Zelle Business Model Explained: How Does Zelle Make Money?
As we move closer to a cashless society, more people are opting for debit and credit cards, embracing the convenience of digital payments. These options have made life easier by eliminating the need to carry cash, no matter where you are or what time it is. In the past, paying through websites or apps could be challenging and often came with additional costs. Today, however, transferring and receiving money online has become effortless, thanks to apps like Zelle.
Zelle is a leading peer-to-peer payment network created by major banks and financial institutions, including Bank of America, JP Morgan Chase & Co., and Wells Fargo & Co., as a competitive alternative to popular third-party P2P apps. Operating in over 130 countries, Zelle has long held a top position in the market.
If you’re curious about Zelle’s business model, you’re in the right place. In this detailed blog, we’ll dive into Zelle’s business framework, covering everything from its revenue streams and customer relationships to its valuable resources and cost structure. But before we get into the details of its business model, let’s take a closer look at Zelle as a company.
Zelle: Company Overview
Zelle is a payment network that lets users send money quickly and securely from their bank account to someone else’s bank account in no time.
It typically takes a few seconds to complete the transaction. Anyone using the platform can send and receive money for free.
In 2021, Zelle users spent $490 billion on 1.8 billion operations, and nearly 3,000 financial institutions networked with Zelle to make the payment process quick.
The platform is similar to PayPal and lets you send money to friends, family, and other recipients – even if you use different banks across the USA.
Company Name: Zelle – Early Warning Services, LLC
Formerly known as: ClearXchange
Company type: Private
Industry: Payment Service and Payment Network
Founded in: 2016
Headquarters: Scottsdale, Arizona , United States
Services: Electronic Fund Transfer
Website: Zellepay.com
- Using the link to the USA checking or savings account, Zelle allows users to transfer funds to another US bank account holder.
- The payer and the payee must be enrolled in Zelle; they do not need to have accounts at the same financial institution.
- When users transfer money via the Zelle or their bank’s app, the funds are immediately put into the recipient’s bank account, which they have connected to their Zelle account.
- With Zelle, money transactions typically take place in minutes and are free.
- Be aware that Zelle does not support gift cards, international accounts, business debit cards and credit cards.
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Zelle: The Growth Timeline of a P2P Payment Giant
Zelle has been shining like a star since its launch in 2017 and has continued to grow. For instance, the platform processed $187 billion by facilitating 743 million payments in 2019 alone.
Source: eMarketer
Below are the jaw-dropping statistics and exciting facts to further prove its rocking performance:
- Zelle grew its user base by 13.9% and 10.01% in 2022 and 2023, respectively.
- In the current year, its user base is projected to grow by 8% in the first six months of 2024.
- The P2P payment platform has managed over 5 billion transactions since its launch in 2017.
- More than 1700 banks and financial institutions offer Zelle in their mobile apps.
- Due to zero transaction fees, small businesses use Zelle to pay employees, vendors, and rent.
- From 2024 to 2026, Zell user’s average annual growth rate is 6.7%.
- Venmo, CashApp, PayPal, etc., are Zelle’s close competitors, and Venmo’s user base is projected to reach 68.3 million by 2024.
How Does Zelle Work?
If you want to use Zelle but are clueless about how it works, then the first step is to see if your bank operates Zelle. Here’s the step-by-step process that explains how Zelle works and makes it easy for users to send and receive money.
- Unlike Venmo, money transfer through Zelle is like sending money from one bank account to another.
- Usually, conventional banking transfers take 5-7 business days, but Zelle allows users to transfer funds from one account to another in seconds.
- Moreover, it initiates transfers; users don’t need to remember long bank account numbers; they only need an email address or mobile number, and you are done.
- If the money receiver’s bank is a participating partner, they only need to register for the service using the bank’s website or application.
- First-time users may have to wait up to three days to receive payment, but once registered, the recipient can accept the payment.
- Even if the recipient’s bank is not one of the partner’s banks, they can still get the money by installing the Zelle app to their phone, enrolling, and providing a credit card.
Components of Zelle’s Business Model
Zelle, a well-known digital payment network app in the United States, operates on a business model that uses modern technology to facilitate secure and quick payment transfers between individuals, merchants, vendors, and other stakeholders. Here’s a detailed breakdown of its significant elements, components, and partnerships.
- Infrastructure: Zelle is an online payment platform connecting individual financial institutions, allowing users to send and receive money quickly.
