Why Zelle moves twice as much money as Venmo and the Cash app combined

By Emilie Bary

A recent Twitter thread highlighted Zelle’s scale against Venmo and App Cash on a key metric

An earlier version of this report incorrectly listed the name of the company that runs Zelle. This is Early Warning Services LLC.

Zelle may not have its own clothing line or suggest emojis when you pay your friend, but the peer-to-peer payment service moves a lot of money, and that seems to be raising eyebrows these days. -this.

Senator Elizabeth Warren has taken aim at Zelle — and the big banks behind her — for not doing enough to protect consumers from fraud on the platform. She chewed on bank executives at a congressional hearing in September and took a particular swipe at Wells Fargo & Co. (WFC) on Thursday, saying the company had higher Zelle fraud rates than other banks.

(Zelle said in a statement that “recent statements regarding Wells Fargo’s fraud and scam rates are inaccurate” and that more than 99.9% of payments made on the wider Zelle network are sent unreported for fraud or scam.)

All of this attention is apparently causing some consumers to take a closer look at Zelle as well, with one Twitter user pointing out that Zelle handled $490 billion in volume last year, compared to $230 billion for Venmo from PayPal Holdings Inc. (PYPL) and $15 billion for Application Cash from Block Inc. (SQ).

Unlike Venmo and Cash App, Zelle is not a pop culture phenomenon. Perhaps that’s why one Twitter user seemed taken aback by the relative scale of the platform.

“I don’t know anyone who uses Zelle…but it runs 2x Venmo and Cash App combined,” read a Thursday Twitter post that has been liked over 5,200 times. “Savage.”

Zelle’s strong volumes shouldn’t come as too big of a shock, however, given that the service has a key advantage. It is managed by Early Warning Services LLC, which is owned by major banks. These banks are among more than 1,700 financial institutions that make it easy for their customers to use the service through their own platforms.

“People are much more likely to use it just because they don’t have to download a whole new app,” said Bill Hardekopf, chief industry analyst at Moneycrashers.com. “That might deter some people from using PayPal or Venmo.”

Peer-to-peer platforms depend on network effects, and Zelle’s place in banking apps gives it an edge. The person you want to pay may not have the Cash app, but they’re probably doing business with one of Zelle’s partner institutions.

Matt Schulz, chief credit analyst at LendingTree, noted that bank representatives have actively mentioned Zelle to him during recent branch visits. “It’s definitely something a lot of people use and is pushed by financial institutions, but at the end of the day there’s still a lot of risk involved in using these things,” he said. .

Twitter users offered a variety of other reasons for Zelle’s impressive volumes, with some considering Zelle the service of choice for larger transfers such as rent payments or home improvement deposits, while users might be inclined to use Venmo more to split a dinner check. Larger transaction amounts skew volumes, regardless of how many people use a given platform and how often.

“Makes sense since I use Zelle for rent and Venmo for everything else,” one Twitter user wrote. Another simply replied: “Owners”.

The original poster took the comments into account. “A lot more people are using Zelle on Venmo/Cash than I ever imagined…and also people seem to care a lot about using Zelle,” he wrote.

The integrated nature of Zelle’s service could also help it appeal to older users who are particularly concerned about the security of their online financial information. While Venmo and the Cash app are popular with many younger users, Zelle is thought to appeal to older people a bit more.

“Zelle’s integration into the banking system of many banking systems gives it a leg up in terms of perceived security,” Hardekopf said.

-Emily Bary

 

(END) Dow Jones Newswire

10-14-22 2119ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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