Sizzle Of The Week: Zelle’s Accelerating Growth

Bank earnings this week gave us a bit of insight into the momentum gained by bank-backed P2P payment network Zelle in 2018. For example, Bank of America reported on Wednesday (Jan. 16) that Zelle payments were up 97 percent in Q4 2018, signaling the latest burst of growth for that payment method. By the numbers, that means that Q4 saw 52 million payments worth $14 billion traveling over Zelle’s rails.

It was performance that seemed consistent with reports of the big and fast growth out of Zelle throughout most of last year. As of Q3, Zelle reported that the P2P network had processed $32 billion worth of payments and 116 million transactions, a 16 percent quarter-over-quarter increase and more than doubling the transaction volume of the same period in 2017. Lou Anne Alexander, group president of payments at Early Warning, said that volume, overall, was up 83 percent and up 67 percent year on year.

“Zelle is one of the fastest-growing consumer financial brands in history, and we are proud of our momentum, especially this quarter, as we signed more than 40 financial institutions to our network through partnerships with our processors — CO-OP, FIS, Fiserv and Jack Henry & Associates. These partnerships are helping financial institutions stay at the center of their customers’ financial lives,” reported then-CEO Paul Finch at the time.

Today, reports suggest that Zelle is exploring ways to expand its consumer base, as well as the range of ways those consumers can hope to use Zelle. According to 2018 reports in Bloomberg, citing people familiar with the situation, Zelle is in the process of enhancing its risk assessment tools as part of the effort to make it safe for people to pay small businesses.

Zelle currently lets businesses disburse payments to consumers, handling 100 million transactions in the second quarter for a total of $28 billion, noted Bloomberg – but does not offer risk protections that are necessary to send money to businesses.

As of yet, there is no official confirmation of this project or pending capabilities. Venmo already offers a comparable service and is popular with their user base. While peer-to-peer (P2P) payment apps have long been reserved for splitting small bills with friends and family, it is growing across use cases as more consumers become comfortable with the payment method.

Zelle’s growth, of course, has the tailwinds of being integrated with the consumer’s mobile banking app – one of the stickiest applications that a consumer has because it is one of the most used.

Its ambition, of course, is to own its own real estate on the consumer’s lock screen, like its rival Venmo, and to become more of an independent payment app rather than a P2P utility living inside its member banks. Whether that aspect of its strategy will succeed remains to be seen. So does its ongoing growth and scale – ubiquity remains elusive, but an essential component for its success. Unlike Venmo, whose users created its P2P network – “hey, Joe, let me send you my $500 for the rent using Venmo” and Joe downloads the app – P2P via mobile bank apps span use cases where the receiver may not be connected to a bank that has integrated with Zelle. Getting that person their money can be wrought with friction.

That aside, it’s hard to argue with the growing number of users and volume as reported by the banks who are among its earliest adopters and network owners. Sounds like Zelle had a sizzling Q4.

Sizzle

Megamergers: Big deal, big headlines – and are mega-mergers back? Two giants in the payments space – that would be Fiserv and First Data – pair up in a $22 billion deal, where Fiserv is acquiring First Data, the largest in the space to date.

Marcus: Goldman’s FinTech play on online banking logged $35 billion in deposits in 2018, said management during a post-earnings conference call – and this comes only two years after launch. The company recently boosted rates it pays on the accounts, so might we expect more torque in the banking giant’s consumer business?

Mobile banking: Results from banks during earnings season show bright spots in mobile adoption. Citi reports that active mobile customers were up 12 percent, and Bank of America’s mobile users were up 9 percent.

Fizzle

Loan Default Rates: Experian notes they are on the rise, as measured in December. Most notable were bank card default rates, which were up 25 basis points to 3.34 percent. Some troubling trends seem afoot – as all loan types, and all major metro areas measured, saw rising defaults.

Bitcoin and tax losses: Yes, the losses on cryptos – where last year many digital coins lost nearly all of their value – can be claimed as deductions. Problem is, though, Credit Karma has found that more than half of people queried do not know they can claim deductions (which, of course, means they will pay more in taxes than they might otherwise).

Apple: Amid waning iPhone sales come the woes of a battery replacement program that last year was a remedy for the company’s slowing down of older phones (which, of course, had older batteries). Eleven million people are estimated to have opted for the replacements, which translates into $1,000 per phone in lost upgrade revenue, which means about $11 billion in lost sales.