The person-to-person payments service Zelle differentiates itself from rivals by promising users that transactions sent over its network will clear in near-real time. Yet in recent months, the service has faced a number of complaints from consumers who say they are having problems sending or receiving money or setting up accounts in the first place.

Zelle has acknowledged the problems, but says the occasional delay is the price some users will have to pay as the big banks’ rival to PayPal and Venmo aims to create one of the industry’s strictest fraud-prevention programs.

“We have taken extra steps during the enrollment process to verify that Zelle is not enrolling a debit card that has been compromised by fraud and to verify each applicant’s identity,” said Lou Anne Alexander, group president of payments at Early Warning, the company that operates Zelle. “Sometimes when those don’t match, that’s frankly been a friction point with our customers.”

In recent months, consumers have submitted hundreds of complaints about Zelle on Google Play and in Apple’s iTunes store. In most of them, consumers say they can neither establish new accounts, nor access money that was sent to them.

The problems appear to be confined to users who do not have accounts at banks that are part of the Zelle network. These consumers are supposed to be able to connect to Zelle by downloading the service’s mobile app, but some report that they have not been able to open a Zelle account, a process that requires linking an account at another financial institution.

One consumer wrote on the Google Play site on Dec. 27 that he could not “connect to my community credit union account. Hours on the phone with ‘escalation’ customer support did nothing. Venmo can do this with no problem.”

Another consumer on Jan. 2 wrote in Google Play’s review section that he “failed to set up [his] card the first five times [and] had to keep trying and waiting.”

Alexander declined to provide details on Zelle’s fraud-detection processes, except to say that consumers are put through “multichannel security checks. If one if those things is out of line then we do not add that person.”

When Zelle was launched in June, the service was available only as an option on the mobile banking apps of institutions in its network. Zelle launched a standalone mobile phone app in September, making the service available to customers of any financial institution.

Richard Crone, a payments consultant in San Francisco, said that Early Warning would have been wise to take more time before making Zelle available to everyone, in order to make the sign-up process smoother.

Because of the problems that some consumers are now encountering, banks in the Zelle network run the risk of having their own brands tarnished, he said.

“You see the visceral reaction in these reviews because people have money pending, and they can’t get it,” Crone said. “There is no better way to upset people than to play with their money.”

Still, Crone said that Zelle is easy to use for customers of the 50 institutions within the network, Those firms include many of the nation’s largest banks, including JPMorgan Chase, Citigroup, Wells Fargo, U.S. Bancorp and Bank of America.

Zelle banks have been boasting about their customers’ rapid adoption of person-to-person payments.

“The introduction of Zelle has nearly doubled the adoption of our [person-to-person] service over the past year, and we continue to see strong growth,” Betty Riess, a B of A spokeswoman, said in an emailed statement. Bank of America processed about 68 million Zelle transactions last year, an 84% increase from 2016, when it operated under the name ClearXchange.

P-to-P transactions rose 200% from December 2016 to December 2017 at the $17 billion-asset FirstBank in Lakewood, Colo., which is also a Zelle bank, according to spokeswomen Chandra Brin.

“While we have fielded a handful of unenthusiastic calls, we’ve also seen a high volume of positive feedback from customers who’ve sent money to accounts inside and out of the Zelle network without issue,” Brin said.

However, there is a large population of consumers whose institutions are outside the Zelle sphere. These include MUFG Union Bank and First Republic Bank, both in San Francisco; BMO Harris Bank in Chicago; Zions Bancorp. in Salt Lake City; and Navy Federal Credit Union, the largest U.S. credit union. In addition, thousands of community banks and smaller credit unions are not Zelle participants.

Early Warning and its partner banks may have erred by not communicating more clearly the difference between using the service from a Zelle bank and connecting from a financial institution that is not participating, said Jordan McKee, an analyst at 451 Research.

“A lot comes down to consumer education, and that’s where a lot of initiatives in the payments space tend to fall apart,” McKee said. “When it comes to communicating the onboarding process to the end user, that part tends to be a bit clumsy.”

Early Warning noted that it has recently launched a marketing effort, including its first batch of television advertising, which it hopes will clear up some of the confusion.

“Many consumers are experiencing not only Zelle, but person-to-person payments, for the first time,” Fintland said. “Understandably, there are a number of questions consumers are having about the service, ranging from how it works to when they can expect funds to be deposited.”

When consumers report problems, Zelle is “focused on taking swift action upon identification, working diligently to ensure that Zelle delivers on an easy, fast and safe payment experience,” said Meghan Fintland, a Zelle spokeswoman.

In the meantime, Zelle may be suffering from a comparison to PayPal Holdings-owned Venmo, which is popular among millennials. Venmo’s online consumer reviews are uniformly positive. In addition, Venmo has a social media element that allows users to publicly post confirmation of when financial transactions go through.

That social media element has significantly contributed to Venmo’s success, Crone said. Venmo also has used artificial intelligence and machine learning to build a database on consumer preferences, which helped it work out the kinks in account authentication, he said.

However, it still takes between two and three business days for Venmo transactions to clear and for consumers to receive their money. If a Zelle user’s bank or credit union is in the Zelle network, transactions are completed in almost real time.

That’s the added value of the Zelle network and, for the time being, consumers who bank with an institution outside of that network will have to accept more rigorous sign-up requirements to access payments that clear almost immediately, Alexander said.

“Because money [in the Zelle network] moves in a matter of seconds, we use fraud and risk management tools that provide us with a level of certainty,” she said. “Unfortunately, you are seeing that approach in our app store ratings.”

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.