The casual payments that people make every day — $20 for the dog walker or $50 to split a dinner check with friends — have long been one of the American banking system’s thorniest problems. Instant person-to-person payments are common in many countries, but in the United States, sending cash between banks is often a technical ordeal.
Zelle’s pitch is that it will be fast, free and ubiquitous. The interface is almost identical at each participating bank, and setting it up takes a few seconds. To send money to others, you need only their phone number or email address. If their bank is part of Zelle’s network, recipients can immediately sweep the cash into their own checking account.
Participating banks are incorporating Zelle’s transfer system into their mobile apps, sparing customers from having to download a separate app. About 86 million people will soon have access, according to Early Warning Services, the bank-owned consortium in Scottsdale, Ariz., that runs the network.
A stand-alone Zelle app will be released this year. Until then, those outside the network can collect payments through Zelle by manually filling in their banking information and linking their accounts.
Wells Fargo, which plans to formally introduce Zelle to its customers this month, has already, like many other banks, quietly built much of the service’s functionality into its mobile app. When it officially turns Zelle on, the money-transfer system in its app will adopt Zelle’s common branding and interface, which is built around two activities: “send” and “receive.”
“We think the simplicity and shared experience around this will magnify the network effect,” said Brett Pitts, a Wells Fargo executive.
That effect — when millions of people flock to a product and, through mass adoption, enhance its utility — is both Zelle’s biggest opportunity and its greatest risk. By taking so long to build their own easy-to-use mobile payments system, the banks opened the door to challengers like Venmo, Popmoney, Square Cash and Apple Pay, each of which has its own devoted users.
“This isn’t a slam dunk. The banks have a big branding and awareness challenge,” Mr. Moeser said. “This has to be done well right out of the gate.”
In the banks’ favor are the vast number of people who have already entrusted them with their finances. Those customers are often willing to put up with some frustrations to avoid the hassles and risks that come with using outside services.
Vemoe most popular of the upstarts (and now owned by PayPal), handled payments of $17.6 billion in 2016. The banks in Zelle’s network collectively processed $55 billion in person-to-person transactions last year, according to Early Warning.
Zelle’s other advantage is its speed. Money transferred through the network will be available to the recipient immediately, participating banks say. Other services, including Venmo, usually take at least a day to complete transfers to a bank account. (Venmo has said it will enable instant withdrawals this year.)
U.S. Bank, one of Zelle’s partners, began offering real-time transfers a year ago within its partner network, and found that senders valued it just as much as those they were paying, according to Gareth Gaston, who leads U.S. Bank’s non-branch banking channels.
“People told us they really liked the reassurance of knowing the money was gone immediately, as opposed to waiting for a check to clear,” Mr. Gaston said. “It was an interesting surprise.”
Banks began laying the technical infrastructure for Zelle in 2011 through a shared transfer network called clearXchange. But that service, which served banks’ needs more than their customers’, was fairly clunky, and its design and features varied at each bank. Zelle, built atop clearXchange’s infrastructure, is the industry’s first attempt at creating a unified consumer brand.
When banks began experimenting with person-to-person transfers, they hoped it would be a moneymaker, with customers paying fees for the convenience of moving their cash around electronically. But the banks moved slowly and competitors flooded in, offering free bank-to-bank transfers as a way to draw in users. (Customers typically pay a fee of about 3 percent if they make payments with credit cards.)
To keep up, the banks have been forced to match their rivals’ price tag: free. Early Warning lets banks set their own user fees for Zelle, but none have announced plans to charge customers for bank-to-bank transfers.
“We see this being something that is part of your core checking experience,” Mr. Gaston said. “The other players in the marketplace are evidence that this is something customers want to have.”
Zelle has been called the banks’ “Venmo killer,” but Venmo insists that it sees room in the market for multiple services.
“Cash is the common enemy,” said Josh Criscoe, a Venmo spokesman.
The banks drew on some of Venmo’s popular features — Zelle’s interface is similarly stripped-down and simple — but skipped others, like the emoji-strewn social feed that allows Venmo users to broadcast their payment stream to their friends. (Or, if they choose, to the entire world.)
Mr. Moeser, the analyst at Javelin, thinks the mobile payments market has plenty of room for both Venmo and Zelle to thrive.
“I don’t think this is a winner-take-all scenario,” he said. “There’s a huge population of consumers, particularly those over 45, who haven’t used mobile payments yet. It’s a hurdle for people — maybe they don’t want to download an app, or mess around with settings. But once people try it a couple of times, and see ‘wow, it worked!’ they tend to get over that hurdle and love it.”