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5 Facts about Zelle – The Great Payments Disruptor

Zelle: Benefits for Banks and Their Customers

Since its founding in 2017, Zelle has rapidly become one of the most popular ways to send money in the United States. Today it counts thousands of financial institutions as participants in its network and has facilitated billions of transactions that represent trillions of dollars of transferred money since its founding. This article discusses 5 of the most interesting facts about Zelle and covers key statistics about the service, its history, ownership, and much more.

1. Zelle is Owned by a Consortium of Banks

The predecessor to Zelle was clearXchange, a person-to-person payment service that was run by JPMorgan Chase, Bank of America, and Wells Fargo, three of the largest banks in the United States and also in the world. In 2016, the ownership of clearXchange expanded through an effective restructuring to include four other large financial institutions: Trust, Capital One, PNC Bank, and US Bank. These seven financial institutions are the owners of the entity that now owns and operates Zelle: Early Warning Services, LLC. Although ownership by such a select group would lead one to believe that the service is exclusive, so far, they have continued to provide Zelle services to essentially any financial institution that’s interested and eligible to join the network.

2. Zelle is Now More than Double The Size of Venmo

Over the past three years, the Zelle Network has processed $1 trillion of payment volume, and in 2021 alone, Zelle processed $490 billion in payments on its network. This represented a 59% increase from 2020 and is itself a staggering amount of volume to process in just one year. Importantly, this statistic means that Zelle processed more than double the value of transactions that Venmo processed in 2021. Venmo processed $230 billion of transactions in 20211. This is notable because Venmo has existed for a much longer period than Zelle and yet the latter is now a substantially more significant player in the business of person-to-person transfers in the United States. Part of the rapid adoption we believe is due to differing economic models between Zelle, Venmo, and other person-to-person transfer services.

3. Zelle is Both Fast and Completely Free

When it comes to sending and receiving money in the U.S. there is no shortage of options. However, many of the popular options have caveats, sometimes associated with the cost of transferring the money, the time it takes for the recipient to receive the money, restrictions on the quantity of money you can send, or restrictions on who you can send money to. Arguably the biggest advantage of using Zelle is that it is completely free to both sender and recipient, and transactions get processed very quickly – sometimes as quickly as just a few minutes2. This is in addition to the fact that it is very straightforward to send money using Zelle. You don’t have to provide or request bank account or routing number information, all you need are e-mail addresses or phone numbers.

4. Thousands of Financial Institutions Now Partner with Zelle

As a matter of fact, Zelle disclosed in February 2022 that nearly 10,000 financial institutions now participate in the Zelle Network. This is a little misleading since “participate” merely encompasses a consumer using Zelle either through the app or by enrolling in their debit card. The latter includes situations where consumers whose financial institution is not a Zelle partner enroll their debit cards to gain access anyway. That said, we estimate that there are over 1,000 banks that are Zelle partners, and based on the announcements over the past year, it certainly seems like the number of banks that use Zelle continues to grow at a rapid pace.

5. Zelle is Only Available Domestically – for Now

One area of weakness for Zelle and its users is the fact that (so far) its use is limited to United States transactions. This is the case for both sender and recipient. You cannot use Zelle to send money to someone outside of the United States. The converse is also true: someone outside the United States cannot access the Zelle Network to send money to Zelle users in the country. Given the size of the remittance industry, which the World Bank estimated to be $540 billion in 2020, and the high cost of facilitating these transfers, the expansion of Zelle to include international transfers would clearly be a game-changer.

Zelle’s Dominance is Poised to Continue for Now

Given the facts about the service – it is easy to use, fast and free – it is far from surprising how dominant Zelle has become in the United States. As its network of financial partners continues to grow, it is well within the possibility that the Zelle Network becomes the standard for person-to-person money transfers in the United States, and while it remains to be seen whether the network can be expanded internationally, there are both economic and societal incentives for at least giving it a shot in the future.

Notes:

1. Venmo processed approximately $230.1 billion in TPV, growing 44%, per PayPal documentation.

2. This is the case for transfers made where both parties’ accounts are at partner institutions


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