Zelle is a peer-to-peer (P2P) payment system that enables users to transfer money to friends, relatives, and other platform users.
Additionally, Zelle allows consumers to pay businesses for products and services at no cost. Merchants pay a 1% charge to Visa or Mastercard, which is shared with the issuing bank.
Zelle users exchanged $187 billion in 2019, a 57 percent raise over 2018.
Zelle was founded in September 2017, and currently, it has partnered with 947 banks as members of its network. It has facilitated over $307 billion in payments for the fiscal year 2020.
Zelle does not earn any money at the moment. Other than that, participating banks earn money if a customer pays a company for products or services.
Thirty major banks in the United States created Zelle and is a standalone app that users can download to their smartphones.
Additionally, the service is incorporated into major participating banks’ mobile banking applications, including Bank of America, Chase, Citi, and Wells Fargo. Consumers who already have their bank’s mobile application will immediately begin using Zelle.
1. What is Zelle?
Zelle is a mobile payments network that enables users to transfer money from their bank accounts to other platform members. It makes it easier to transfer money without using cash or visiting a bank.
Zelle is a payment network that operates on a peer-to-peer (P2P) basis. It allows its users to transfer money to their friends and family instantly and conveniently using their smartphone devices.
Merchants pay a 1% charge to Visa or Mastercard, which is shared with the issuing bank.
The service is only open to account holders in the United States whose banks are members of the Zelle network. Registration is quick and easy.
How Does Zelle Work?
Unlike Venmo, Zelle transfers money directly between bank accounts.
The majority of banking transfers between accounts require account numbers and can take several business days to complete.
Zelle removes this hassle by allowing its users to move funds in a matter of minutes from their bank account to their friends and family bank accounts.
Once registered, you can use the Zelle app to transfer money to your friends and family.
Also, you can use the Zelle network via a partner bank’s app, such as Well Fargo or Chase.
To send money, all you need is to enter the recipient’s email address and phone number. Typically, you can send and receive funds within minutes.
At the moment, the network is only open to customers. As a result, businesses must revert to alternative payment methods.
Zelle is a payment service operated by the Mastercard Send and Visa Direct payment rails.
Banks in the modern era almost always use one of the two as their payment processor, allowing almost every bank to participate in the Zelle network.
Zelle works as an individual app, or you can use the Zelle service through your ban website or app. You may sign up for Zelle in one of two ways:
- Install the Zelle app on your Android or iOS device.
- Enroll in your bank account’s email address or phone number.
Once linked, you can send a payment to their email address or phone number by entering their email address or phone number.
3. What Banks Use Zelle?
Zelle is compatible with most major banks, and the majority of them have incorporated the service into their mobile banking app.
To receive and send funds, consumers who download Zelle’s standalone app must include a phone number or email address, as well as debit card information.
You can download Zelle and use it to transfer money as long as you have a Visa or Mastercard debit card.
While writing this article, Zelle has currently partnered with 947banking firms. The payment network is included in the mobile applications of the majority of its partner banks.
The user may use the Zelle network to transfer money as long as he or she has a Mastercard or Visa debit or credit card.
If your bank is already a Zelle partner, you will be led to your bank’s mobile app, or you can download its smartphone app.
To get the full list of banks that have partnered with Zelle, please refer to this list.
Does Zelle Charge a Fee?
Unlike some other peer-to-peer (P2P) transfer applications, Zelle is fee-free.
Venmo and Cashapp charge fees for sending money via credit card and instantly depositing funds into a user’s bank account.
These fees, which can range from 1.5 percent to 3 percent, can make large-value transfers prohibitively expensive.
What is the Transfer Limit of Zelle?
If your bank does not support Zelle, the weekly cap for money transfers is $500.
If your bank has partnered with Zelle, you might be able to move greater amounts; contact your financial institution to learn about your institution’s spending limits.
However, when it comes to receiving funds through Zelle, there are no limits on the amount you can accept.
The following are some of the major banks that sell Zelle and the regular and weekly transfer restrictions they impose on users.
Here is the transfer limit of Zelle App.
|Bank Name||Daily Limit||Monthly Limit|
|Bank of America||$2,500||$20,000|
|Chase Personal Checking||$2,000||$16,000|
|Chase Business Checking or Chase Private Client||$5,000||$40,000|
|Citibank Account, Basic Account, and Private Account||$2,000||$10,000|
|Citibank Citi Priority, Citigold, and Citi Private Bank||$5,000||$15,000|
How Does Zelle Make Money?
