A new peer-to-peer (P2P) payment platform will launch this month, and it’ll be backed by some of the largest banks in the United States.
You’re probably thinking, “Oh, great — another app I have to download.” Well, it’s more than just another app.
It will give some of the most popular P2P payment platforms like Venmo, Square Cash, and PayPal a lot of competition.
The new platform is called Zelle.
For the past six years, some of biggest U.S. banks have been hard at work with trying to perfect Zelle before it makes its debut. They want to sure everything is relatively seamless and successful so banks can finally take control over this market.
People rarely carry cash or checks on them, and tech companies saw how this cashless trend kept expanding. And they decided to take advantage of it through the introduction of apps like Venmo and Square Cash, which allow people to transfer funds to another person hassle free.
It became easier to go out to dinner and not stress over how to split the bill while at the restaurant.
It also became easier to pay rent to a roommate or landlord without having to send a check in the mail and hope it would make it to your recipient.
There are a lot of benefits to this new payment platform. And like all good things, it made a person’s life a lot easier and more convenient, which is the root for most successful innovations.
You could make the case that these platforms are directed toward younger generations, but I think that’s an unfair assumption.
According to Pew Research Center, roughly three-quarters of Americans (77%) own smartphones. Almost all generations are familiar enough with these types of platforms and apps that it has become more of a “way of life” rather than something obscure and hard to adapt to.
It’s convenient for everyone.
These current platforms and apps have paved the way for Zelle.
Square Cash, Venmo, and PayPal have already worked to establish these new payment platforms with their users and that familiarity will benefit Zelle. People are already behind the format and prefer these platforms as their go-to payment methods, so Zelle doesn’t have to wait for people to trust or “catch on” to the idea.
How Does Zelle Work?
Zelle will work on a bank’s website and in a bank’s app — the money will then be available minutes after a transfer.
Paul Finch, the CEO of Early Warning Services, had this to say in a statement about Zelle’s launch:
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.
It’ll be relatively instantaneous, and users won’t have to wait for funds to be transferred.
Just like other payment apps, Zelle will only require users to know basic information about their recipients, such as a person’s phone number or email, in order to transfer funds. No need to ask for account or routing numbers.
There will be a Zelle app for any potential users who don’t have bank accounts with the 30 banks that will support the platform.
Those banks include the following:
- Ally Bank
- Bank of America
- Bank of Hawaii
- Bank of the West
- BB&T
- BECU
- Capital One
- Citibank
- Citizens Bank
- Comerica Bank
- ConnectOne Bank
- Dollar Bank
- Fifth Third Bank
- FirstBank
- First Tech Federal Credit Union
- First Tennessee
- First National Bank
- Frederick County Bank
- Frost Bank
- HomeStreet Bank
- JPMorgan 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
- Wells Fargo
While big banks like JP Morgan Chase, Bank of America, and Wells Fargo have offered their customers with P2P capabilities for awhile, this is the first time that customers will be able to send money in real time through a wide array of institutions.
The head of enterprise payments at Bank of America, Mark Monaco, had this to say about Zelle:
The combination of that speed and the safety and security of knowing that it’s being facilitated by financial institutions is important to customers… You get the convenience of P2P payments with the security that banks offer.
Some companies may already be feeling the pain from the announcement of Zelle. On Monday, June 12, 2017, PayPal’s (NASDAQ: PYPL) share price fell 2.5% to $52.08.
Brett Pitts, head of digital for Wells Fargo Virtual Channels, had this to say:
We do have the opportunity to switch people from other P2P products… The bigger opportunity that I’m excited about its getting lots and lots of people who aren’t using P2P to start using Zelle.
A huge selling factor is that bank customers won’t have to go through another app to transfer money to a person who doesn’t have an account at the same bank as them.
And even if they do have the same bank, at least now a transfer will be more immediate than having to wait a day or two for everything to settle.
In addition to that, an added sense of security for customers would be a plus! Customers will be going through their banks to transfer money rather than through second party apps.
Zelle has the potential to make those second party apps obsolete.
Until next time,
Jennifer Clark
Pro Trader Today