PODCAST: The Rise and Success of Zelle

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Rise

The following is a transcript of the Zelle podcast episode

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

Welcome to the PaymentsJournal podcast. I’m your host Ryan Mac and on today’s episode we’re going to be talking about Zelle, the digital payments network owned by Early Warning. Joining me is Vice President and Head of Sales and Customer Success at Early Warning, Ian Macallister. Ian, welcome to the podcast.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Thanks. I appreciate it.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

To get things started. Let’s first offer an intro to the topic for those of us who have been living under a rock for the past couple months. Can you give us a little bit of an overview of Early Warning and Zelle?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

I’d be happy to. Early Warning, which is the company that owns the Zelle Network and the Zelle brand, is a company that’s been in place for close to 30 years. The basis of what Early Warning does is work with U.S. financial institutions to do things like protect the financial industry against fraud and bad actors in the payment system. But recently it launched a few years ago a product that now we call Zelle. We’ve been working over the last year to integrate with large financial institutions, and really any financial institution in the U.S. can join Zelle. And we’ve had a lot of great success working with our partners and also our financial institutions to make Zelle a reality.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

How are the implementations going? Are you seeing implementations across the spectrum of financial institutions—big banks, community banks, and credit unions?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

We have. We’ve had a lot of great success especially recently working with those financial institutions. So we have over 140 banks and credit unions signed already to participate with Zelle. We currently have 29 live and a significant amount of the rest implementing. Just to give you a sense of some of the traction we’ve had over the last quarter. In the first quarter, we had over $25 billion moved through the Zelle network and over 85 million transactions just in that quarter alone. Our goal is, like I said earlier, to provide a network where any U.S. bank or credit union can join. A lot of them are doing it directly with us—some working directly with Early Warning in the Zelle network—but others are using partners that we established a few years ago. And those would be Fiserv or FIS, Jack Henry, or CO-OP to provide the ability to join the Zelle network to any of the 10,000 plus financial institutions the U.S. Plus we have other partnerships like IBM and ACI and DCI and D3 where they’re out there as vendors working with a lot of the financial institutions to again educate and help provide technology solutions for them to join Zelle. So that 140-plus institutions is just the tip of the iceberg because our goal is to get to over 10,000.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

How has the growth of P2P transactions been progressing? We’ve seen Bank of America’s report of a 4 million users and Quarter 2. And all Zelle financial institutions collectively completed 35 million transactions worth about $10 billion in Quarter 2. It sounds like numbers like that would make your competition (joking here) “zelle”ous.” But is that kind of growth that you’ve been expecting, and is there any other qualitative information that you can share with us about that?

*UPDATED Q2 INFORMATION FROM EARLY WARNING* 

  • Today, we have more than 150 financial institutions signed up to offer Zelle in their mobile banking apps, with more than 30 currently offering Zelle today.
  • In Q2 2018, we had 100 million transactions for a total of $28 billion in payments. Transaction volume was up 17% quarter-over-quarter (QoQ), and total money moved was up 11%. Across the entire Zelle Network, more than 67 million tokens have been enrolled.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

The cool thing about Zelle is it is a network and that as networks grow, they have a network effect. So, one friend is sending money to another and then that person sends money to a few of their friends or they split a bill. We’re definitely seeing that element of network effect occurring, and that really helps with partnering with the larger banks so they can provide this as an innovative solution in their own mobile banking. If you look at just those 140-plus that I mentioned earlier, they all have a mobile banking app and when Zelle is implemented to that mobile banking app, there are people out there with phones and a banking app that already has Zelle. So it really is the ability to provide them the knowledge and education that they already have Zelle on their banking app. And once they do, you start to see the growth of the transactions and the interaction with Zelle take off. To give you a sense of those banks, they have over 110 million apps installed on phones across the U.S. So 110 million people already have Zelle. It’s just now educating them that they can use it. Additionally, we’re starting to see the use cases of the network grow too. It’s not only just person-to-person payments. We see a heavy usage for rent. But we also see meals being split. We see utilities being shared. A lot of gifting going on. People paying their dog walkers or paying their friends back for travel when they’ve gone out and traveled together and paying them back. The real cool thing is seeing not only the usage growth but also the use cases across the people using the network.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

I think you make a really great point there in terms of just the education of it. With a lot of new technology being implemented today, especially in the financial institution arena, it makes sense for these financial institutions to get out there and educate the consumers on these because as you were pointing out, there’s a lot of use cases for them and you’re discovering more of them each day as Zelle gets into the hands of more and more users. Moving on, do you think that consumers will use multiple P2P solutions? So for example, perhaps consumers might use Facebook P2P solutions for small transactions when they are in a messenger app and then use Zelle for larger transactions?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

