Millennials, it seems, like to share everything about themselves, from selfies on Facebook and Instagram to how much money they spent at the pub last night. It’s one reason the person-to-person payment app Venmo — which encourages users to share spending habits with friends — is so popular with the 18-to-34-year-old crowd.
But in rebranding and reintroducing a P-to-P payments service, the nation's biggest banks are targeting a broader demographic and betting that people who came of age in the 1980s and 1990s want to be more private about how they spend their money.
Zelle is the large banks’ latest foray into P-to-P payments. It is rolling out in stages this year — first as a feature within the mobile banking experience offered by Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and other institutions, and later as a stand-alone app for consumers who don’t have an account at one of the participating banks.
The successor to a lackluster venture called clearXchange, Zelle is courting adults ages 18 to 54 who already rely heavily on their mobile phones. All told, 103 million U.S. consumers fall into that category. “We would say we’re moving P-to-P from millennials to mainstream,” said said Lou Anne Alexander, group president of payments at Early Warning Services, the bank-owned company that is developing the system.
Zelle is being touted as a fast and secure way to send cash to a big swath of American consumers. But as the revamped service competes against Venmo and its parent company, PayPal Holdings, its prospects also hinge on whether the big banks have made the right assessment about the willingness of middle-aged folks to mix payments data with their social networks.
Among young adults, Venmo has become a popular way to send cash to friends, whether it’s to split rent, the monthly utility bill or a bar bill. The app’s users often crack jokes when asked to describe the reason for a particular payment. Requests for payment can also be shared, so that friends know who owes money to whom.
Transaction volume for Venmo, which is owned by PayPal Holdings Inc., has grown by at least 130% in each of the last four quarters.
Zelle’s architects considered, but ultimately decided against, mimicking Venmo’s marriage of payments and social media, according to Alexander.
“There’s a little bit of, you grow out of that being an interesting thing to do or share,” she said with a laugh.
“So as we’re thinking about the use cases for Zelle, sharing the bar tab for last weekend certainly is one of those. But also other use cases that wouldn’t lend themselves to some of the comical social interaction that you see,” she added.
At the same time, Alexander pointed out that younger adults who have been early adopters of the technology are likely to shape the habits of their parents and other older consumers. “So absolutely we are not ignoring the millennials and their influence,” she said.
It will become clear over the next couple of years whether the big banks have made a wise calculation about how to bring P-to-P payments into the mainstream.
Richard Crone, a payment industry consultant, is skeptical. He attributes Venmo’s rapid growth to its use of social media.
“If you owe money, you definitely want to show people that you paid, that you’re not a deadbeat,” said Crone, the CEO of Crone Consulting LLC in San Carlos, Calif.
“Peer pressure is the strongest form of motivation," Crone said. "And that’s what Venmo plays into.”
Moreover, as Venmo moves into in-store payments, its use of social media may offer a way for PayPal to monetize the app’s growing popularity, Crone said. After all, when a social media user endorses a particular retailer, that thumbs-up is valuable to the merchant. So the merchant may be willing to pony up for the positive buzz.
Initially, the dozen or so big banks that plan to offer Zelle seem unlikely to make money from the P-to-P service.
But over time, Zelle’s partner banks hope to support a wide range of business-to-business and business-to-consumer payments that seem more likely to generate revenue. Participating banks are also hoping that the P-to-P service will result in more satisfied retail customers, who are less apt to leave for another bank.
If it turns out that the big banks have miscalculated by choosing not to build their own social network, they can always add that feature at a later date, said Beth Robertson, another payment industry consultant.
Talie Baker, an analyst at Aite Group, said she does not think users are demanding a social network for P-to-P payments. “Most users are interested in security and ubiquity,” she said in an email, referring to the overall size and scope of the payment network.