Meet Zelle, the new P2P payment app backed by big banks

Colin Lalley 1600


Colin Lalley

Colin Lalley

Associate Content Director, Home & Auto Insurance

Colin Lalley is the associate content director of home and auto insurance at Policygenius, where he leads our property & casualty editorial teams. His insights have been featured in Inc. Magazine, Betterment, Chime, Credit Seasame, Zola, and the Council for Disability Awareness.

Published June 21, 2017 | 4 min read

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Update, September 8, 2017: Zelle has announced a standalone app similar to Venmo, so users no longer have to apply on their bank's app. The Zelle app will require a Zelle-specific account.

There's no shortage of peer-to-peer (P2P) payment apps out there. Need to split a check at dinner? PayPal-owned Venmo is the go-to app for many, but there’s also the Square Cash app, Circle, Android Pay, Samsung Pay, and Apple Pay (and soon you’ll be able to send money via iMessage).

What do all of these have in common? They’re tech companies, not banks. Venmo alone processed $6.8 billion in transactions in the first quarter of 2017 alone. But banks realize they’re missing out as customer loyalty goes elsewhere. Enter Zelle.

Zelle is the banks’ way of trying to court customers back from the tech companies who are becoming more and more entrenched in financial services. The payment app has been in the works since 2011, was officially announced in February 2017, and is finally being rolled out now. You can tell they’re trying to steal Venmo’s millennial base by the pictures of avocado toast they have on their site, but this is also an opportunity to make P2P payment apps mainstream. Backed by over 30 major U.S. financial institutions and two major credit cards, Zelle has the chance to shine a spotlight on a popular, but still ultimately niche, service.

What banks are involved with Zelle?

Zelle is the only P2P payment app that has the direct backing of banks. The current financial partners are:

  • Ally

  • Bank of America

  • Bank of Hawaii

  • Bank of the West

  • BB&T

  • BECU

  • BNY Mellon

  • Capital One

  • Chase

  • Citi

  • Citizens Bank

  • Comerica Bank

  • ConnectOne Bank

  • Dollar Bank

  • Frederick County Bank

  • Fifth Third Bank

  • FirstBank

  • First National Bank

  • First Tech Federal Credit Union

  • First Tennessee

  • Frost

  • HomeStreet Bank

  • KeyBank

  • MB Financial Bank

  • M&T; Bank

  • Morgan Stanley

  • PNC

  • SchoolsFirst Federal Credit Union

  • Star One Credit Union

  • SunTrust

  • TD Bank

  • USAA

  • US Bank

  • Wells Fargo

Zelle is also partnered with MasterCard and Visa.

Not every bank listed is set up with Zelle right now; Capital One is the first to use it, while USAA’s site notes that support is coming soon. The banks will roll out support for Zelle over the coming year, and they’re surely hoping to add more banks over time.

The benefits of using Zelle

Venmo has a lot of benefits, but one major drawback: money takes time to transfer from your Venmo account to your bank account. That might not be a huge deal for people who are just waiting for a friend to pay them back for an Uber ride, but for people actually depending on that money it can be an issue.

Because Zelle is working directly with banks, the primary benefit is having instant transfers to bank accounts. It’s a big differentiator for an app entering an already-saturated market. No matter the bank, money is sent – and received – instantly.

Venmo realizes that’s what customers want. After Zelle’s release, Venmo’s parent company PayPal announced that it would also be offering instant transfers, but at a cost of 25 cents per transaction.

Speaking of cost: The Boston Globe notes that "members of the Zelle network will have the option to charge, it’s not clear if any banks will even try to do so when Venmo and other payment apps cost nothing." That’s not completely true, as there’s a 3% fee when sending money via credit card, and with partnerships with Mastercard and Visa, it seems unlikely that there will be similar fees with Zelle (or that banks will institute any other fees).

The other attractive feature of Zelle is its ubiquity. One of the downsides of Venmo, or any other P2P payment app, is that when you want to send money, you have to make sure the other person has the same app. But most people won’t need a Zelle app in order to send money.

The 30+ banks that are already partnered with Zelle cover around 86 million mobile banking customers. Those customers don’t even have to download a separate app; Zelle will be integrated into a bank’s existing mobile banking app, and all you need is the recipient’s email address or phone number. But there will be a standalone app for those whose banks aren’t supported but who do have a Mastercard or Visa credit card.

Will Zelle ultimately catch on? It’s hard to say. P2P payment apps are gaining traction, but they’re still not wildly popular. Venmo is still largely in the realm of millennials and Silicon Valley, mobile payment (like Apple Pay) isn’t accepted everywhere, and the most you’ve probably heard of Square Cash is on Pod Save America promos.

But when it’s fully rolled out, you’ll have a hard time finding someone who can’t accept your Zelle payment. The two biggest friction points of Venmo – delayed transactions and ensuring that the recipient also has Venmo – aren’t issues with Zelle. Some of the biggest banks in the country, along with local branches and credit unions, are involved, which is certainly endearing to people (probably the older crowd) who trust Bank of America more than they do Venmo.

It will take some time before we see the real effect of Zelle, since it’s not available at every member bank yet. Once it is, though, it could hit critical mass and give Venmo a run for its money.

Image: Zelle