As of today, Zelle is not profitable. During the clearXchange period, its participating banks attempted to charge a fee for each transaction.
They soon abandoned this app because other platforms, such as Venmo or Square Cash, were available for free from the start.
Zelle will remain free in the near future. Its participating banks need to keep customers and protect themselves from upstarts such as Chime or Venmo.
Additionally, Zelle introduced a feature in 2018 that allowed users to pay businesses for products and services. In this case, merchants pay Mastercard or Visa a fee of up to 1% for payment processing.
Zelle shares the revenue with the issuing bank.
Future revenue streams include the launch of a Zelle-branded debit or credit card and the promotion of additional financial products within the Zelle app, i.e., earning money from affiliate commissions.
Early Warning Services, the organization behind Zelle, almost certainly receives fees from participating banks in return for building and maintaining the Zelle network. However, as previously noted, the Zelle app generates no revenue for its parent company.
What is The Zelle Business Model?
Since Zelle is not a fee-based website, it generates no revenue directly. Indeed, it was built with the express purpose of saving banks money.
PayPal, Venmo, and Square charge banks a fee for each transaction, so holding these transactions in-house save money.
Additionally, this enables financial institutions to profit from the general transition toward a cashless society and avoid the costs associated with maintaining ATMs and branch offices.
Notably, the app produces indirect revenue for the consortium of banks, which collectively have access to more than 100 million US users.
It covers various ancillary and add-on programs, including credit cards, mortgages, loans, and insurance.
Zelle has also seen substantial growth among Generation X and Baby Boomer users, many of whom were previously unfamiliar with the P2P model.
In less than two years, Zelle has grown to become the largest peer-to-peer service in the United States, with users making approximately 743 million transactions totaling $187 billion.
Although not specifically mentioned, Zelle owner Early Warning Services LLC likely earns a fee from participating banks to preserve the network’s integrity.
Zelle introduced a feature in 2018 that enables consumers to pay businesses for products and services.
Zelle provides this service at no cost to the customer. However, the merchant must pay a 1% charge to Visa or Mastercard, which will split the revenue generated with the bank that issued the card.
It would not be unfair to propose that additional financial items be suggested inside the Zelle app in the future. It will allow collaborating institutions to earn revenue from affiliate commissions and referrals.
What is the Success Story of Zelle?
Zelle, formerly known as clearXchange, was founded in 2011.
Bank of America, Wells Fargo, and JPMorgan Chase formed a consortium to compete with other payment apps such as PayPal or Venmo.
In its early stages, clearXchange was still very clumsy and sluggish. For example, it may take up to five days for users to move money between accounts.
Additionally, clearXchange was only accessible via the platform’s website or partner bank app, making it difficult for the service to gain widespread acceptance. Additionally, the network was comprised of a small number of banks.
Finally, features differed significantly between partner banks. It added complexity to the customer experience and made it more difficult for users to adapt to the service.
Much of that changed in 2016. Bank of America, JPMorgan Chase, and Wells Fargo previously owned the service. It was sold to Early Warning Services (which itself is owned by a consortium of banks).
Under Early Warning’s leadership, the pace of product growth eventually caught up to the owners’ ambitions.
Zelle officially opened to the public in September 2017 while clearXchange was shut down.
They launched the service in collaboration with more than 30 US banks. It amounted to almost 100 million account holders.
With backing from some of the largest banks in the United States, Zelle rapidly gained traction. The consortium invested up to $1 million per television advertisement to promote the app.
Additionally, the in-app experience for Zelle was standardized across all participating banks, making it easier for new users to get started.
Gen Xers and Baby Boomers, in particular, have established themselves as significant growth channels. Many of them were unfamiliar with newer banking services such as Chime and remained loyal to conventional banks.
It enabled traditional banks to target their existing customers more effectively by introducing them to the world of peer-to-peer payments through Zelle.
These policies propelled Zelle to become the largest peer-to-peer payments service in the United States only two years after its introduction. In 2019, Zelle’s users processed approximately 743 million transactions totaling $187 billion in payments.
