It's free, it's cool: Banks to offer Zelle, instant cell phone money exchange

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Sending a text on your cellphone takes just a few seconds. The day is here when you can send money to someone through an

CLEVELAND, Ohio -- Sending a text on your cellphone takes just a few seconds.


The day is here when you can send money to someone through an actual bank almost as quickly as you can send that text.

Seven of the 10 largest banks in Northeast Ohio, including Key, PNC and Citizens, have just started offering -- or will launch in the next few months -- a service that allows consumers to send money instantly using just a cellphone number or email address.


The service is called Zelle. (Rhymes with bell; derived from gazelle.) It's free. And it's in real time. And it's pretty cool.

Traditionally, if you want to give someone money, you can mail a check, or use your bank's online bill pay service to mail a check, or you could send money electronically through a service like Venmo or Popmoney. All of those take a day or two or three. Or you could hand the person cash, but that requires having the money on your person.


With Zelle, you use your own bank and send the money instantly, using only the person's email address or cellphone number. You have a record of the payment. It can't get lost in the mail. You don't need to have the person's account number or even the name of the bank.

Say you go to lunch with a friend and the server doesn't split the $20 bill and you can't pay with the credit card you'd planned to use. With Zelle, you can instantly give your friend $10. It will be in your friend's bank account in a few seconds, before you even walk out of the restaurant.

Or say a co-worker is collecting money for a food basket for a colleague recovering from surgery. You don't have $5 on you. You could send it instantly by Zelle.

"Zelle is meant to make life easier," said Steve Kenneally, vice president of payments and cyber security policy for the American Bankers Association in Washington, D.C. "It's providing a great alternative to writing a check or running to the ATM."

"There is a huge market for this," said Gareth Gaston, executive vice president of omnichannel at U.S. Bank, which started offering Zelle in June. He thinks Venmo and other services "haven't scratched the surface" on the demand.

"This isn't just some millennial app," Gaston said. "This is designed for old people, too."

There are countless scenarios where someone might like to send money instantly -- to a landlord, to your babysitter, to a roommate, to your gutter cleaner, and so on. While Zelle can be used to pay any individual or small business as long as you both have accounts with the same or different participating banks, it seems to make the most sense initially for spontaneous payments -- not necessarily bills you would expect to pay regularly. But it can be used for payments of any size.

In Northeast Ohio, four banks have somewhat quietly launched Zelle this summer: PNC, Chase, Fifth Third and U.S. Bank. Four other large local banks are rolling out Zelle in the next several months: KeyBank, Citizens, First Federal Lakewood and First National Bank of Pennsylvania. Those eight banks hold 70 percent of the deposits in Greater Cleveland.


The only non-participants among Cleveland's 10 largest banks are Huntington, Third Federal and Ohio Savings. Huntington and Ohio Savings say they're currently evaluating Zelle.

Nationally, 34 banks are part of Zelle, including all of the nation's 20 largest banks, with only a couple of holdouts. Among the other large national players that are part of Zelle: Bank of America, Wells Fargo, Citi and Capital One.


Cleveland's largest bank by deposits, KeyBank, will add Zelle this fall. "We're always looking for simple, straightforward banking services solutions for our clients," said Stephen Schroth, senior vice president of digital banking strategy and design.

There are several other services out there, some free and some not, that offer person-to-person payments, including PayPal, Venmo, Square, Google Wallet and Facebook Messenger. But none of these has been embraced and captured a huge chunk of the market. Many people may be uncomfortable giving their bank account information to a third party.


With Zelle, you're not giving any financial information to anyone. Your bank already has it.

"There is a trust factor people have with their bank," said Larry McClanahan, director of digital delivery for Fifth Third Bank in Cincinnati. "Other solutions may have some brand awareness, but . . . this has our name behind it. And that's a comfort for customers."


And through Zelle, consumers know their money is insured and the bank is regulated, said Kenneally at American Bankers. Third-party services don't have to comply with the same security and privacy regulations.

"Banks are responding to customer demand," said banking analyst Fred Cummings, president of Elizabeth Park Capital Management in Pepper Pike. "They don't want their customers to use PayPal's product, Venmo, which is the market leader in person-to-person payments."

Zelle is an effort by banks to make sure they "remain critically relevant to consumers and businesses," even those who don't want or need branches, said Nashville banking analyst Jeff Davis. Physical branches have been the "crux of how consumer and small business deposits have been collected and distributed" for 200 years, he said.

But -- and this is big -- banks need to be important to people who increasing rely on their phones and computers to move money, Davis said.

Banks are fierce competitors, not usually collaborators. But they've been working together on a universal person-to-person payment system for six years leading up to Zelle. "This is something that's good for the entire industry," Kenneally said.  


Zelle's utility is expected to broaden. There are plans to expand Zelle so you can pay anyone who has a debit card, regardless where they bank, Kenneally said. Banks are also talking to corporate America about using Zelle to issue refunds or rebates for consumers.

Kenneally sees Zelle remaining free for consumers, because it's difficult to start charging people for something after they become accustomed to not paying.

The number of consumers using P2P payments increased by one-third from 2013 to 2016, according to Javelin Strategy & Research. And it's expected to double in the next four years.

Banks that are part of Zelle nationwide represent more than three-fourths of all U.S. deposits. Bankers are putting Zelle in the same category as ATMs, credit cards, online bill payment and mobile deposits. At first, people may not be sure why they'd use it. Then at some point they won't know how they managed without it.

"I think it's going to be a journey," Gaston said. "I think it's going to take time."


HOW ZELLE WORKS

  1. Sign in to your bank account.
  • Register a recipient using her cellphone number or email.
  • Choose "send money through Zelle" and enter the amount.
  • The money is withdrawn immediately.
  • The recipient will get a text message or email in real time.
  • As soon as the recipient accepts the payment, it's deposited into his bank account.
  • A person can choose not to accept a payment.
  • Some banks place a daily or monthly limit on how much you can send.

Local and national banks that launched Zelle this summer:

PNC
Fifth Third Bank
Chase
U.S. Bank
Bank of America
Citi
Wells Fargo
Capital One

Local banks getting ready to launch Zelle in the next several months:

Citizens
KeyBank
First Federal Lakewood
First National Bank of Pennsylvania

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Article It's free, it's cool: Banks to offer Zelle, instant cell phone money exchange compiled by www.cleveland.com

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