- User Interface: It offers an appealing interface to users and allows users to make online payments through its user-friendly website and app solutions.
- Bank Partnerships: Zelle partners with reputed financial institutions across the USA, offering its services to users. These banks include Bank of America, Chase, JP Morgan, PND Bank, Fidelity Bank, Discover Bank, and Wells Fargo.
- Security Measures: To make the overall transactions smooth and secure, Zelle integrates encrypted protocols and authentication methods to stop fraudulent activities.
- Fee Structure: Zelle doesn’t charge any transaction fees, but the platform has various fee policies to carry out smooth transactions.
USP of Zelle Business Model
- Bank Account Integration: Similar to other popular platforms, Zelle directly syncs user’s bank account information, removing the need for third-party integrations.
- Real-time Transactions: Zelle focuses on swift and secure transactions, making sending and receiving money faster while earning attractive rewards and gifts.
- Wide Accessibility: With its broad accessibility, Zelle reaches a broad audience, taking advantage of existing customers and expanding its reach to serve digital customers.
In short, Zelle’s business model revolves around advanced technology and partnerships with banks and financial institutions to offer a seamless online payment experience. It focuses on real-time transactions and direct bank account integrations, which sets them apart in the modern online payment environment.
How Does Zelle Make Money? Have A Look at Its Revenue Streams
Since its launch, Zelle has been making decent revenue, but the platform relies on different revenue streams. No, they don’t charge any commission on each transaction, but all revenue sources focus on partnerships with well-known financial institutions.
Zelle has three primary revenue sources: license fees, value-added services and bank-imposed fees. Let’s talk about each revenue source in detail:
Licensing Technology
Zelle levies a fee to its partner banks to provide services to the bank’s clients. In exchange, banks can incorporate Zelle payments into their mobile banking apps, providing clients with an even more convenient way to transfer money between numerous financial institutions with just an email address or smartphone number.
Value Added Services
Zelle’s person-to-person (P2P) payment feature is frequently connected with the company’s bank partners as an added value offering. Essentially, the financial institutions cooperate with Zelle and occasionally advertise the P2P payment system -which forms the basis of the company’s business model – as an extra, paid service.
Bank-Imposed Fees
Although Zelle does not impose transaction fees on its partners, it occasionally does. Similar to the value-added services scenario previously mentioned, more banking and financial institutions are likely to integrate Zelle with their mobile baking apps due to the possibility of charging for additional features like business payments and rapid settlements.
Zelle does not directly benefit from any transaction fees levied by banks; nevertheless, it does increase Zelle’s appeal as a digital payment option by giving the banks a means of making money. This indirectly promotes Zelle’s adoption by additional financial institutions and may contribute to the platform’s quick uptake.
Check Out Zelle’s Competitors and Alternatives
Indeed, Zelle is widespread across the USA digital payment ecosystem, but its inevitable downfall compels merchants and individuals to look for alternatives or other better options.
The major downside of the Zelle is that the platform doesn’t let you hold balance within the app. If the company turns out to be fake, you might not be able to get your money back for products or services that you bought online. Refunds are available if the business is found to be fraudulent.
But the good news is many alternative apps let you hold your balance within the app while drawing funds directly from your bank quickly and securely.
Venmo
Venmo is a popular B2B payment app that works like Zelle. Venmo also follows the same business model, making sending and receiving money easy. It is a social payment program app that functions similarly to a digital wallet, allowing you to save money for later usage.
This will be useful if you send money to friends and family regularly. You don’t have to take money out of your savings or checking account when sending money.
Debit or credit cards, as well as bank accounts, can be used to open an account. To use the app, you must have a working phone number. You can pay a fee equal to 1% of the transaction amount to get instant access to the funds if you need to transfer them to your bank account.
PayPal
Headquartered in San Jose, California, PayPal is an online payment system that allows users to send and receive money securely via a website or mobile app.
PayPal processes 41 million transactions on average daily, an increase of 20.58% from the expected 34 million transactions processed per day in 2019.
PayPal can also be used to make online purchases when connected to your bank account, debit card, or credit card. It acts as a go-between to safeguard your bank information and can be accessed online, through a mobile app, or in person.
