Perhaps you’ve heard of Venmo, a PayPal-owned company that caught like wildfire among millennials and is currently the most popular way for people to split the bill. The digital peer-to peer (P2P) payment service is ubiquitous to the point of being a verb — “Venmo me” — but that’s not stopping the big banks from making a play for the market.
They’re responding with Zelle, a P2P transaction platform that says it can process payments between accounts at different banks within minutes, for free. When using apps like Venmo, PayPal, and Square Cash, consumers may have to wait up to two or three days to access deposits in their bank accounts or pay a fee for instant access.
What is Zelle?
Zelle is a P2P payment service that lets you send money directly to your friends’ and family members’ bank accounts using only an email address or phone number, even if their account is with a different bank. As of this writing, Zelle is only live at nine banks: Bank of America, Capital One, Chase, Fifth/Third Bank, FirstBank, PNC, U.S. Bank, USAA, and Wells Fargo. It lists 25 additional bank as “coming soon” on its website.
Parent company Early Warning says Zelle will reach about 86 million U.S. consumers through its partners’ mobile banking applications. If your bank isn’t partnered with Zelle, you can still create an account using clearXchange, the network that powers Zelle, to send and receive money using email addresses and phone numbers (much like other P2P payment services).
Before Zelle became available through banks’ mobile apps, it was already hard at work establishing itself in the P2P payments space. Early Warning reported in April the Zelle network processed more than 170 million P2P payments in 2016 totaling $55 billion. In the same year, Venmo processed $17.6 billion in payments on its free mobile app, a year-over-year growth of more than 140%.
How Zelle works
Zelle plays up its ease of use: Because it’s integrated into mobile banking apps, customers of banks using Zelle can use a single app to schedule bill pay, make deposits, and complete fee-free P2P transactions. That means there is no extra app to download, unlike stand-alone apps like Venmo and PayPal. (Zelle does, however, plan to release an app.)
Here are some examples of how Zelle has been integrated into mobile banking:
To reach customers whose banks aren’t part of the Zelle network, Early Warning says it partnered with MasterCard and Visa to make a Zelle app that will allow transfers to those at nonparticipating banks and just about everyone with a U.S.-based debit card. Early Warning says they plan to release the app in the coming months.
Where Zelle has an edge on competitors
When you send money to a friend using Venmo, they instantly receive that amount in their Venmo account, but then need to initiate a bank transfer to access the funds. The same goes for PayPal and Square Cash. With Popmoney, a service that sends money directly between bank accounts, there’s no need to initiate a deposit, but it takes a couple of days for the transactions to clear. With these services, it can take one to three days for a deposit to become available in your bank account.
By leveraging its network of bank partnerships, Zelle claims consumers should be able to make transactions between different institutions within minutes. However, if your recipient does not have access to Zelle through their bank or credit union, or their partnered bank does not yet support real-time payments, Zelle loses its advantage. The same is true if you decide to send the money using clearXchange. Transactions would then take between one and three days to complete, no better than the likes of PayPal or Venmo.
Though Zelle touts transaction speed as one of its greatest strengths, its competitors aren’t far behind. Square Cash offers instant access to transferred funds for a fee of 1% of the deposit amount, and in June, PayPal started rolling out instant transfers to PayPal and Venmo users with eligible Visa and MasterCard debit cards. That perk will carry a 25 cent fee per transfer, so for now, Zelle has an edge by offering fee-free speed.
