FinTech News

Zelle Reportedly Looking to Expand into Business Payments

In a relatively short period of time, Zelle has grown into the most-used peer to peer (P2P) payments app, topping competitors like Venmo, Square’s Cash App, and App Pay Cash. Now it seems the big bank-backed app is looking to expand its reach even further. According to a report by Bloomberg, Zelle is currently working to introduce tools that will ensure users can safely pay small businesses using the application.

If Zelle did move into business payments, it would follow the lead of Venmo, which made a similar move last year. As Bloomberg notes, this Pay with Venmo feature has since been adopted by big brands like Abercrombie & Fitch while Venmo payments have also been integrated into the Uber app. Of course it’s also worth noting the Venmo’s parent company PayPal has also long offered both P2P and merchant payment options.

The likely reason why P2P apps would want to expand into business payments is simple: profits. Crone Consulting head Richard Crone explains that such arrangements not only mean that merchants pay for transaction processing but might also pay to have their business promoted within the app. This led Crone to declare, “Merchant acceptance is the path to profitability for P2P.” To that point, Crone Consulting projects that P2P payments made to businesses will total $17 billion this year, growing to $74 billion in 2021. That would mean the business payments would increase from making up 9% of P2P payments value in 2018 to 23% in the next three years.

Were Zelle to move into merchant payments, it would need to ramp up its risk protections and risk-assessment tools — something that is reportedly already underway. At the same time, Bloomberg notes that the app doesn’t currently have plans to expand beyond digital payments and into point of sale solutions. Despite signs pointing to expansion, Zelle’s owner Early Warning Services declined to confirm the report, saying “We continue to research future use cases, but do not comment on our road map.”

With Zelle processing more than 100 million transactions (worth a total of $28 billion) in the second quarter of this year alone, there’s little doubt that the app would find success if it did indeed expand into merchant payments. That said, the app’s lack of “cool factor” could prove to a roadblock as it seems less likely to gain as loyal of a following as its competitors — something that may be required if they expect users to choose its payment solution over other options. Then again, just as it leveraged its reach to climb to the top the P2P app heap, perhaps the built-in user base that Zelle’s banking partners bring to the table will be the key to unlocking future potential.

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