The P2P Marketplace: Can Zelle Live Up To Its Promise?

//The P2P Marketplace: Can Zelle Live Up To Its Promise?

Since we last wrote about Zelle, the P2P payments solution has experienced some significant growth (and an anniversary). While we’ve heard our fair share of financial institution executives lamenting the rise of competing P2P platforms from fintechs, the key for Zelle is that it has some differences that make it less a competitor and more of a potential ally for FIs. I recently had the opportunity to discuss some of these differentiating factors in a recent interview with CUJournal, on the rise of Zelle and its implications for the industry.

Typically, payments solutions are limited by their network, meaning more connections equals more success. The explosive growth of Zelle is a testament to this—with the large owner FIs on board the payments platform is set to surpass Venmo in terms of users this year. Another perk of Zelle’s is that the platform has made integration easy for most financial institutions.

Secondly, Zelle has done a good job with its marketing efforts. While this may not seem significant to financial institutions considering working with the platform, the power of brand awareness should never be underestimated. Financial institutions can benefit from this investment as brand recognition – and brand equity – is established among members and customers.

If there is one, Zelle’s big downfall is its recent fraud scandals. In fact, we addressed this concern early on in our first blog about Zelle. The company has received its share of negative press for issues that essentially boil down to its failure to be transparent with consumers. It’s difficult (if not impossible) for financial institutions to completely prevent consumers from transferring money to a fraudster through the platform and it is still unclear if the institution bears any liability if the customer authorized the payment. Zelle payments are unlike checks which can be stopped prior to settlement or credit card transactions which can be disputed. In addition, there’s always the risk of people using stolen identities or hacking to gain access and conduct transactions. Having a strong CIP is clearly critical in this regard as well as the right security tools and programs.

The P2P marketplace is evolving quickly, and it’s difficult to predict where the industry may be even a year from now PayPal, as an example, is focusing on cross-border payments. They acquired Swedish firm iZettle for $2.2 billion this year and indications are they will continue to look for more acquisition targets to further that goal. Zelle, on the other hand, will likely continue to expand in the U.S. as more financial institutions get on board and consumer awareness increases via the network effect. Regardless, the P2P landscape is changing rapidly and for now, Zelle provides a viable pathway for financial institutions to meet consumer demand.

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