Zelle gains momentum in payments vs PayPal

Zelle/Business Insider

• Payments app Zelle increased its total payment volume
  to $32 billion in the third quarter, according a new
  report. 
• Zelle is catching up to PayPal, which hit $36 billion
  in person-to-person payment volumes in the
  quarter. 
• Launched in 2017, Zelle is one of the biggest banking
  industry-backed efforts to thwart threats from financial
  technology competitors.

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Zelle, the payments app launched a year ago by the biggest US
banks, is steadily gaining momentum among mobile banking
customers.

In the third quarter of 2018, Zelle processed $32 billion in
payments, up 13% over the last quarter, according
to a
report issued on Tuesday by Zelle network operator Early
Warning. The figure is nearly double the number recorded by
Venmo, a rival money transfer service owned by PayPal, which
handled $17 billion in payments during the same period.

Zelle is also catching up to PayPal, which hit $36 billion in
person-to-person payment volumes in the quarter. 

The market for digital payment services is growing rapidly.
According to
an analysis released by eMarketer in October, mobile
peer-to-peer transaction volume is expected to reach $167 billion
this year. Currently, an array of players are trying to compete
for US users from incumbents like Apple and Google to fintech
companies like Venmo and Square. 

Launched in 2017, Zelle is one of the biggest efforts backed by
the banking industry in the face of threats from financial
technology competitors. Zelle is owned
by seven largest US banks including JPMorgan,
Bank of America, and Wells Fargo and functions similarly to Venmo
in that it allows customers to transfer money instantly to family
and friends. Zelle says it’s different than rivals because it
connects more seamlessly with customers’ bank accounts and is
safer.  

Analysts at eMarketer
expect Zelle to leapfrog other payments services before
the end of the year in terms of users. It’s estimated that Zelle
will grow by more than 73% this year to reach 27.4 million users
in the US, putting it slightly ahead of Venmo’s 22.9 million
users.

In the last 12 months, Zelle’s transaction volume rose 83% to 375
million transactions, according to the report. 

There are 34 banks that are live on Zelle’s network and an
additional 152 banks both big and small have signed contracts to
go live soon. 

Zelle is also looking at new ways to expand its customer base,
including the insurance market, payroll for companies in the
gig economy, and small businesses, Jamie Armistead, Vice
President of Business Line Leader for Zelle, said in an
interview. Insurance company AllState has already started to use
Zelle to help distribute funds for customers who has insurance
claims and the American Red Cross is also using the app to help
release payments to its customers.

It’s also eyeing opportunities with mobile wallet providers,
Armistead said, though he declined to comment further. Leading
mobile wallet providers in the US include Google, Apple and
Samsung.