There are dozens of ways you can can send money to friends, family members, or the person you picked up your coffee table from on Craigslist. They range from social media options like Snapcash or Facebook Messenger, to full-fledged mobile and web apps like the PayPal app or Google Wallet. We asked Aite Group’s Banking and Payments industry analyst Talie Baker which big players in the P2P payments space to compare to Zelle. Here’s a breakdown of how they stand up to the financial industry’s P2P processor:
Click an icon below to see how Zelle compares to other payment applications
|Feature||Zelle||Venmo||PayPal||Square Cash||Popmoney||Google Wallet||Facebook Messenger|
|Who you can send money to||Anyone whose bank offers Zelle (86 million consumers) or anyone who is set up with ClearXchange (25 million registered users)||Anyone with a Venmo account (unknown, owned by PayPal)||Anyone with a PayPal account (210 million customer accounts)||Anyone with a Square account (unknown)||Anyone at any of 2,400 financial institutions (70 million consumers)||Anyone with a Google account; no need to have a the Wallet app||Anyone with a Facebook account who is 18+ years old|
|Time it takes deposit to become available in recipient’s bank account||Minutes, unless the recipient banks with a bank that doesn’t support instant transfers or isn’t a partnered institution||1 to 3 business days after transferring from Venmo account to bank. Instant access coming soon, for a fee of $0.25 per transaction.||Up to 4 business days. Instant access coming soon, for a fee of $0.25 per transaction.||Up to 2 business days. Instant deposits are available for a fee of 1% of the deposit amount.||Up to 2 business days||1 to 3 business days after transferring from Google Wallet to bank||Up to 5 business days|
|Has a stand-alone app||No. Zelle is integrated directly into existing bank mobile apps.||Yes||Yes||Yes||No. PopMoney is integrated into existing mobile banking apps.||Yes||Yes|
|Has a web version||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Fees||None||Free to send money from a bank account or debit card
3% fee to send money from a credit card
|Free when you send funds via a bank account
2.9% plus 30 cents (U.S.) of the amount you send using a debit or credit card
|Free to send money from a bank account or debit card.
3% fee to send money from a credit card
|Free when receiving money
$0.95 to send or request funds
|Accepts credit card transactions||No||Yes||Yes||Yes||No||No||No|
|Transaction limits||None, but your bank may impose transfer limits||Send and receive up to $2,999.99 per 7 days after identity verification; receive up to $2,000 per transaction on Venmo.||Send and receive up to $10,000 per transaction||Send up to $2,500 a week after identity verification; receive more than $1,000 per 30 days after identity verification||Daily transaction limit for a debit card: $500
Daily transaction limit for a bank account: $2,000
30-day transaction limit for a debit card: $1000
30-day transaction limit for a bank account: $5,000
|Send up to $9,999 per transaction or up to $50,000 in 5 days. If you live in Florida, you can send up to $3,000 every 24 hours.||Up to $9,999 within 30 days|
|Supports international transfers||No||No||Yes - Fees to more than 200 countries vary.||No||No||No||No|
|Lets you store funds on an in-app account||No||Yes||Yes||Yes||Yes||Yes||No|
|Fraud protection||None||None||Yes||Sellers protection only||Varies by state||None||None|
Other things you need to know about Zelle
Transfer limits: There are no limits to the amount of money you can receive, but there may be limits on how much money you can send, depending on your bank and the type of account you’re using.
Zelle allows banks to regulate your transaction limits. For example, Chase caps transfers from personal checking accounts at $2,000 per transaction, and customers can send up to $2,000 a day and $16,000 in a calendar month. However, customers sending money from a Chase Private Client or Private Banking client account can sent up to $5,000 per day and $40,000 per calendar month. Check with your bank to see if any limits apply to you before sending large amounts of money.
No credit card transactions: You won’t be able to send money using a credit card at all, even after Zelle rolls out a mobile app, like you can for a 3% fee on Venmo.
No international transfers: As of this writing, Zelle’s system doesn’t support international payments. The service only works with U.S.-based bank accounts, so you won’t be able to send money directly to family abroad. However, if you are traveling and have access to your bank account overseas, you can receive transfers made to your U.S.-based bank account.
No fraud protection: If you get scammed out of your money, Zelle can’t help you. Unlike Paypal, which says it will help victims of fraud get a full refund, Zelle does not offer any protection for buyers or sellers transactions.
The company warns against using Zelle to send money to people you don’t know, saying the platform is “a great way to send money to family, friends, and people that you are familiar with such as your personal trainer, babysitter, or a neighbor.” Zelle says transactions to those you don’t know — like to sellers on online bidding sites — could be high risk, as neither Zelle, nor its participating banks offer a protection program for Zelle transactions. Venmo doesn't offer buyer or seller protection either.
The bottom line
If you’re sick of waiting one to three days to access your roommate’s $400 share of the rent, Zelle may be a solution — that is, if you and your roommate both have bank accounts on the Zelle network. And even though Zelle may not have the name recognition of Venmo or PayPal, it offers something they don’t: fee-free instant transactions. A 25 cent fee for instant access to your funds or a 3% fee for using a credit card can add unnecessary costs to using your own money. But if you’re simply looking for a way to pay friends for free, Zelle is an easy-to-use option — just like many other P2P platforms out there.
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