The race to dominate person-to-person transfers has been a curious one so far, because P-to-P typically isn't a money-maker for banks or even for PayPal, whose Venmo unit is generating red-hot growth this year in the category.
Executives at participating banks expect their P-to-P processes under Zelle—the new name for the bank-run clearXchange network—will closely mirror Venmo's current streamlined approach and consumers will easily recognize and use the service when it goes live in 2017. That may seem like an obvious step, but it took years to even get this far.
"So far every bank has developed a different approach to enabling transfers within clearXchange," said Braden More, Wells Fargo's head of payments strategy, who acknowledged that the existing process for Wells Fargo's SurePay service was likely to vary slightly from other banks' processes.
More says the new conformity will boost Zelle's appeal for Wells Fargo customers.
"We expect to see more customer usage when all the banks come together around common principles for the Zelle brand and the service's processes," he said.
Though P-to-P continues to be a loss-leader for most providers, Venmo is demonstrating to banks how important P-to-P funds transfers can be as a foundation for social commerce.
"Banks lost out on the first wave of P-to-P, and it took Venmo to come along and show them what it could do for payments as a whole, and now they're trying a second wave of P-to-P to see if they can recapture what they lost," said Steve Mott, an analyst with BetterBuyDesign.
With much larger reach and direct connections to consumers, banks have the obvious advantage in building a robust P-to-P channel under a single brand name with simplified processes, Mott pointed out. But banks still have the potential to fumble P-to-P again, he warned.
"Venmo is already out there, with the brand recognition and the momentum, and some banks may have already soured consumers on trying to send money through these P-to-P channels that were clumsy and not well orchestrated," Mott said.
Banks have a few aces up their sleeves. Bank of America, which went live with clearXchange in March 2016, expects security to be one factor driving consumers to use their banks' P-to-P offering once the product has been rebranded as Zelle.
"Consumers have made it clear that trust in their bank is incredibly important to them, especially as they rely on more third-party apps to handle money," said Dave Godsman, Bank of America's head of consumer payments.
But even as banks improve their own offering, rivals like PayPal are moving on to the next step of blurring the line between P-to-P and e-commerce.
The former eBay subsidiary recently forged agreements with Visa and Mastercard to improve access to PayPal in merchants' online checkout pages, ending a feud with the card networks that dates back to PayPal's beginnings in 1998 (card networks objected to PayPal's practice of promoting cheaper ACH transfers to fund PayPal accounts).
PayPal is also extending its partnership with Facebook to include more opportunities to make direct purchases within the Facebook Messenger chat app. These moves also expand the possibilities for Venmo, which is gradually expanding its Pay with Venmo, said Brad Brodigan, vice president and general manager of retail and middle market at PayPal.
"The ecosystem PayPal is building is going to fuel some amazing commerce experiences for Venmo users," Brodigan said, noting that while Venmo currently supports only about a dozen merchants with Pay with Venmo, that number will grow soon.
Venmo users can book a hotel, order food, buy tickets and request a ride through the integrations announced so far with merchants including Munchery, Gametime, ParkingPanda, Wish, Boxed and White Castle.
"We're still testing Pay with Venmo, and moving slowly, making sure that each merchant is the right fit," Brodigan said.
P-to-P remains Venmo's core platform and it will have plenty of competition as social commerce grows from many directions and banks steadily improve their own integrations with the card networks through their own digital wallets, which increasingly support one-click checkout on an expanding range of channels, including social media.
"Nobody is making money at P-to-P but everyone sees it now as a crucial driver of consumer engagement across a lot of platforms and they want to be part of it," said Eric Grover, an analyst with Intrepid Ventures.
ClearXchange encompasses the nation's largest banks including founders JPMorgan Chase & Co., Bank of America and Wells Fargo & Co., and by early next year 19 banks will offer Zelle, accounting for about 76 million consumers. When agreements with Fiserv Inc. and other payment companies go live later next year, more than 90% of bank accounts will connect to Zelle, clearXchange said.
PayPal has not disclosed Venmo's total number of users, but Venmo's total payment volume reached $4.9 billion in the third quarter, up 131% over the previous year.