Seventeen years ago PayPal took on Wells Fargo’sBillpoint (joint venture with eBay) and Citibank’s (C2IT) fledgling P2P payment services. It wasn’t a fair fight. With a $400 million VC war chest and an all-star exec team (Elon Musk, Peter Thiel, Max Levchin, David Sacks, Reid Hoffman and so on), the fight didn’t make it past the first round. Within a year PayPal had a stranglehold on eBay payments due to its superior UX and aggressive business model.
Now the banks are back with Zelle, a rebranded version of the clearXchange that has been up and running for six years. The service already has great traction. In 2016, Early Warning, the bank-owned operator (see note 1), processed 170 million transfers totaling $55 billion for the 85 million customers of their big-bank owners. That works out to exactly 2 transactions per customer annually with an average of $320 per transfer.
The value transferred is three times the size of Venmo’s $17.6 billion in volume, though the number of Venmo transactions is probably higher, perhaps considerably higher if its average transaction size is in the $15 to $20 range implying 1 billion venmos last year.
Yesterday and today I used the mobile and desktop Zelle from Capital One for the first time. Other than the glitch with my mobile phone number (see note 3), which would stop many consumers from going further, setup was quick and easy. The desktop version is pretty straightforward, with a Send Money with Zelle link in the middle of the Payments menu (see screenshot below). This assumes you know what Zelle is, or you just ignore it since it comes after the key words, “Send Money.”
But the mobile UI is less intuitive. It wasn’t initially obvious how to use it because there is no Zelle or payments navigation item in the Capital One app…yet (it’s only been out since June 12). However, once you go to your checking account section, it’s one of the main navigation items at the top (see inset below).
I was initially surprised at what happened with my test payment. I sent a buck to my son (sorry, Paul I only had $1.12 in my account) and I was pleasantly surprised to find that my payment had been “qualified for expedited deposit” and he’d have the cash right away without the usual ACH delay.
But when my son forwarded the email he received, I was surprised to find that my Capital One payment has morphed into a branded Chase QuickPay with Zelle. There was no mention of Capital One anywhere in the message (see screenshot #1).
That makes sense now. My son has a Chase account and was already registered with Chase QuickPay. If he’d not already been registered, he would have received a Capital One branded email (see screenshot #2 below).
Why the new brand?
Zelle/clearXchange will continue to grow at a good clip if its big-bank owners stick with it. It’s already 3x the size of media darling Venmo (owned by PayPal). But I’m not sure the massive investment in creating a new payments brand is worthwhile (cut to the boardroom discussion of a 2018 Super Bowl ad).
I get that they are trying to create another Visa/Mastercard network that consumers recognize and trust. But unlike credit transactions at the POS in the 1950s and 60s, p2p payments are relatively understood by consumers and have much less need of a third-party organization to achieve the network effects. The big banks are already wired to each other and what’s needed, what clearXchange was already offering, is just a simpler UX inside each bank’s online and mobile application. Adding the Zelle name to the mix seems like a step backwards on that front.
Maybe I’m wrong and we’ll all be Zelling money to Mars in a few decades. But I’m not convinced the new brand will stand the test of time.
Bottom line: Love the service, which I expect to flourish, but confused by the branding.
#1: Email to a pre-registered Zelle recipient banking at Chase
#2 Email to a Zelle recipient not registered with a participating bank
Author: Jim Bruene is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy.
Owners of Early Warning (aka Zelle) are: Bank of America, BB&T, Capital One, JPMorgan Chase, PNC, U.S. Bank, and Wells Fargo.
If I were any bank other than BofA and Capital One, I’d be crying foul over how the banks are listed in alphabetic order. On the desktop, it doesn’t matter (yet) since they are all above the fold. But on mobile, you can only see BofA and Capital One, and there is no indicator that you should scroll for more.
I received a fatal error message when I tried to use my mobile number as contact to send Zelle payments (see inset) from Capital One’s mobile app. This could be something particular to my account, but from the cryptic popup message, it sounds like my phone is registered at another bank. And that would be a big concern for most customers who would fear that identity thieves are hard at work draining their accounts.
In a $460 million deal, Texas-based ATM operator Cardtronics has acquired Canada-based DirectCash Payments. The deal is expected to help Cardtronics expand into Canada and the United Kingdom. DirectCash Payments has 25,000 ATMs around the globe, primarily in Australia, Canada, and the U.K. Once the deal closes in Q1 of 2017, it will boost Cardtronics’ network to 225,000 ATMs across North America, Europe, and Asia Pacific.
Jack Henry & Associates (F10) teams up with Visa (F10)
In a new partnership, Jack Henry & Associates has integrated with Visa to allow customers to send P2P payments directly to a recipient’s Visa debit card. This eliminates the need for a recipient to provide their account and routing number to the sender. With increased competition in the P2P payments industry (PayPal/Venmo (FDNY 16), Square Cash, Zello), banks are feeling pressure to compete by offering faster delivery of funds. The partnership enables banks to offer funds-transfers a day sooner, or even same-day. Jack Henry began offering P2P payment capability in 2005 and expects the new method to boost usage.
Sberbank (F16) and MasterCard (F11) partner to launch ApplePay in Russia
Starting this week, Mastercard cardholders in Russia can now pay using ApplePay, thanks to a new partnership between Russian bank Sberbank and Mastercard. In a statement, the bank’s Deputy Chairman of the Executive Board, Alexander Torbakhov, said, “Apple Pay is driving the popularization of contactless payments in Russia and globally. Many of Sberbank clients actively use new technologies, and an increasing number of them will prefer cash-free and contactless payment using their smartphones.”
This is the Russian bank’s second big move this week. On Monday the company inked a partnership with Hyperledger to begin working on the Hyperledger Project.
