All Aboard Zelle: A New Train Takes Off On An Old Rail

The big bank-backed P2P offering is rolling out in earnest as an emerging channel that might have the chops to be champ.

Credit unions and some of their major technology suppliers are on the leading edge of a major payments play, one called Zelle.

Unlike Apple Pay, which focuses on the point-of-sale and accommodates debit or credit, Zelle competes with the Venmos of the world. And it might be the answer to the specter of disintermediation, especially among the younger set.

Now gaining visibility through multi-channel national marketing, Zelle is an ACH-based debit transaction messaging system for person-to-person payments. It was announced with fanfare at the 2016 Money 20/20 conference as the brainchild of a group of big banks and risk specialist Early Warning. The group joined forces to morph the clearXchange consortium into a ubiquitous competitor to Venmo and PayPal.


Ryan Riveland, Early Warning director of market solutions for payments, told a recent NACHA webinar that more than 60 banks and credit unions, representing 97% of the market for ACH debit rails, have signed on as Zelle participants.

Those front-running credit unions include First Tech Federal Credit Union ($11.4B, Mountain View, CA) and BECU ($17.9B, Tukwila, WA). Four debit processors also are now involved: Jack Henry, Fiserv, FIS, and CO-OP.

Integrating the Zelle P2P system successfully requires cooperation between payments channels and core processing systems, so vendor engagement is critical. Fiserv and Jack Henry are rolling out turnkey solutions, but early adopting members at First Tech meant the Silicon Valley-based cooperative couldn’t wait. Instead, according to the head of cards and payments at First Tech, Brian Ziff-Levine, in-house technologists did their own integration.

First Tech went live with Zelle last May, and P2P payments have grown by the double digits each month since. Zelle, meanwhile, is claiming an average of 100,000 new enrollments every day and $22 billion moved in the fourth quarter of 2017 alone.

Integration And Platform Migration

BECU hopes for similar uptake when it launches Zelle later this year, based on the new app’s popularity and reach and on BECU’s own long experience with P2P (it was one of the first financial institutions to go live with Fiserv’s Popmoney in 2009).

Nidhi Shandilya, BECU’s digital payments senior manager, says Zelle is positioned to provide a faster, ubiquitous P2P payments solution. Integration, however, is a sizable project that touches multiple channels and systems, including mobile, web, core processing, servicing, enterprise risk, and operations. Once completed, BECU plans to transition its Popmoney users onto the new service.

BECU is one of 2,400 financial institutions that currently offer Popmoney, and Fiserv plans to work with credit unions using both or either solution, says Steve Shaw, vice president of strategic marketing for Fiserv’s digital channels and electronic payments divisions. Fiserv is working to integrate Zelle into all its credit union cores and users of the firm’s flagship DNA platform will probably be the first to get the turnkey integration option.

Symitar, meanwhile, plans to offer a credit union-branded Zelle app for users of Jack Henry’s goDough or Banno Mobile platforms and a set of API tools for credit unions with their own mobile banking platforms. Either option will use the JHA PayCenter hub to ensure next-day settlement through ACH, Visa, or MasterCard, generate reconciliation reports, and generate the data contribution files required by Zelle in support of fraud mitigation, says Rusiru Gunasena, director of the JHA PayCenter.

Zelle As A Verb

Zelle could be the brass ring of P2P that financial institutions have been seeking to compete with Venmo. Fiserv’s Shaw says the payment channel has got all the right components, including information sharing, direct consumer brand awareness, and a national media campaign.

Individual FIs also are doing their own thing. First Tech, offers Zelle within its mobile app and shows members how to sign up on its website. BECU, meanwhile, will market it on any channel members interact with the credit union, Shandilya says.

An indicator of real success will be if Zelle becomes, like Venmo, a verb in the vernacular, says payments consultant Glen Sarvady of 154 Advisors in Atlanta. He says the ongoing integration and implementation work will be critical to Zelle’s success with participating credit unions, as will accentuating the power and reach of the Zelle brand.

Sarvady says that’s where the value really lies.

It’s the network, the payments channels veteran says. People have to know it’s interoperable. You’ve got to have that common branding, or it just leaves people confused.

April 11, 2018

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