operated by the bank-owned entity Early Warning. The banks had been working to develop their own alternative to popular mobile payment apps for years, but those efforts only recently began picking up momentum.
Last summer, the group announced that over 30 U.S. banks were now backing Zelle, as it prepared to launch under its new branding for consumers. Its standalone mobile app followed in fall 2017.
Today, Zelle says there are more than 60 financial institutions on board, including 50 percent of U.S. demand deposit accounts, and it has expanded its partner ecosystem to include ACI Worldwide, CGI, D3 Banking Technology and IBM. They joined existing partners FIS, Fiserv, and Jack Henry & Associates.
Zelle believes these relationships and forthcoming core processor and system integrator partnerships will see it connecting to even more banks and signing up more consumers in 2018.
Because of its deep integration with banks’ own technology, and the clearXchange network it was built on top of, Zelle was already processing more than double the payment volume of Venmo as it went to launch under its new branding.
In PayPal’s third quarter 2017 earnings, the company reported that Venmo processed approximately $30 billion in payments over the past 12 months. Or, in other words, Zelle is now processing more than double the payment volume of Venmo.
Despite Zelle’s sizable chunk of p2p payment processing, it’s less clear to what extent U.S. consumers are aware of Zelle.
To introduce the app and brand to U.S. users, Zelle has been airing zany TV commercials – some that may have cost $500,000 to over a million a spot, Reuters reports – to introduce the service and the name to U.S. consumers.
The ads’ goal is not necessarily even to get the viewer to go and download the Zelle app.
In fact, in the commercial featuring rapper and “Hamilton” star Daveed Diggs making an ATM run, he laments, “I don’t need any more apps, you guys. I don’t know.”
Another person then responds, “it’s in lots of banking apps – probably right on your phone.” The point being that: by the way, you already have access to Zelle, so why don’t you use it instead?
Though Zelle has the advantage of its banking partners and integration, it’s too soon to count out its rivals.
Venmo, for example, has been expanding beyond social payments to include the world of online shopping. In October, the company announced that Venmo would now work at over 2 million online U.S. retailers – almost everywhere PayPal is accepted online today. And both services will support instant bank transfers, to limit the appeal of Zelle and retain their existing users.
Zelle says its service is available on more than 95 million phones, but isn’t saying how many people actually use it on a daily, weekly or monthly basis.
PayPal reports its year-end results on January 31, which will give us a more current picture of how Venmo stacks up.