Zelle Eyeing Expansion Into Small Business Payments

Zelle, the digital payment app that enables consumers to send money to friends and family, is gearing up to expand its offering to enable customers to pay small businesses. Bloomberg, citing people familiar with the situation, reported Zelle is in the process of enhancing its risk assessment tools as part of the effort to make it safe for people to pay small businesses. Zelle is backed by Bank of America, JPMorgan Chase and other banks.

According to Bloomberg, there isn’t a set date for the release and it could decide not to launch the service. However, the move is seen as a way to take on Venmo, which is owned by PayPal and already offers the capability. While peer-to-peer (P2P) payment apps have long been reserved for splitting small bills with friends and family, it is growing as more consumers become comfortable with the payment method. Bloomberg, citing Crone Consulting, reported that P2P payments to businesses in the U.S. will almost quadruple to nearly $17 billion this year. By 2021, the business side of the P2P market is expected to hit $74 billion.

Zelle currently lets businesses disburse payments to consumers, handling 100 million transactions in the second quarter for a total of $28 billion, noted Bloomberg. As of now, Zelle doesn’t offer risk protections that are necessary to send money to businesses, said the report.

With Zelle projected to overtake Venmo, eMarketer expects the payment service to grow more than 73 percent this year. The firm is projecting that Zelle will reach 27.4 million users in the U.S. — more than Venmo’s 22.9 million users, reports said.

“One of the main hurdles new apps face is building trust and a sizable audience,” said eMarketer Forecasting Analyst Cindy Liu. “But Zelle has leapfrogged the early stages of adoption by having the benefit of being embedded into the already existing apps of participating banks.”

Overall, eMarketer said that users of P2P mobile payment products will rise 30 percent in 2018 to encompass 82.5 million people — or just about 40 percent of smartphone users in the U.S. Furthermore, eMarketer forecasts that the transaction volume of P2P payments will increase by 37 percent in 2018 to reach just over $167 billion this year.

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