Four years after Venmo revolutionized the mobile-payments space by giving millennials an easy way to exchange small amounts of money, instantly—and three years after PayPal acquired Venmo owner Braintree for $800 million— America’s biggest banks are finally catching up. On Sunday night, financial risk management company Early Warning announced that it has partnered with 19 U.S. banks—including Wells Fargo, Bank of America, Citi, Capital One, and JPMorgan—to offer Zelle, a money-transfer service designed to compete with Venmo, PayPal, and Square Cash.
Zelle—named for the “speed and agility” of a gazelle, according to Early Warning C.E.O. Paul Finch—will let users send money to others online or using a mobile app, beginning early next year. Unlike Venmo, PayPal, and other money-transfer services, however, Zelle allows users to gain access to their funds immediately at no extra cost. (Square Cash, Square’s answer to Venmo, charges a fee for instant deposits, while Venmo doesn’t offer such a service, requiring users to wait 1-2 business days before mobile deposits turn up in their real-world accounts.) Early Warning says 76 million mobile-banking customers will be able to access Zelle, which replaces an earlier money-transfer service called clearXchange, founded five years earlier by JPMorgan, Bank of America, and Wells Fargo.
Zelle will have to make a compelling argument to millennials to get them to switch over from other services. Venmo still reigns as the quintessential millennial transaction platform, and it is still growing quarter-over-quarter. In the first three months of 2016, Venmo’s payment volume grew 154 percent, to $3.2 billion. PayPal ended 2015 with 179 million active customer accounts, growing its user base by 6.6 million in the last quarter of 2015. Several banks already have had their own digital payments services, like JPMorgan’s QuickPay, or Citibank’s PopMoney, but none have caught on widely. While it is unclear whether the Zelle name will simply paper over these banks’ existing brands and UX, creating a uniform experience, or whether the Zelle platform will supersede them entirely, Early Warning’s Venmo killer has one major advantage. It may not have the built-in cool factor that Venmo has cultivated over the years, but Zelle will benefit by being the default service provided automatically by many of the country’s biggest banks. While Venmo is already in wide use, it remains to be seen how loyal users will be once Zelle can provide instant transfers—an obstacle that third-party payments services haven’t been able to overcome.
