Peer-to-peer (P2P) platform Zelle processed over $1 trillion in total payment value last year, which the company stated was the highest amount ever sent on a P2P payments platform in a single year.
Overall, Zelle processed 3.6 billion transactions last year, marking a 25% year-over-year increase. The platform also added 16 million users, bringing the total number of consumer and small business accounts on Zelle to 151 million. The fintech’s growth rate exceeded that of its P2P rival, PayPal, last year. According to CNBC, PayPal’s total payment value surpassed more than $400 billion.
Zelle is owned by Early Warning Services, a consortium of seven of the largest U.S. financial institutions, including JPMorgan Chase, Bank of America, and Wells Fargo. The platform was launched eight years ago, largely in response to the rising popularity of P2P apps like Venmo, PayPal, and Cash App.
Key Differentiators
One of Zelle’s key differentiators is its backing by major banks. Unlike its P2P peers, most transactions on Zelle take place through banks’ apps as opposed to its own. For that reason, Zelle recently shut down its standalone app entirely.
Another key feature of Zelle is that transactions occur instantly, bypassing the traditional two-to-three business-day delay seen with many other transaction types. Additionally, Zelle users avoid many of the extra fees commonly associated with competing solutions.
Criticisms and Competition
Despite the platform’s success, Zelle is facing several obstacles. Zelle payments are irrevocable, which can create issues when users send payments in error or under fraudulent pretenses. As a result, government agencies like the Consumer Financial Protection Bureau have raised concerns about who is responsible for reimbursing consumers in such instances. With many P2P platforms, it falls on the customer to verify the recipient before sending payments.
Beyond regulatory concerns, Zelle is also navigating a competitive landscape. The platform not only faces competition from other P2P services but also from the bevy of payments technologies that have emerged in recent years.
Digital wallets like Samsung Pay and Apple Pay have integrated P2P payments while also support various payment types, such as credit cards and BNPL services, which can be used across retail and e-commerce transactions.
Additionally, FedNow and RTP continue to gain momentum. It means that despite a record-setting year, Zelle could still encounter roadblocks ahead.
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