If you want to send money directly to your friends online, there are a number of apps that allow you to do so, including Venmo. Venmo is one of the leading person-to-person (P2P) financial apps, successful to the extent that it is sometimes used as a verb ("Just Venmo me the money").
That may change. A new app that has been called the "Venmo Killer" is being introduced to take on Venmo and other money transfer platforms such as Google Wallet.
The new Zelle website and mobile app is the banking industry's answer to Venmo and similar mobile payment platforms with origins in the tech and social media world. Zelle is the product of six years of evolution through clearXchange, a service originally created by Bank of America, Wells Fargo, and Chase in 2011. Over time, the service has grown to include more banks through ownership by the banking industry consortium Early Warning Services LLC.
Zelle and Venmo are similar, including the ability to split bills between customers, but Zelle offers advantages because of the infrastructure already put in place by major banks. By integrating major banks onto the same platform, Zelle can offer simple and nearly instantaneous transfer of funds between account holders in different banking systems.
With Venmo, a typical request for payment may be received instantaneously, but you must log into your Venmo account, cash out that balance, and wait for Venmo to transfer the funds to your bank account – a process that can take a few days. Since Zelle uses common infrastructure between the banks, a payment based on a Zelle request can show up in the recipient's account within minutes of when the sender agrees to send it.
Banks have been slowly integrating Zelle's capabilities into their own services without the Zelle branding, in preparation for the 2017 launch. If both the sender and recipient's banks have already incorporated Zelle's structure, transfers are completed within minutes – otherwise, recipients will need to register with clearXchange and the transfer will take 1-3 days to complete, as with existing P2P platforms.
At the time of writing, there are 38 major banks and credit unions listed in the Zelle partnership. The banks will be making Zelle active within partners' mobile banking apps on a rolling basis, starting with JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), and Capital One Financial Corp (NYSE:COF). The remaining partners will be added over the course of 2017.
Banks with existing P2P platforms, like Chase's Quick Pay, will combine the two services ("QuickPay with Zelle"). Presumably, the Zelle brand will eventually replace all individual banking P2P brands.
Consumers whose bank accounts are not associated with Zelle will be addressed later in the year. Eventually, real-time payment for those customers will be available through Zelle by downloading the app and matching it to a VISA or MasterCard debit account.
Zelle may be a serious challenge to Venmo, but Venmo does retain some advantages. The social media aspect of Venmo is missing in Zelle. Should banks decide to charge for Zelle services, Venmo remains as a free alternative. In addition, Venmo is reportedly attempting to neutralize the time advantage and allow instant transfer during 2017. Finally, for those who already have Venmo accounts and are happy with the results, the advantage of quicker transfer may not be worth switching platforms or keeping track of yet another app.
It should take time for Zelle to become fully established, but the extensive affiliation with major banks and a solid infrastructure with significant resources give it a very good chance to succeed. Perhaps before long, you will be saying, "Just Zelle me the money." Another advantage: rappers will have an easier time rhyming "Zelle" than "Venmo"!
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