Zelle, the mobile payments app from US banks has been operating in the industry for less than a year now but it has already become Venmo’s rival. Venmo is the leading mobile payment app in the industry and Zelle is already competing with its volume.
How does Zelle operate?
Zelle is a p2p payments system that connects big banks and mobile companies just like Venmo or the Square Cash app. Backed by the Bank of America, Wells Fargo and many major banks in the U.S, Zelle does not have similar social features that Venmo provides. Instead, it capitalizes mostly on former demographics. Despite being a newcomer in the payments and mobile industry, it has already set its mark as a promising and potential pioneer after being perceived as Venmo’s competitor.
Zelle has more than 60 partner banks and a spokesperson announced that less than half of them launched the service last month. However, the payment service that Zelle offers brought $75 billion in the year 2017, which is twice more than the $35 billion that PayPal’s Venmo amassed then.
Zelle helps in the expansion of the mobile payments industry
The importance of mobile payments is being felt more and more, especially by financial institutions and millennials who have chosen digital payment methods over cash or checks. According to Josh Beck, a KeyBanc analyst, “The banks do have a scale. They’re probably in a good position to tackle this market”. Many analysts are of opinion that it is not important that there is only one dominating leader in the market but it is definitely a prized one where traditional banks are desperately seeking to enter. As Zelle starts getting comfortable in the market, its competitors are also getting motivated by the expansion of the industry and the increasing implementation of cashless banking services.
Banks encourage millennials to open an account with them. They hope that providing them with popular services that they can relate to will retain them as customers. However, millennials prefer instant services and they won’t mind leaving the banks behind for easy mobile payment facilities.
Connecting millennials to big banks
Zelle has become the ideal app that connects big banks with millennials. Millennial banking customers can now remain within the comfort of their home and still enjoy instant payment facilities. Beck says that “It’s a battleground for them. In their heart of hearts, the banks are quite concerned about Venmo”.
By providing a flexible interface that made end-to-end transactions easier to adopt, Venmo became a favourite in the market, unlike Zelle which lacks the social component that Venmo has. Venmo also offers unique features in its app that allow users to attach subject lines, comments to transactions or emojis which in turn boost the feed. While you perform your transactions, you can also laugh at funny memo lines and your network friends can also get a glimpse of your upcoming plans.
PayPal COO Bill Ready mentioned to CNBC that “it’s not just a conversation about money. It’s really a conversation about the experience you had. It’s not about just splitting the tab. It’s about who had one glass of wine too many”. In fact, Venmo is part of PayPal’s mobile payments portfolio and throughout all of its P2P services, it has only moved $27 billion. Thus, Zelle cannot be considered to be a big threat yet.
Zelle focuses more on security than on social components
Ready also noted that “We have tremendous momentum behind our broader [person-to-person segment]. As other players come into space, our growth has only accelerated”. For Ready, these new players increase the awareness of users even more and also brings in potential users of mobile payments. Zelle focuses mainly on a previous demographic which features less social components and prioritizes the security aspect more. It doesn’t charge any fees, unlike Venmo and Cash apps which do take a tiny percentage of particular transactions.
The marketing of Zelle took place gradually and quietly as banks integrated Zelle into their banking apps. Zelle had a unique adoption challenge since banks did not have to educate their users to start using it but just to inform them that it was installed on their app. A huge advertising campaign was launched for this service with over 3,000 TV ads with the goal of “[broadening] digital payments from millennials to mainstream”.
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