The third quarter proved more than kind to peer-to-peer (P2P) payments, at least according to financial results for the two main competitors, Zelle and Venmo, which continue to duke it out for market share and consumer loyalty — and doing so as another big digital player prepares to debut a P2P offering.
On Tuesday (Oct. 23), Zelle — the P2P service backed by Bank of America, JPMorgan Chase and other financial institutions (FIs) — said in its Q3 results that transaction volume increased 16 percent year over year, and that the total amount of money moved increased 13 percent during that same time frame.
During the third quarter, Zelle processed 116 million transactions and $32 billion worth of payments.
Zelle Enrollment Boost
Enrollment in the Zelle P2P service via participating FIs increased 10 percent, “resulting in more than 75 million tokens — mobile numbers or email addresses — across the entire Zelle network to date,” the company said.
“In the last 12 months, Zelle has processed more than 375 million transactions valued at $106 billion,” said Lou Anne Alexander, group president of payments for Early Warning services, which operates the P2P service. The company added that, since the third quarter of 2017, transaction volume across the Zelle network has increased 83 percent, while transaction value has grown 67 percent.
Bank of America, which earlier reported its Q3 earnings, said that Zelle P2P transactions increased 138 percent year over year during the quarter, with 42.5 million payments made through the platform — more than double the payments made during the same period last year. The growth for Zelle, and for Bank of America, comes amid other mobile gains for the financial institution.
The growth also comes amid every increasing pressure on merchants and financial services providers to offer sophisticated mobile tools for consumers — especially younger consumers. Mobile-order ahead for food and beverages, along with more mobile control over finances and transactions, are among the ways that the mobile channels keeps gaining importance. Now, P2P payments are boosting the mobile push.
PayPal-owned Venmo will have an estimated 22.9 million U.S. users by year’s end, behind Zelle’s 27.4 million, according to a recent eMarketer projection. In PayPal’s recent Q3 financials, Venmo played a significant part in the positive nature of that report, with Venmo’s total payment volume increasing by 78 percent year over year.
Total Q3 payment volume for Venmo, meanwhile, hit $17 billion. Beyond that, 24 percent of Venmo users completed a “monetizable action” — PayPal CEO Dan Schulman said on a call with analysts that the growth is encouraging: “Our monetization efforts appear to be reaching a tipping point,” he said. That 24 percent compares with 17 percent in the second quarter of 2018 and 13 percent from May, he added.
He credited some of that Venmo Q3 growth to ridesharing and food delivery.
“Across the Uber and Uber Eats apps, we saw more than 300 percent month-over-month volume growth in September versus August,” Schulman said. As PYMNTS reported in July, Uber and Venmo inked a partnership deal after PayPal said that more than 6 million payments on Venmo mentioned Uber in their descriptions during the past year, making integration between the two apps a natural fit.
More Venmo growth is expected, thanks to a deal involving American Express, Schulman told analysts when discussing Q3 results. “Over the next several quarters, PayPal will have enhanced access to American Express as a payment option in our wallet,” he said. “The agreement will allow PayPal to access American Express tokens and enables a deep integration of our Venmo and PayPal P2P capabilities within the Amex platform.”
Zelle And Small Business
Moreover, Zelle has its own fresh growth ideas. For instance, it wants to play a bigger role in enabling consumers to pay small businesses. It is reportedly enhancing its risk assessment tools as part of the effort to make it safe for people to pay small businesses. The move, seen as a direct jab at Venmo, seeks to tap into a lucrative market: Sources have said that P2P payments to businesses in the U.S. will almost quadruple to nearly $17 billion this year. By 2021, the business side of the P2P market is expected to hit $74 billion.
As Zelle and Venmo take each other on in the P2P space, they must also keep their eyes on other competitors. That includes Google, which is working on using QR codes to allow its users to send P2P payments. While Google Pay already enables P2P payments, XDA-Developers revealed that the company is adding support for QR codes to make that process a bit easier, at least if a user needs to pay someone they just met and make a quick transaction.
The coming months — that is, the busy holiday shopping season, when people tend to engage in commerce that seems perfectly suited for P2P transactions — will no doubt bring more important developments in this growing and increasingly important sector of payments.