What's Zelle?

19 US financial firms - among which are such giants as JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Citigroup, as well as regional lenders and credit unions - have relatively recently signed up for a new real-time payments network called Zelle.

Announced at the end of 2016, Zelle still has not taken off. The venture will replace the existing system called clearXchange this year, and will be accessible to more than 76 million mobile banking customers when it starts, states Early Warning, the bank-owned entity in charge of this project.

Challenging the Status Quo

Yesterday I wrote about the innovation-driven challenger banks in the United Kingdom, and compared them to relatively stalemate situation (with regards to FinTech innovation) in the United States. As I concluded, it is quite obvious that status quo will be challenged in the US - it is only a matter of time. Although still in its infancy, Zelle might be the first step towards that.

Zelle might be the first step challenging financial status quo in the US.

The underlying idea of Zelle is to change people's perceptions towards traditional financial firms, seeing them as slow and not user-friendly. To be frank, it is not an easy job taking into account the fact that for decades transferring funds between financial institutions took days.

The underlying idea of Zelle is to change people's perceptions towards traditional financial firms, seeing them as slow and not user-friendly.

However (and thank God...), CEOs of the biggest banks finally realised that this must come to an end, and something in line with 21st century's capabilities has to be introduced. One more figure also plays a role here: non-banks process 20% of person-to-person payments in the United States.

Therefore, the core goal of Zelle is to standardise the money sending features across the partner companies' existing online banking apps. Later on, there will be a standalone Zelle P2P payments app, which will include Send, Receive and Split options.

Zelle is short for gazelle, which conveys speed & agility. Will such an "inspiring" brand bring the necessary changes in the US financial word?

Some Features

• With Zelle, one will be able to send payments using just an email address or mobile phone number - this could be done either from withing the mobile banking apps of the network's banks or using the standalone Zelle app.
• Speaking about receiving the funds, a person would need to have a US checking or savings account and register at ZellePay.com (if they have not already signed up to the app), or else be using the Zelle app with a valid debit card account.

Open Network - the Competitive Advantage

Obviously, the KEY advantage of Zelle is the user base that financial giants (and all other institutions that will join the project) will bring. And as network will grow, so will grow the value for consumers looking for a fast & secure way of sending & receiving funds.

Seamless User Experience

According to their spokesperson, the unique characteristic of Zelle is that it is embedded within the online and mobile banking experience of individual network banks. This means that customers never have to leave the safety of their financial institution to make a payment. In addition to that, customers do not have to provide an account number to a third party app, which in turn protects the identity and payments of Zelle users.

Will Zelle Disrupt the Market?

Tough question to answer, at least now. The idea and intentions are really good, and potential to scale this out is definitely promising. Nevertheless, managing the interests of such pool of bankers might be quite problematic (as Zelle has not been launched yet, this might give you a hit). Another thing to consider is pricing. Competitors like Venmo, Circle or Facebook (via its Messenger) offer little or no fees (depending on the way you choose to send money). Hence, introducing fees would obviously make Zelle less attractive.