Payments

Zelle is winning the peer-to-peer payments war, sort of

  • PayPal reports $9.4 billion in Venmo transaction volume for the third quarter, up 93 percent year over year.
  • While Zelle's transaction volume is almost double Venmo's, it's not clear whether it's cutting into Venmo's market share.
Zelle is winning the peer-to-peer payments war, sort of

“Venmo-killer” Zelle may be winning the peer-to-peer payments war — that is, if the numbers are to be believed.

On Thursday’s earnings call, PayPal CEO Daniel Schulman reported that Venmo volume of transactions were up 93 percent year over year in the third quarter at $9.4 billion. As for Zelle, the third quarter saw over 60 million transactions processed valued at $17.5 billion, according to Early Warning, the bank-owned consortium that runs Zelle (Zelle could not provide a year-over-year growth figure by deadline). The banks, too, are reporting growth in Zelle peer-to-peer transactions. Bank of America recently reported that it processed $4 billion in Zelle transactions in the third quarter of 2017, while Wells Fargo observed 46 percent growth in peer-to-peer payments, without providing a specific figure for Zelle.

So while it’s obvious that the banks have scale, based on transaction volume alone, Zelle is surging ahead. Aite Group Senior Analyst Talie Baker told Tearsheet that the banks currently hold 83 percent of the of the market share in digital peer-to-peer payments against non-bank providers like Venmo — data that supports the view that the banks are well-positioned to dominate the market.

But whether or not Zelle’s uptake is cutting into Venmo’s market share is unclear. Some analysts argue that the banks’ Zelle transaction volumes include account to account transactions happening within the same institution, and don’t account for new peer-to-peer payments from customers at different institutions.

“[The banks] can put out their Zelle numbers all they want, but that’s not new incremental transaction volume,” said Ron Shevlin, director of research at Cornerstone Advisors. “When Venmo transactions happen between people, it doesn’t matter whether they’re from the same bank, but much of the transaction volume the banks are reporting as Zelle transactions are things already happening among family members [who bank at the same institution.]”

As a result, it may be a stretch to say Zelle is cannibalizing Venmo’s market share, he said. Instead, Shevlin added that the market for peer-to-peer payments has a lot of room to grow, one in which no clear winner will emerge.

“I don’t think even over time, one will emerge — there will be places for a lot of different providers, including Facebook, Apple, Google — all will have a place as the total pie grows,” he said. “Nobody is a Venmo killer and nobody will dominate.”

 

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