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If you haven’t heard about Zelle yet, you’ll likely be hearing about it very soon. Zelle is a person-to-person payment service that was launched in June 2017 by over 30 leading banks and credit unions in order to give their customers a better way to send money to friends, family members, or even their children’s tutor through email and text messages. Zelle is considered the banking industry’s response to Venmo, PayPal, Square, and other digital payment services or apps.
The thing that is revolutionary about Zelle compared to Venmo is that it allows for near instant transfers between accounts rather than taking overnight or several days to process transfers. As of it’s launch, Zelle became available to 86 million Americans who bank with the institutions that helped create it. The banks that partnered to launch Zelle currently process $55 billion in person-to-person transactions and hope that, with the advent of Zelle, that number will rise.
Zelle’s History and Future
Zelle has been in the works for a number of years. It started with an initiative called clearXchange that began in 2011 when banks like Wells Fargo, Bank of America, and JP Morgan Chase came together to create a shared transfer network. Since then, banks have been experimenting with different forms of person-to-person transfers. Zelle is the product of that experimentation and work.
Currently, the service is available to customers or members of participating banks and credit unions through the banks’ existing mobile apps, but a standalone app is set to launch in the future. People who are not clients at those banks can still receive money from Zelle, but cannot currently send it.
What Banks Currently Support Zelle?
Currently, there are around 30 banks and credit unions across the U.S. who are Zelle partners. Some companies already have Zelle in their mobile apps while others will be rolling Zelle out to their customers over the next 12 months. The list of banks who are on board include Ally Bank, Bank of America, Bank of Hawaii, Bank of the West, BB&T, BECU, Capital One, Citi, Citizens Bank, Comerica Bank, ConnectOne Bank, Dollar Bank, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, First Tennessee Bank, First National Bank, Frederick County Bank, Frost Bank, HomeStreet Bank, JP Morgan Chase, KeyBank, M&T Bank, MB Financial Bank, Morgan Stanley, PNC Bank, SchoolsFirst Federal Credit Union, Star One Credit Union, SunTrust Bank, TD Bank, USAA, U.S. Bank, and Wells Fargo. Check here to see if your bank currently has Zelle working in their mobile app.
What Does it Cost?
While Zelle was originally conceived as a revenue generating service, many digital payment services are free and so banks were forced to offer Zelle free of charge to customers when they pay using their checking accounts. If customers decide to use their credit card in order to make person-to-person transfers, they are charged 3% of the transaction.
Zelle functions using the technological platform of the money transfer network that banks previously created called clearXchange. This infrastructure allows them to process bank-to-bank transfers within minutes allowing for a faster form of digital payment than other platforms allow. Because Zelle is part of banks’ own mobile apps, it is expected to roll out relatively seamlessly since many customers already have their bank’s mobile app installed. Zelle’s interface is stripped down and easy to use, making sending transfers simple, but it lacks the social aspect some person-to-person payment apps like Venmo have.
Because Zelle is a product offered directly from your bank, there are a number of security benefits to using Zelle versus using a third-party payment processing app like Square, Venmo or PayPal. Zelle has the same level of security that your bank app has, which is usually considerable and involves complex encryption.
Also, because you’re using your banking app, you don’t have to share your financial details with another app which cuts down your exposure. Unlike most banking apps, apps like Venmo don’t automatically log you out – which could leave you exposed if you lose your phone or someone steals it. Should you encounter fraud or should your money be stolen via Zelle, your bank might be more likely to replace that lost money than if you experienced theft via a third party service.
Author: Andrew Rombach