Posted: May 15, 2018
Comments: 0
Author: Lou Grilli

A Look at Zelle, a P2P Solution.

Zelle, the bank-owned P2P payments solution and app which launched late last year, has already achieved a milestone, moving $75 billion across its payments network in 2017. Granted, part of that success is from its previous incarnation as clearXchange, which was white-labeled for the big banks with names like Wells Fargo SurePay and Chase Quick Pay. Now that the brand is singularly named across all its participating financial institutions, with millions being spent on advertising including this one, Zelle hopes to take on Venmo, the highly successful P2P app beloved by millennials and Gen Z. Some credit unions have gotten on board; First Tech FCU, with branches in Oregon, Washington and Idaho and several other states was an early adopter of Zelle, integrating the capability into its mobile banking app.

Zelle’s P2P solution moves money from the sender’s account directly to the recipient’s account using debit rails, specifically leveraging debit BINs that are 'fast funds enabled' so that the transfer takes place real-time. But Zelle’s ambitions go much further. Breaking up those two halves of the transaction, debiting funds from the sender’s account, and “pushing” funds to the recipient’s account, opens up a whole new world of possibilities that bypass traditional payment rails. Some of those possibilities are B-2-B, B-2-C, and G-2-P.

Business to business payments (B-2-B) is one place where checks still dominate as the preferred payment rail, moving an estimated $550 billion annually to pay for services, materials, and supplies. Zelle wants to help make these check-based payments faster and more secure by supporting tokenized digital payments for institutional and corporate clients, through services likely offered by the business’ financial institution. Business to consumer (B-2-C) payments likewise still rely primarily on checks sent through the U.S. Postal Service for such things as insurance claims settlements, merchant refunds and rebates, utility deposit refunds, royalties, and school housing stipends. However, Zelle wants to make it faster, cheaper, and better to pay consumers, by facilitating real-time payments to the recipient using their email or phone number. Government payments (G-2-P), from federal down to local, can benefit similarly by facilitating tax refunds, jury duty payments, and entitlement program benefit payments directly and real-time to the intended recipient’s account. This eliminates the possibility of a check being stolen from a mailbox. All of these examples are replacing existing payment methods such as ACH, and even antiquated payment methods, such as cash, wire transfer, and checks, with a faster, and in most cases, more secure payment rail.

Could Zelle also be used in the opposite direction? Could the Zelle app be used to pay utility bills, to pay taxes due, to pay for child care? Early Warning, the parent company of Zelle, has not announced this capability, but the possibility is conceivable. Let us hear your thoughts in the comments section below.

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Lou Grilli

Lou GrilliLou Grilli

Lou is the AVP of Product Development & Thought Leadership at Trellance. In this role, he is responsible for managing the organization’s product portfolio, as well as providing leadership on industry trends related to data analytics and payments.

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