Why The Big Banks Created Zelle

Competition among peer-to-peer payment apps like Venmo, PayPal, Cash App and Zelle have been heating up for the past 10 years. The big banks tried to compete in the space when PayPal first came on the scene 25 years ago, but their business models failed. Now, Zelle, a seven-bank platform, is outpacing its rivals in average transaction value. But a rise in reported fraud activity recently got the attention of Congress, with allegations that the banks aren’t supporting those affected customers.

Watch the video above to learn more about why the banks created Zelle and whether the app can hold its own against the battle to win in the peer-to-peer payment space.

Chapters:
0:00 — Introduction
01:27 — Business model
02:47 – The rise of P2P apps
05:45 — Fraud allegations
10:07 — Fierce competition

Produced by: Charlotte Morabito
Edited by: Nic Golden Henry
Additional Camera by: Jordan Smith, Talia Kaplan
Graphics by: Alex Wood, Christina Locopo
Supervising Producer: Lindsey Jacobson

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Why The Big Banks Created Zelle

[hungson]

I like Zelle because the money goes directly to the bank account. The only thing to keep in mind is to only use it to transfer money to ppl you know, not random guys on the internet

[youtubeprofile]

US is always lagging when it comes to digital infrastructure stuff like this. Quite a number of countries have already been using nation-wide p2p for many years now.

[DustinMikkelsen]

I use Zelle to pay my rent and neither my landlord or I, have an account with any of those banks. Also, Zelle is integrated directly into my banking app, it's very convenient. That being said, the moment they start charging a fee, I'm gone and so is everyone else that I know uses the service.

[xDEAD_Inside]

India has the best P2P payment systems in the world currently known as UPI. The major reason for this is because our Central reserve Bank of India strictly regulates all the other banks.

UPI is a protocol and any bank/merchant/3rd-parties can implement it in their apps. So direct bank to bank transfer to any bank in India is possible. 90% of transactions happen within 1 second. There are some features found in UPI which cannot be found anywhere. Offline transfers (through USSD), transfer through phone numbers or email like UPI addresses, free transfers (and it will stay like that for a long while), international transfers (to select few countries).

India has also launched its own credit and debit cards (Rupay cards) to rival Visa and MasterCard.

[kryori]

On the one hand, direct bank-to-bank transfer would be a great way to avoid the pitfalls of unregulated or loosely regulated spaces like fintech. On the other hand, linking the ability to transfer cash to the choice to directly store that cash in one of seven banks is a massive problem. All of these institutions are attempting some version of regulatory capture through their political donations, and all of these institutions have histories of abusing customers so much that the government had to step in. Remember overdraft fees? Putting more money, power, and control in the hands of big banks is not in any consumer's best interest.

[Imperatorius]

Scan the QR code or send $1 and confirm the intended recipient received it before sending the rest. There, just solved the fraud issue.
Problem is that no matter the guardrails you put in place to protect the consumer, human stupidity will always find a way to smash through them.

[gareth]

“It changed the world” lol! It changed US only. Almost all developed countries already has bank to bank tranfer online almost a decade before zelle. When I was in US in 2018, their online transfer does not even transfer on weekends. It waits until Monday. 😂😂😂

[reynanmarques]

In Brazil we have Pix, which is the protocol and is managed by the Central Bank, and all banking institutions are obliged to incorporate it to their systems and offer it for free to all customers, it was a social revolution and made a lot of people banked.
For me it is always curious how everything in the USA is very backward for a country that calls itself the #1 in the world.
And you can transfer to any bank, pay any bill, the whole process is absolutely free and done within 1 minute and confirmed on the spot

[rajat.]

In India, no one in metro cities carries cash. We all use UPI. Even street side vendors and vegetable hawkers accept digital payments. Also UPI charges 0₹ for all transactions.

[JattforceX]

India's UPI (unified payments interface) is the king when it comes to P2P payments. Major contributor in making India a digital economy

[kathleenjames]

Thank you for shar-ing your thoug-htful content…for
putting it out there with the passion that many of us need and strive for. I'm starting to listen to you
almost every morning. Your voice and words are
calming, clarifying, uplifting and motivating. It feels real and genuine. I am grateful to have your channel as a source for having a better relationship with myself and the world around me?

[matthewb]

The US is very late to the application of payment through digital means. In 1993 Finland began to strongly phase out the use of checks as a means of payment and established an electronic payment, first by telephone, then by the internet. From 2010 to the present, all of my payments took place via the internet or cellular smart phone. Never once was a fee charged as it was covered by general banking maintenance fees or other profits earned by the bank. Banks in the US are very cavalier with security of offering credit, the use of credit and debit cards and payment systems. I always had to supply a pin number to pay when using my credit card in Finland, and for purchases over 50 euro when using a debit card.

[rrtripathi]

NCPI (2008) is operating Unified Payment (UPI) system since April 2016 in India. It's similar to Zelle. No independent revenue source with major Indian banks and government being it's collaborative owner.

[reghu]

Well we have UPI, unified payment interface in India. Started in 2015 I think, before that P2P has one or two days delay. But now with UPI it's instant, and now it's the standard payment mode.

[maxb]

"engagement tool", "revenue generating machine", "payment space", "auction space". Why can't business people just speak with clarity. It's always too much pointless business jargon. Everyone's trying to look so damn smart and professional.

[mountainman]

We've had this for the last 15 years in the UK. It didn't require a joint venture between banks. Goodness me, this country is very archaic in certain areas.

[BMWROYAL]

I’m sorry but I don’t think it’s Zelle’s job to try to get your money back if you get scammed, that can only be proven in court. It’s not like someone forced you to send someone money

[superheroverse]

(UPI) from INDIA; It is the fastest payment service method instant transfer happens within 5-10 sec from one bank to other.

[varunvora]

The term peer-to-peer is heavily misused in this video. P2P means there is no use of a centralized administrative system. All the payment systems mentioned use a bank or fintech servers to facilitate the transaction.

[torontokid]

So is Zelle like Interac E-Transfer in Canada? That system works pretty easily and has been around for years.