Banks weigh in on online payment app Zelle being used for retail

The Zelle peer-to-peer payment system has become a popular way to transfer money during the pandemic. People are avoiding ATMs and replacing cash and checks with digital money transfers. Zelle has a lot of eyes on them right now, and it’s not just from consumers. According to the wall street journal, financial institutions also monitor them. So much so that institutions are debating a plan to bring Zelle to checkout at major retailers.

Zelle recorded nearly 1.8 billion transactions in 2021, totaling $490 billion, doubling their pre-pandemic levels. The company’s growth has opened up new possibilities for Zelle, but has also sparked disagreements between the platform’s owning banks, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo. The tea is that banks are wondering if it is in their interest to promote a payment option that would directly compete with the Visa and Mastercard card networks. Financial institutions collectively earn billions of dollars each year from the fees merchants pay when shoppers use credit and debit cards.

If Zelle were to become the new payment method, banks would risk accessing funds directly between buyers’ and merchants’ bank accounts. Reports indicate that Wells Fargo and Bank of America are in favor of expanding the service to retail payments, according to industry insiders familiar with the matter. Currently, executives at JPMorgan, the largest US bank, are unconvinced that the time is right for a Zelle expansion. The company urges to focus more on protecting consumers against fraud, for example, insiders. US Bancorp and Capital One Financial Corp. are also uncertain.

For Zelle to be used as a payment method, Zelle owners must vote before the service can be activated at all banks using the platform. Seven banks own Early Warning Services LLC, the company that operates Zelle, and approximately 1,450 financial institutions offer Zelle to their customers. The company has already added features that serve businesses and “is working with financial institutions to explore more opportunities,” said a spokeswoman for Early Warning Services.

Roommates, do you think Zelle should be used to make payments for retailers?

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