We’re definitely advocates for any digital payments infrastructure. Our goal — Early Warnings’ goal — and our banks and credit unions’ goal is really to reduce the usage of cash and check because those are heavy operational costs for people, for banks, for really the payments industry. So reducing cash and check is really our goal. And if there are other players out there that kind of help facilitate people moving from using traditional cash and check to digital payments, we’re cool with that. It’s kind of like the higher tide raises all boats in this scenario. You mentioned a few things that we’re seeing that when people want to do contextual payments, we focus on making sure it’s fast, safe, and easy for people to do payments through Zelle, but again if people are selecting a digital payment over cash or check, it’s going to benefit not only Zelle but it will benefit the financial industry too.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

There was some press a few months ago about consumers using their Zelle P2P app to buy goods from people that they didn’t know and if the transaction went bad, consumers expected reimbursement on the bad transactions is if the seller were an approved merchant. Now any there best practices that have come out of those instances that financial institutions are starting to deploy?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

First of all, we took this very seriously, and our banks and credit unions take it very seriously too. We certainly want to ensure that we’re providing — I mentioned fast, safe, and easy — the middle word was “safe.” We want to make sure that is the core construct of how we’re building Zelle. So we take it very seriously and we work very closely with our network banks and credit unions. We’ve already put some changes in place, our structure around the user experience that is embedded within the mobile banking app. And that really is to ensure that people confirm or know whom they’re sending money to. So again, we’re doing it both from a user experience standpoint to ensure that if I’m trying to send money to Ryan that I’m confirming via the experience that I’m sending it to Ryan, and additionally making sure that there’s the education for the consumers out there that this this is a real-time payment infrastructure so that when you’re sending money, it’s just like handing somebody cash. So would you hand cash to somebody that you didn’t know or trust? I’m not sure you would, so we make sure that we’re educating customers to send money to friends and family. I think those are important elements of what we’re doing, that enhancement of education. This is a new infrastructure, a new payments rail, and there are going to be scam artists out there. We definitely are averse to people trying to scam people through Zelle, but at the same time through education and through the experience, we feel that that will benefit people’s trust of the safety of the network. We’ve actually recently already seen the fraudulent transactions go down. Based on the [fraud] data we’re seeing, we’re trending below other kind of digital payment infrastructures or systems. Although we did get some negative press, we took that very seriously and made some changes and we feel like we’re trending in the right way.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

I’m certainly glad to see that there’s some good coming out of that and moving forward in a positive direction. Now, can you tell me about your business-to-consumer distribution strategy? As I’ve come to understand, one of the areas of interest is tuition reimbursement. Can you talk about this market and how Zelle plans to help with tuition reimbursement?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Zelle initially was built as a P2P platform, but very quickly our banks were able to innovate. Thinking about that network and the other use cases, even back in 2014 when Bank of America launched their digital disbursements product using the infrastructure of Zelle, they recognized that they were able to build a product that helped modernize the payments infrastructure for corporates where they traditionally relied on just checks most of the time in the way that they did payments. Leveraging Zelle for corporates to be able to send money to their customers is a very innovative way and an additional value-added service that they can provide payments in real time to their customers no matter the use case. One was tuition reimbursement as you said, which is great. The first use case was insurance, which is a very well used use case. We also see rebates, refunds, some emergency type of payroll and transactions, we see tipping, and a bunch of others. The good thing is that when Bank of America launched this, other banks, followed suit pretty quickly. So we already have seven financial institutions with large corporate entities in their bank leveraging the disbursements product. So we’re excited about it. One of the ones that we were really excited about last year was that we could help as a network in times of trouble when the American Red Cross used up the disbursement product for emergency relief funds. So that was a tough situation for those that were impacted, and we at the company felt like we could provide value to those consumers who need to get money quickly, through the American Red Cross. So that was a cool thing to be part of.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

The software development side of my brain really gets excited when I get to talk to platform builders. As you were pointing out with the Bank of America example, it’s providing this platform and then they come in and say, well wait a second, there’s something else here that we can bolt on top of this. And other organizations come and say, yeah well, we can put this on top of here or we bolt this into it this way and then it really becomes something that’s extremely valuable to the end-user. So I definitely get excited seeing over the next couple years how it is that this evolves and who builds on top of this platform and what other things evolve from this. Looking at the five-year outlook, is there anything else on your near-term road map that you can share with us?

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

Being owned by financial institutions and also having all these clients — we have thousands of clients already at Early Warning, and we have 140 signed up to use Zelle —  we have a lot of input of what our customers want. That’s a good thing. We have a good base of customer feedback. And it’s making sure that we listen to our customers, which are banks and credit unions, but that they listen to their customers, which are people and corporates. So whenever they identify opportunities to leverage over a real-time, fast, safe, and easy type of infrastructure like Zelle, we’ll be there to provide it. Right now we’ve focused predominantly on person-to-person payments and business-to-consumer payments, but as we bring on more financial institutions, our goal is to drive ubiquity across the U.S. financial institutions and do it the safe way. And if there are other use cases that our clients want and their customers want, we definitely will be there for them.

Ryan McEndarfer Editor-in-chief at PaymentsJournal.com

Well, thank you for taking the time today for speaking to us about.

Ian Macallister Vice President, Head of Sales and Customer Success at Early Warning

I appreciate your time. Thanks for having me.