Banks are debating a plan to bring Zelle to the checkout at big retailers.
The money-transfer service boomed during the pandemic, when people avoided ATMs and replaced cash and checks with digital money transfers. Zelle recorded some 1.8 billion transactions in 2021 totaling $490 billion, both more than double their prepandemic levels.
That growth has opened up new possibilities for Zelle and sparked a disagreement among the banks that own it—a group that includes JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. At the center of the debate is whether it is in the banks’ best interest to promote a payment option that competes with card networks Visa Inc. and Mastercard Inc., according to people familiar with the matter.
Banks collectively earn billions of dollars each year from fees merchants pay when shoppers use credit and debit cards. A payment option that moves funds directly between shoppers’ and merchants’ bank accounts could chip away at that. But Visa and Mastercard set the fees and take some for themselves, and sidestepping the card networks would allow banks to set rules and fees on their own. Zelle’s newfound popularity has some bank executives asking if the service could be the way to do that.
Wells Fargo and Bank of America are in favor of expanding the service to retail payments, according to people familiar with the matter, eyeing the popularity of such offerings in Asia. Bank of America customers made more Zelle transactions than wrote paper checks for the first time ever last year.
Executives at JPMorgan, America’s largest bank, aren’t convinced it is the right time for a Zelle expansion and are urging first more focus on protecting consumers from fraud, the people said. U.S. Bancorp and Capital One Financial Corp. are undecided, they said.
Banks in favor of the move could try it out on their own, but a vote from Zelle’s owners is needed before the service can be activated across all of the banks that use it, some of the people said. Seven banks own Early Warning Services LLC, the company that operates Zelle, and around 1,450 financial institutions offer Zelle to their customers.
Some banks are reaching out to merchants to gauge interest in a pilot that would allow them to accept Zelle for online payments as soon as this year, the people said. How it would work, what to charge the merchants for the service and what incentives to offer consumers are all being debated, the people said.
Zelle has already added features that serve businesses and is “working with financial institutions to explore more opportunities," a spokeswoman for Early Warning Services said.
There is no guarantee such a service would catch on in the U.S., where card payments reign supreme. Large merchants banded together several years ago to offer shoppers a pay-by-bank-account option, but the effort ultimately fizzled out.
Past failures haven’t stopped companies from trying. Discover Financial Services recently partnered with a financial-technology firm to enable bank-account payments over its network.
The popularity of pay-by-bank services such as Alipay and WeChat Pay in Asia has some banks and payments companies worried that a tech giant could swoop in and displace them.
Zelle in 2019 began allowing shoppers to use the service at small businesses. Zelle saw a 162% increase in small-business payments in 2021 from a year earlier, Early Warning Services said.
Meanwhile, three banks plan to launch a pilot that will allow people to use Zelle to send rent payments to a couple of large property managers, according to people familiar with the matter. Rent for years has been a sector that card networks have been trying to gain traction in without much success.
This story has been published from a wire agency feed without modifications to the text
