By Ray Birch
TAMPA, Fla.—If the new Zelle Network “becomes a verb,” it will be a strong sign the new P2P option has caught on with consumers, asserts one analyst.
At this point, whether or not the Zelle Network will become successful remains up in the air, said Lou Grilli, director of payments strategy at CSCU. In 2016, Early Warning announced the Zelle Network, a financial institution-led digital payments network in the U.S. that lets members of participating FIs send money to anyone with a U.S. bank or credit union account.
“Here is the hard part--it has to become a verb,” insisted Grilli. “Not because marketing people have dictated to people they should make it a verb, but because people begin to use it so much and get very comfortable with it.”
In other words, users would need to say things like,
“Zelle me the money.”
That is what Grilli said has occurred among Millennials with the popular Venmo P2P network. Grilli said young adults use Venmo so often that doing anything else to pay friends, for example, would seem absurd.
Grilli described a lunch he had with a coworker during which splitting the bill was discussed.
“The young waitress overheard us talking about how we might split the payment, use a card and the other person pay back in cash, and she said, ‘Why don’t you just Venmo it.’”
Venmo Usage High Among Millennials
What struck Grilli about that comment is how the waitress suggested using Venmo without “missing a beat” as she cleared the table. “Like, why would you do anything else. Use of Venmo has spread virally and organically among Millennials.”
Grilli said that is an indication of how entrenched Venmo is among young adults, and restated that is where Zelle needs to be.
Grilli’s insights come following announcements from companies aligning with the Zelle Network, predicting Zelle will solve the P2P issue that has faced banks and credit unions. Many of their customers and members have not wholeheartedly adopted the various P2P offerings, such as Popmoney, and clearXchange. One of the big reasons, experts say, is the solutions are separate, leaving consumers unable or unsure if one P2P solution can work with another. clearXchange, for example, is Early Warning’s predecessor to Zelle, and it allows FIs to white label their P2P solution, further confusing consumers.
But with the Zelle Network, there will be no white labeling and the network will reach about 80% of FIs nationwide, according to reports
Lou Grilli
Grilli agrees the wide reach and a consistent name bodes well for the future of Zelle.
“Will Zelle take off? Will there be strong adoption? That remains to be seen. My crystal ball is as fuzzy as anyone’s,” said Grilli, who expects heavy promotion of the network will begin later this year. “Here is the lens I place on this: Zelle has to be available like Popmoney is now online and in mobile banking. But it has to be available as a standalone app. This app has to be clean and intuitive, easy to use the first time by anyone of any age, and it has to be secure. If there are any breaches or rumors money got taken out but did not go anywhere, it could doom Zelle.”
If Zelle does not take off, CUs on the network will certainly lose money on the proposition. Grilli reminded that P2P is not a service that offers a revenue stream and FIs cannot charge consumers for what they perceive as a free service. Credit unions will spend money marketing Zelle and providing member education.
P2P To Quickly Grow
But it would be a mistake to not get involved in P2P, which is now becoming a quickly growing market—$50 billion was transferred between people in 2015 according to the Federal Reserve, and Grilli estimates the total now may be near $80 billion. He also said Venmo is showing 126% year-over-year growth.
P2P is a necessary service credit unions will have to offer to meet their members’ expectations, he said.
“You can’t write a business case for this, which is the difficult part about P2P,” said Grilli. “If Zelle fails that will just be lost money. But if Zelle takes off we can start to see some of that cash and check business get moved to P2P, which increases efficiency and provides another member benefit. I am hoping that it takes off.”