Lack of trust pushing users to bank-backed Zelle

Digital payment firm Early Warning’s chief data officer says trust still an issue for third party vendors

Consumer trust remains a key battleground in driving third party adoption within the US P2P payments network, according to Ravi Loganathan, chief data officer at Early Warning – the firm that operates Zelle. But that’s changing, thanks to the banks who are turning to such vendors.

“There’s permission for those consumers who have not trusted third party applications out there that their own financial institutions are offering fast payments and are willing to try it,” says Loganathan.

With seven of the largest, systemically important banks offering Zelle within its mobile banking app along with 51 other institutions. Being able to lean on the name of established bank brands gives the firm an advantage to tap into a greater reach than other competitors, says Loganathan: “customers are familiar with their banking application – it’s within a trusted and authenticated space.”

Zelle has the potential to reach 70% of all US current and checking accounts, according to Loganathan.

“If you look at the rest of the marketplace,” says Loganathan, “there’s a tendency to only market to younger generations. We have Gen Xers and baby boomers right up there using Zelle services along with millennials.”

Zelle is owned by a consortium of banks including Bank of America, JPMorgan Chase and Wells Fargo. Venmo – the other major player in the space, is owned by PayPal – suffered a transaction loss rate – reimbursements due to fraudulent activity – that jumped from 0.25% to 0.4% between January and March 2018, according to The Wall Street Journal. Zelle has likewise been targeted by fraudsters according to the New York Times.

Loganathan says banks are attempting to garner greater trust with older consumers – which Zelle’s most recent survey identified as a potential growth area.

“I think older generations are a missed opportunity for payments. They also want to be part of the cool crowd, these products haven’t been positioned to them in a meaningful and relevant way from a trusted source.

“That’s why we’ve seen rapid adoption followed by cross-generational adoption; particularly among older generations which resemble the profiles of bank current and checking accounts,” he says.

Earlier this year, market research firm eMarketer estimated that Zelle would overtake Venmo with 27.4 million users in the US, compared to Venmo’s 22.9 million and Square Cash’s 9.5 million users.

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