Banks roll out Venmo-style pay­ments app

Zelle ser­vice start­ing out as add-on to bank­ing apps

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - BEN STEVERMAN

For years, banks have watched as their youngest cus­tomers split restau­rant checks, shared util­ity bills, and pitched in for par­ties us­ing third-party pay­ment apps such as Venmo. Now, they’re try­ing to take back the per­son-to-per­son pay­ments busi­ness by of­fer­ing an app of their own.

Nine­teen banks, in­clud­ing Bank of Amer­ica, Cit­i­group, JPMor­gan Chase, and Wells Fargo, are team­ing up to start Zelle, a web­site and app that will let users send and re­quest money much like Venmo does. Bank of Amer­ica says it is the first to incorporate all of Zelle’s ca­pa­bil­i­ties — in­clud­ing the abil­ity to split bills be­tween users — into its own mo­bile app, start­ing last week. A stand-alone Zelle pay­ment app should be avail­able to any­one with a debit card, re­gard­less of where they bank, by the mid­dle of the year.

Zelle has some stiff com­pe­ti­tion from Venmo and its par­ent com­pany PayPal Hold­ings Inc. Venmo, which started in 2009, pro­cessed $17.6 bil­lion in trans­ac­tions last year, a 135 per­cent in­crease from the pre­vi­ous year.

In the com­mon ver­nac­u­lar, “to Venmo” means to move money to and from friends and fam­ily. That’s a huge ad­van­tage, said Michael Moeser, di­rec­tor of pay­ments at Javelin Strat­egy & Re­search. When pre­sented with an­other op­tion, “an avid Venmo user is go­ing to ask, ‘Why do I need some­thing else?’” he said.

Zelle’s not-so-se­cret weapon is its con­nec­tion to the big banks where mil­lions of Amer­i­cans keep their money. Re­quest $40 from a room­mate over the Zelle net­work us­ing Bank of Amer­ica’s app and the money shows up in your ac­count within min­utes of when he agrees to send it. On Venmo, that $40 would show up in your Venmo wal­let right away, but then it stays there. To get the cash in your hands, you need to log in to your Venmo ac­count, cash out your bal­ance, and wait — some­times days — for the money to show up in your bank ac­count.

Venmo is try­ing to ac­cel­er­ate that process. PayPal made deals with Master­card Inc. and Visa Inc. to move money over their debit card net­works. By the mid­dle of 2017, it should be pos­si­ble to cash out a PayPal or Venmo ac­count in­stantly, ac­cord­ing to PayPal Hold­ings spokesman Josh Criscoe.

Zelle was built by Early Warn­ing, a bank-owned com­pany that also runs the clearXchange pay­ment sys­tem. It’s no easy task to build an app that syncs with 19 large banks, four pay­ment pro­ces­sors, and two card net­works.

To launch the new app with­out dis­rupt­ing the old sys­tems, Zelle is be­ing rolled out in phases: In the first, un­der­way now, bank pay­ment apps will incorporate Zelle’s op­tions and ba­sic de­sign with­out any Zelle brand­ing. Banks can add these fea­tures when­ever they’re ready. Later, bank apps will tout Zelle brand­ing, and, some­time in the first half of the year, a stand-alone app will launch.

Bank of Amer­ica’s per­sonto-per­son pay­ments will be free. Though mem­bers of the Zelle net­work will have the op­tion to charge, it’s not clear if any banks will try to do so when Venmo and other pay­ment apps cost noth­ing.

The lack of an ob­vi­ous rev­enue op­por­tu­nity may be one rea­son why it has taken so long for banks to launch a se­ri­ous com­peti­tor to Venmo. Moeser sum­ma­rized the at-

ti­tude of banks un­til re­cently: “Do I re­ally care about two 18-year-olds send­ing $20 to each other? Maybe not.”

But the peo­ple de­sign­ing Zelle im­ply their goal is much big­ger than just help­ing col­lege stu­dents split a pizza bill.

“This is a great time for us to move [per­son-to-per­son pay­ments] from mil­len­ni­als to main­stream,” said Lou Anne Alexan­der, Early Warn­ing’s group pres­i­dent for pay­ments. The use of mo­bile bank­ing apps is grow­ing ex­po­nen­tially, cre­at­ing many more op­por­tu­ni­ties for peo­ple of all ages to send and re­quest money. “Any place we see checks and cash, that’s our tar­get,” she said.

Be­cause Zelle is spon­sored by and con­nected to the banks, Alexan­der said users should feel more com­fort­able us­ing it for larger trans­ac­tions and

for a broader ar­ray of uses, from pay­ing a con­trac­tor to col­lect­ing money for a school dance team. Zelle may also be used for busi­ness-to-con­sumer pay­ments, such as in­sur­ance com­pa­nies pay­ing out claims.

Any­thing that pro­motes the use of dig­i­tal pay­ments is ul­ti­mately good for Venmo, said PayPal’s Criscoe. “The com­mon en­emy is cash.”

Zelle and Venmo have a lot in com­mon, with one ma­jor ex­cep­tion. Venmo is also a so­cial app, where users can choose to make their trans­ac­tions, along with any as­so­ci­ated emoji-filled mes­sages, pub­lic. Criscoe said av­er­age users check Venmo two to three times a week just to see what their friends are up to.

Zelle users won’t have the op­tion to spy on their friends’ pay­ment ac­tiv­ity. The idea was tested on con­sumers but fell flat with Zelle’s in­tended au­di­ence, Alexan­der said. “While ap­peal­ing to some ages, it’s not re­ally ap­peal­ing to all.”

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