Zelle, Covid-19 has boosted the use of the leading P2P payments companies — Zelle and Venmo.
Consumers and businesses sent 1.8 billion payments through the Zelle Network during 2021, an increase of 49% from a year earlier, Early Warning Services, LLC, the network operator behind Zelle, has announced. Those payments totaled $490 billion, up 59%.
Venmo experienced similar growth. In the second quarter of 2021, Venmo’s total payment volume grew by 57 percent year-on-year. Both companies are expanding beyond P2P to P2C. Companies adopted Zelle in 2021 for various use cases; 162% year-over-year increase in payments received by small businesses. and total payments value were double those of closest P2P competitor according to Aite-Novarica Group. That’s partly because the average payment on Zell is five times larger than the average on Venmo — $300 vs. $60.
Zelle works with and around real time payments (RTP) through The Clearing House (TCH),, said Meghan Fintland at Zelle. If both banks on a Zelle transaction are TCH members, the amount gets settled immediately. If the banks settle through ACH the settlement may take 12 hours or so.
“The big value for businesses is they are getting the money immediately and don’t have to wait for clearing.” The fastest growing in Zelle transaction has been on the business side, from Fortune 500 companies to universities use it for disbursements. The limits on the payment amounts are set by the financial institutions, not by Zelle, and the fees are also set by the banks.
The Zelle service saw an uptick during Covid-19 as people turned to real-time payments by mobile or computer as an alternative to going to the bank and getting cash, using an ATM or writing checks. A user may have elderly neighbors who don’t want to go to a store and will pay a friend for groceries using Zelle.
“When we first launched it was about paying back your friends for dinner or concert tickets, and then in the pandemic it was life saving use cases. Money was a big thing that people needed, and it was flowing through Zelle,” said Fintland. “With the pandemic people weren’t even going to the ATM any more. They needed money fast and Zelle is the perfect option. We had whole new consumer sections that adopted digital banking. Seniors were used to cash and checks. I don’t see checks coming back.”
Fraud is a concern in P2P payments. Zelle warns users they should only make payments to people they know and trust. The company relies on education to protect its users.
“We provide consumer resources on our web site and make it clear to the consumers they should only be paying people and businesses they know and trust.”
While credit and debit card networks uses some very fast, very sophisticated fraud detection tools, backed up by guarantees that fraudulent transactions will not cost consumers, Zelle is relying on education and leaving the ultimate risk to consumers.
“It’s not the same as a credit card,” said Fintland. “It matters whether it is fraud or a scam. There is authorized and unauthorized. If you make an authorized payment, like tickets on Craigslist where you pay them $200 and you don’t get a ticket — you authorized that payment so you are not protected. So that is why we do so much on the education side — don’t use Zelle to buy stuff on Craigslist.”
Venmo provides protection, not just education, for payments for goods and services through Venmo’s Purchase Protection Program.
“Goods and services payments are designed to provide both buyers and sellers peace of mind knowing that they may be covered if the transaction doesn’t go as expected,” the company said in its announcement. Buyers can simply toggle the button on the payment note screen to identify it as for a good or service. The seller will pay a small fee to receive their money (1.9% of the transaction plus 10 cents). That amount will be deducted from the total amount sent.
Both customers are protected under the program which Venmo said is ideal “for customers looking to purchase a higher priced item from someone they don’t know, giving customers added trust and confidence that Venmo has them covered.”