The 5 largest US banks are launching a Venmo ‘killer’

venmo iphoneDave
Smith/Tech Insider

NEW YORK (Reuters) – The US banking industry is about to launch
its answer to the popular mobile payments app Venmo,
in what is likely to be the biggest change in years in how
individuals exchange funds digitally.

Over the next week, five of the largest US banks will light up
their segments of a new payments network called Zelle, executives
said in interviews. They plan to announce details of the launch
on Monday, and expect another two dozen banks and credit unions
to join over the next year.

The long-awaited network will allow tens of millions of bank
customers to send money to each other instantly – known as
person-to-person payments – with a few taps on their smartphones.
That is an improvement over Venmo, which immediately
alerts users that a money transfer is in progress, but takes time
to shift funds between bank accounts.

Customers who use existing bank payment apps may not notice much
of a change beyond marketing. Transfers will simply happen faster
because the banks are finally linking to each other, executives

“By coming together to offer Zelle, we are providing a large
majority of Americans with a safe, fast and easy way to move
money,” said Bill Wallace, head of digital at JPMorgan Chase
& Co, the biggest US bank by assets.

JPMorgan, Bank of America Corp, Wells Fargo & Co, US Bancorp
and Capital One Financial Corp will be the first to plug into
Zelle. The network is the product of an industry consortium
called Early Warning Services LLC, whose seven owners have more
than 86 million US mobile banking customers.

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Zelle took years to establish because fierce rivals had to come
together to make it work. In the interim, Silicon Valley has made
inroads into digital payments, particularly with the young
customers coveted by banks.

PayPal Siri Lifestyle Send MoneyPayPal

In addition to Venmo, which is owned by PayPal
Holdings Inc, Facebook Inc, Alphabet Inc’s Google and Apple
Inc all offer payment platforms that allow individuals to
send money to each other. The banks want to leap over those sleek
but scattered offerings by connecting their critical mass of
account holders through a single network.

“Fragmentation has been frustrating for consumers,” said Paul
Finch, chief executive of Early Warning. “Inconsistent
experiences have made it difficult to send and receive money
between banks.”

Despite losing some ground to technology companies, banks still
have a big advantage: No matter what network is used to transfer
money, banks hold the vast majority of funds.

And despite the popularity of apps like Venmo, they
transfer far less money than banks. The value of digital payments
processed through non-financial firms was one-fifth of what banks
and credit unions processed last year, research firm Aite Group

“We are excited to bring the service to everybody and anybody,
regardless of which brand of phone you have in your hand or which
generation you belong to,” said Gareth Gaston, head of
omnichannel banking at US Bank.

Along with building customer loyalty, banks hope that Zelle will
reduce their costs from handling checks and cash. Eventually,
they would like to sell access to businesses that want to
eliminate their own paper-related costs.

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As more banks connect and more customers use the service, sending
cash to another individual will simply involve knowing the
person’s mobile phone number or email address. Later this year,
individuals with accounts at banks not connected with Zelle will
be able to use its real-time features by downloading an app and
pairing it with a Visa Inc or Mastercard Inc debit account.

In launching Zelle, banks are being careful not to confuse
customers by offering yet another payments app.

For instance, Chase will initially twin the brand with the
QuickPay app its customers already use by showing “QuickPay with
Zelle” on its mobile app and website. Eventually, the QuickPay
name could fade away.

(Reporting by David Henry and Anna Irrera in New York; Editing by
Lauren Tara LaCapra and Leslie Adler)