Zelle places its bets on corporate-customer transactions

Zelle is looking forward to double-digit-percentage growth this year in b-to-c payments. On Friday the bank-backed payments app released its first-quarter growth numbers: $25.1 billion (a 15 percent increase from the previous quarter) across 85 million transactions (a 14 percent increase). Zelle launched with its bank partners in June. But even though Early Warning Services, the payment network behind Zelle, has focused many of its efforts on peer-to-peer services since then, it has “several” large corporate customers that use Zelle to disburse money to individuals, said Lou Anne Alexander, Early Warning’s group president for payments. Their transactions tend to be smaller in volume but larger in dollar amount compared to Zelle’s average p-to-p transaction. She declined to name or specify how many companies offer Zelle’s business-to-consumer payments. Alexander said disbursements will be one of the company’s biggest growth opportunities for 2018. Though the total activity will be much smaller than p-to-p activity, Zelle also sees it as another channel for consumer awareness and education, as corporate customers can show consumers Zelle is as much for receiving money as it is for sending money, Alexander said. “Corporates are endorsing Zelle as a faster and safer network, particularly since they disburse larger dollar volumes,” she said. “Many times a consumer’s first interaction with Zelle happens because their corporate partner is trying to disburse money to them quickly, so we see … that customers are likely to enroll to get their money.” Like Zelle’s p-to-p payments, the digital disbursements offering lets companies pay their customers — rebates and rewards, claims, benefits, refunds — using just their phone number or email address, per a customer agreement, without having to ask them to hand over and trust them with sensitive and sometimes hard-to-access bank account information. Companies benefit from it by lowering their check-processing costs and delivering faster customer service and payouts. Bank of America’s head of small-business banking, Sharon Miller, said she’s had discussions about bringing Zelle into business banking products, though those conversations are in the most abstract stages. “I’ve had meetings about that a lot. … You’ll see more and more of that,” she said. “We want to make sure we're focused on being easy, convenient and thinking ahead. No determination has been made, but we have to look at that carefully, what our business owners tell us — how are they going to pay their landscaper or gardener? Do they have to write a check, or is there a world where they can pay them via Zelle?” For business or corporate Zelle payments to happen though, the consumer receiving the funds needs to have a Zelle account, either through a U.S. banking app or through Zelle’s standalone app if that customer’s bank isn’t yet part of the Zelle network. Early Warning plans to make every U.S. bank part of its network. “We have well over 100 financial institutions now that have signed up to participate in Zelle. We have 10,000 to go,” which is a spike from the 18 it had in the fourth quarter of 2017 to the first quarter of this year, Alexander said. “We’re optimistic the network will grow quickly.” But there’s still a consumer-education and -awareness gap to overcome in order to reach adoption. Recent research by Total System Services shows 71 percent of consumers have no experience with p-to-p payments; 46 percent said they’ve never used a p-to-p service and 25 percent said they were unfamiliar with the concept. Consumer education should also extend through the onboarding process, which is a job both for Zelle as well as its bank partners in setting expectations for new users’ first enrollment periods and first transactions. Typically, they only bring information to the customer once they’re finally in the system. There’s even customer confusion, still, over how to use Zelle — that’s something Early Warning is tackling now, Alexander said, by designing alerts into the transaction process. “[We want to] make sure customers understand and know who they’re sending money to and that when they press the send key, that money will be gone — and that they should treat it just like cash,” she said. Not all of its bank partners have implemented those alerts yet, but Early Warning has been testing them with some over the past “several weeks” and will make it a standard within all of the banking products shortly. “It will take a bit of time for all of the banks to implement this, but as you are in the act of doing the transaction, we think that's the best time” to educate customers, Alexander said.