CashApp
With the 2013 debut of CashApp, customers now have a handy option to transfer and receive money without using wire services or banks. Since then, it has increased its user base and range of services, including an investment platform, support for direct deposits, and debit cards linked to CashApp. Moreover, users can use cashback offers from malls, restaurants, and stores, including Whole Foods, Walgreens, and Walmart.
CashApp is a smartphone app, as its name would apply (available on the App Store and Play Store). Browsers like Chrome, Mozilla, Firefox, Opera, etc. can also access it.
Apple Pay
Apple Inc. launched Apple Pay, a mobile wallet and digital payment service. It works with all the Apple devices, such as iPhone, Mac, iPad, and Apple Watch.
This payment option uses near-field communication (NFC) to substitute payment cards at contactless point-of-sale (POS) terminals.
Moreover, Apple Pay can be used for specific public transportation networks using credit and debit cards, such as TFL in London and SL in Stockholm, or with particular transit cards, including the Clipper in the San Francisco Bay Area and the Octopus Card in Hong Kong.
Google Pay
Several innovative new payment options, like Google Pay (previously known as Android Pay), are being welcomed by customers worldwide.
Google Pay is a replacement for Android Pay and is used for items people buy in shops, on the web, and in apps. Popular brands such as Airbnb, Lyft, Instacart, Doordash, and others have already integrated Google Pay into their apps to make payment transactions seamless.
Google Pay is a part of the Google Wallet app and operates in over 50 countries and regions.
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How Much Does It Cost to Build an App Like Zelle?
The cashless economy has become more popular. People tend to make payments online, and Zelle is one of the world’s most popular online payment apps.
As you have heard most of the time from reliable and experienced app development companies – telling the exact development cost for Zelle like payment app development, is impossible. Every app is unique, and different factors affect the overall development cost and some of the factors are:
- Platform choice
- The number of developers with different expertise and experience
- Experienced and creative team of designers
- Features you want to incorporate
- Location of the app development company (Asia is more cost-effective than other developed countries)
- Complexity of your app
In short, predicting the cost of developing a Zelle similar app is like buying a new car. The car’s price depends on the features, models, machinery, and more; in the same way, the cost to build an app like Zelle varies depending on multiple factors.
The entire process can take days and even months from start to launch. The process may include:
- Conceptualization of the idea of the app
- Building an experienced team of developers and designers
- Developing UX (prototyping, wireframing, and designing main screens)
- Development (native and hybrid apps)
- Test and final launching
This process and cost seem too much. Hence, startups and emerging entrepreneurs usually opt for the white label or ready-made solution as it allows them to hit the market early while saving lots of time and resources. If you are one of those entrepreneurs who want to have an online payment app like Zelle but are clueless about other technicalities, contact us; our team of enthusiastic people will help you develop the roadmap and provide you with a ballpark cost estimation.
Conclusive Thoughts
On one side, apps like Zelle, Venmo, Google Pay, and Apple Pay have been the most significant part of the market’s success and sit at the top. On the other hand, the market is still not saturated and has enough room for more.
We hope this blog helped you gain a complete understanding of the Zelle business model. If you want to plan your idea, White Label Fox is your best bet. By considering all the above aspects, we deliver payment apps with the utmost security as per the demand of the users. So, get an exceptional app like Zelle and take your business to new heights.
Frequently Asked Questions
Are peer-to-peer payment apps profitable?
Yes. Online payment apps like Zelle can help entrepreneurs expand their business among many customers. An on-demand app like Zelle is an easy way for the owners to expand their reach and brand visibility.
How long does it take to build an app like Zelle?
It takes an average of 2-3 months, with most coding and design projects taking four months. But if you opt for the readymade solution, it takes only around 2 weeks.
How does P2P payment work in Zelle?
Zelle users can make payments using the Zelle app on their mobile phones. They can link their bank account/ card or money to the Zelle app.
Is Zelle free to use?
Yes, Zelle is free to use when sending or receiving money through a bank or credit union that supports Zelle. However, it’s always a good idea to check with your bank to ensure no additional fees apply.
How quickly are funds transferred using Zelle?
Transfers made through Zelle are typically completed within minutes, provided both the sender and recipient are enrolled in Zelle. If the recipient is not enrolled, they will receive an invitation to sign up, and the transfer may take a bit longer.
Is Zelle safe to use?
Yes, Zelle is safe to use as it leverages bank-level security and encryption to protect your transactions. However, because transfers are instant and usually irreversible, it’s important only to send money to people you trust.