PayPal (F11) and Vodafone partner for in-store NFC mobile payments
Acting on a partnership it first initiated in February, PayPal partnered with Vodafone to enable U.K. users to make NFC payments from their PayPal accounts using their Android phones. The agreement enables consumers to make transactions of up to £30 ($36.60) at 400,000 retail locations. For more expensive purchases, Vodafone Pay users can use their Vodafone wallet (launched in 2013), which requires a PIN.
The NFC payment capability with Vodafone was piloted in Spain. PayPal also has agreements in place with other global telcos, including America Movil, Telcel, and Claro.
Happy birthday, U.S. EMV. It’s been one year since EMV regulation in the United States was placed into effect. If you live in America, you’ve likely noticed that adoption is low. In fact, according to a recent report from Mastercard, 88% of consumers have been issued chip cards, but only 33% of merchant locations accept them.
Though usage remains low, Mastercard reported this week that it has seen an overall decrease in fraud since the EMV change. The company reports that between April 2015 and April 2016, retailers who have transitioned to EMV experienced a 54% decrease in counterfeit fraud.
Ready, set, ACH
As of September 30, a new rule from NACHA requires all banks to process incoming same-day ACH credits. Most ACH payments are currently settled on the next business day: the new rule-change offers originators the option to send an ACH transaction to any recipient account for same-day processing. NACHA has imposed a same-day fee on every same-day ACH transaction to help financial institutions receiving the funds to recover the cost to enable same-day ACH. Phase two of NACHA’s Same-day ACH initiative will take effect 15 Sept 2017.
Technologies: AI, chatbots, and natural language processing (NLP)
The industry-wide obsession with chatbots continues. Finovate last month showcased a dozen variants on the chatbot theme. One of our newer alums, Personetics (F16), is even holding a Chatbot Bootcamp next month in San Francisco. And our chatbot-banking post in March is our fourth most-read. But the bigger conversation is around natural language processing (NLP) and how it can be used to retrieve information and perform tasks. A new report from Juniper Research estimated that NLP would drive $2.1 TRILLION in annual purchases via mobile five years from now (2021).
The annual Sibos 2016 conference in Geneva took place at the end of September—between the last Fintech Trending meeting and this one. Organized by SWIFT, Sibos is considered to be the world’s premier financial services event covering areas such as payments, securities, cash management, and trade.
So what was big at Sibos 2016 this year? The blockchain. 2016 was the first year that Sibos dedicated a track “exclusively to distributed ledger” technology. And the event’s startup-industry challenge was all about how to use the blockchain in the securities industry. The three startups that won the challenge will develop PoCs using technologies like smart contracts (SmartContract), distributed ledgers (Rise Financial Technologies), and open-source blockchain platforms (Coin Sciences).
Some have ascertained the irony in SWIFT’s embrace of the blockchain: Its $6 billion payment-messaging service is one of the technologies “widely perceived to be at risk for disintermediation” by blockchain technology. And indeed, companies like Finovate alum Ripple (F13) have made great strides in helping FIs like Bank of America, Santander, and Royal Bank of Canada use distributed-ledger technology to provide a global blockchain-payments network with “near-instant” settlement. Interestingly, Ripple recently hired former SWIFT board member Marcus Treacher as its new global head of strategic accounts. Treacher told CoinDesk in September that SWIFT was the “de facto way everyone moves money through countries.” And cross-border payment is something he specifically believes Ripple “can do better.”
Global Banks Partner to Form Blockchain Payments Network—CoinDesk
Speaking of blockchain, a number of companies with blockchain and distributed-ledger technologies will be presenting at our developers conference, FinDEVr Silicon Valley, next week. These companies include PwC, which will present its blockchain-as-a-service technology to improve trade finance, and IBM with its hyperledger implementation in the cloud that helps manage and test blockchain-dev projects. Also on hand will be distributed database specialists Aerospike (FD16) and Cognitect (FD16).
From FT Partnersrecent report on the boom in insurance-technology innovation, to InsurTech Rising’s event, Informa, to launch on 21 Oct, this area of financial technology is garnering increasing attention.
Why? As FT Partners pointed out in their 247-page report, the insurance industry is one of the areas of finance that so far has been least affected by the technological disruption nearly commonplace elsewhere. The insurance industry is a multitrillion dollar business; property and casualty insurers alone generated more than $64 billion in net income in 2014. And it sits at the nexus between the drive to better engage customers (is there anything enjoyable about insurance from a consumer perspective) and the need to accommodate complex and shifting regulatory landscapes (something the rest of finance is becoming increasingly familiar with).
What are the focuses of insurtech? Most technology innovation in the area revolves around trends in distribution and administration: data and analytics, and marketing and customer engagement. This includes everything from the kinds of products offered to consumers, such as micro-insurance, to using mobile channels and interactive technologies to make insurance products easier to understand, choose from, and purchase.
How are industry players responding and what to watch for? From partnering with innovative startups to acquisitions, incumbent insurance firms are increasingly aware of the challenge. FT Partners reports that more than 40% of traditional insurers surveyed by Ptolemus Consulting said they were planning to “acquire, or have already acquired, innovative startups to help them expand their digital capabilities” and more than half say they have already invested in social media, data mining, and predictive modeling. Nearly 70% have embraced mobile technology.
Wave Mechanics: FT Partners Report Highlights Trends Driving Rise of Insurtech—Finovate
Prepare for the InsurTech Wave: Overview of Key Insurance Technology Trends—FT Partners
Note: Finovate alums have the year of their first appearance listed after their name. For example, FIS first appeared at Finovate in 2009, so there is a (F09) after their name, with a link to that first demo.