The service became so important to people’s survival that it became mandatory. For example, in Venezuela, which is suffering from extreme hyperinflation, citizens have begun using the app to pay for basic goods and services.
Nonetheless, the service has encountered some opposition along the way. Numerous users have confirmed being scammed by other Zelle users.
These fraudulent users will sell a product or service (on a website such as Craigslist), request payment from the buyer, retrieve the money, and then delete their account.
Zelle and its participating banks have replied that they are not responsible for the recipients of money sent by their users.
Zelle’s website and the app now provide constant reminders for users to send funds only to relatives, friends, or others in their immediate circle to counteract these scams.
Despite these setbacks, 2020 will be a banner year for the payment network. Users conducted 1.2 billion transactions and sent a total of $307 billion to one another.
Is Zelle Safe To Use?
Compared to carrying cash and mailing bills or checks, Zelle can be considered a safer method of transferring money quickly.
Since a third party never holds the assets, they are still secured. And the company touts its protection, arguing that your bank already safeguards your personal financial information.
One caveat to using Zelle is that you must be certain that you are sending funds to the correct recipient—and that the recipient is someone you trust.
Due to the speed at which money travels, if the recipient has a Zelle account, Zelle transfers money into minutes and cannot be canceled once it is sent.
That means you’ll want to double-check your transfers to ensure you don’t make an error and give the funds to the incorrect recipient.
According to some experts, Zelle’s lightning-fast fund transfers make it a prime target for criminals. If you’re sending money in exchange for goods or services, a scammer can take your money and fail to complete the transaction.
Indeed, Zelle lacks the security features offered by PayPal, such as protection against being charged for an item that was not purchased or not obtaining an item for which they paid.
If you become a victim of fraud in which you approve payment to others for goods or services that they never provide, there might be no way to recover those funds through Zelle.
If your account is compromised and funds are transferred without your permission, Zelle suggests contacting your financial institution to determine if you can report the fraud and recover your funds.
You can learn more about fraud and scams on Zelle’s website.
How to Send & Receive Money With Zelle
Zelle enables you to send and receive money directly into your bank account. On its home page, you’ll see three panels labeled “Send,” “Request,” and “Split” (yes, you can split payments). How to submit and receive money with Zelle:
Send Money with Zelle in 4 Steps
By entering the recipient’s email address or phone number, you can submit a payment.
The app will show a message asking, “Are you sure?” explaining that the payment cannot be canceled.
Once you click on “Yes,” follow these four easy steps to send money using Zelle:
- Enter the amount
- Click on REVIEW
- Fill out the “What’s this for?” line
- Click On SEND
Receive Money with Zelle in 3 Steps
To use Zelle to request money, you must first grant the app access to your phone contacts.
You can receive money through Zelle App using these three easy steps:
- Enter the amount
- Fill out the “What’s this for?” line
- Click on REQUEST
The app will notify you once you receive the money.
Who Owns Zelle App?
Early Warning Services LLC, a FinTech firm, owns Zelle. Other financial institutions are using Early Warning’s fraud management and prevention services.
The headquarter of Early Warning Services is in Chicago and has branches in Tempe, San Francisco, and Scottsdale.
A group of banks that owns and operates the Early Warning Services such as Bank of America, Chase, PNC, US Bank, Wells Fargo, Capital One, and BB&T are among them.
What are the Key Takeaways from Zelle Business Model?
- Zelle is a peer-to-peer payment network that enables users to send and receive money with ease. It was founded by a group of 30 North American banks.
- Zelle is a completely free platform that generates no revenue. However, the software was almost certainly created to retain market share in the peer-to-peer industry and reduce third-party fees charged by rivals. Additionally, there is some evidence that Zelle increases customer adoption of supplemental financial services.
- Zelle, along with Visa and Mastercard, charges a 1% merchant fee in the B2C space. If the service gains traction, financial products associated with it may be suggested inside the app.
Final Thoughts about Zelle and Zelle Business Model
Zelle is a payment processing service that streamlines transfers, but don’t expect the app or banks came to the rescue if anything goes wrong.
I recommend that if anyone wishes to use Zelle, CashApp, or Venmo, they create a separate checking account with very small balances.
Thus, even though you are hacked, compromised, or scammed, the amount of money at risk is negligible, while if you use it in conjunction with a daily checking account, the entire balance is at risk.
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