Small businesses fueling Zelle’s growth

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More consumers and businesses are using Zelle, and the bank-backed payment network wants to remove any points of friction for new users.

Early Warning Services wants banks to concentrate on making sure their customers know how the Zelle service works — especially first-time users who may get a notification of receiving a Zelle payment, but aren’t aware they have to register an e-mail address or phone number to create the token needed for the account-to-account transfer.

“The comforting words of ‘you have money’ is a strong motivator for people when notified of a Zelle payment, so we have high conversion rates,” said Albert Ko, CEO of Early Warning, which operates the Zelle network. “But when the recipient clicks on that the first time, does it send them to register or to a web page they have to log into? Some people don’t get past that.”

Early Warning announced Wednesday that $106 billion was sent through the Zelle network on 392 million transactions during the first quarter of 2021. Year-over-year, sent payment values increased by 74%, while payment transactions increased by 61%.

Zelle Small Business is one of the major growth areas for the Zelle Network, with transactions increasing 180% year-over-year.

“If you look at overall numbers, run rate and growth rate, we will be doing north of a half a trillion dollars moved this year and exceeding two billion transactions,” Ko said in an interview about first-quarter numbers. “The vast majority of them are repeat users and that is what drives the network. People are delighted by the solution and use it more.”

The average Zelle transaction value is $273, indicating that the service has moved beyond a tool to split restaurant meals or pay small amounts to friends or family members, Ko said.

“The vast majority of [users] are repeat users and that is what drives the network. People are delighted by the solution and use it more,” said Albert Ko, CEO of Early Warning.

“The average shows an amount that matters and it means a lot to get it quickly,” Ko added. “Small businesses see that and use it to move money, safely and quickly right into an account. That is what is driving a lot of the usage and new growth. The underpinnings are recurring users now using it more — and more cases from where Zelle had its original focus.”

Overwhelmingly, at more than 90%, the use of Zelle takes place through the app on a mobile device. But that doesn’t help a customer if they mistakenly think, for example, that they can send money to another person only if that person is using the same bank.

“With the volumes we’re talking about, that 90% is a very significant number,” Ko said. “But we recognize that even though recognition of Zelle continues to increase, the awareness of what Zelle is and exactly what it does and how many banks offer it … there is room for improvement there.”

In the near future Zelle will add an option to use QR codes to initiate and receive a payment. Users would get a QR code option in their Zelle service and use cases would mount once it officially becomes part of the payment options, Ko noted.

Also, the Zelle process will include a new feature in which once a payment is sent, the sender will be able to see if the person is actually signed up to accept Zelle. If that person is not, an alert can be sent to remind the person to sign up upon receiving the e-mail with payment attached.

Zelle as a business tool is likely to keep growing as more businesses owners find it easy to use for payments to suppliers and vendors, or to employees.

Early Warning did not release enrollment figures, which it does not provide quarterly.

The transaction growth in the first quarter of 2021 continued a trend that started last year during the height of the pandemic — and its consumer shift to digital and contactless payments.

Early Warning reported a 60% increase in Zelle transaction volume during the first six months of the pandemic in 2020, compared to the same period in 2019.

Currently, consumers of nearly 8,000 financial institutions participate in the Zelle Network, whether accessing Zelle through their financial institution’s mobile banking app or enrolling their debit cards in the Zelle mobile app.

Early Warning is closing in on 1,000 banks and credit unions with the “live” Zelle account-to-account experience integrated into their online and mobile banking services.

Early Warning is a fintech company owned by seven of the country’s largest banks — Bank of America, JPMorgan Chase, Truist Financial, Capital One Financial, PNC Financial Services Group, U.S. Bancorp and Wells Fargo.

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