Should Credit Unions Work with a Fintech like Zelle?

By Jamie Armistead

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As person-to-person (P2P) payments become table stakes, perhaps you’re asking, “Is now the time to jump on the P2P band wagon? Do we risk falling behind if we ignore these digital payments?” 

There is no doubt that consumers are demanding real-time digital payments. According to a recent Aite Group Study, 85% of U.S. consumers who used P2P services to receive payments in the past 12 months reported that it is “important” or “extremely important” to receive payments in real-time. Your members are demanding real-time payment services. And it is not just Gen Z or millennials who expect fast, safe and easy payments. 

Early Warning’s 2019 Digital Payments Adoption Study found 50% of first time P2P users are 45 or older. And the great news is they want to use P2P, because it is offered from their bank or credit union. Seventy-six percent of Generation X and 74% of Boomers surveyed ranked “offered through a financial institution they use” as a top reason to try P2P payments. Let that sink in. Consumers are using digital payments because they trust you. Generation X and Boomers have a high degree of trust in their financial institutions. They are willing to try Zelle because the service is in their FI’s app, which they are already comfortable using.

A New Question

OK, many of you are with me and understand that P2P is no longer a question of “Should I offer it to my members?”, but “What is the best service for me to offer them?” Launching a new faster payment type can create new opportunities and challenges. You have to decide what is right for your organization and membership. There is no disputing that Zelle is one of the fastest growing and most popular solutions in the market today. Millions of consumers are sending and receiving money fast and easy through Zelle. In total for 2018, Zellemoved $119-billion on 433-million payments processed. Many of them are likely your members, since consumers of more than 5,100 FIs, in and out of the network, are using Zelle.

Credit unions and community banks of all sizes are participating in the Zelle Network.Participants include more than 350 signed banks and credit unions – ranging from those with $47 million in assets to billions. Many are joining through one of our key reseller partners, including CO-OP, FIS, Fiserv and Jack Henry & Associates. We have also engaged additional tech companies to explore what role they can play in easing implementation complexity and help with onboarding times.

Addressing Some Concerns

In the recent CU Today article, Emerging Payments Issues to Consider, some concerns were raised about joining Zelle.I wanted to take some time here to addresses them.

Cost:We’re definitely sensitive to the cost associated with Zelle and that’s why we established the relationships with the resellers. They provide turn-key solutions covering the four key components of Zelle enablement: real-time messaging, real-time fraud monitoring, digital enablement and data contribution. They also address settlement, which takes a burden off your operations team. Of course, these technology partners charge for these services, but we think you’ll find that they’re working to make Zelle affordable for institutions of all sizes.  

What you get in return are a myriad of benefits.  Fewer checks to manage and less cash in the system for starters. You also need to weigh the cost in relation to retaining and growing your member base, enhancing engagement and cross sell-opportunities, and the brand affinity generated because your members stay in your banking environment instead of going elsewhere. Then, there is the added benefit of providing a service customers want in a fast, safe and easy way. 

Remember, too, Zelle offers its participants marketing materials and continues to develop creative assets for use by all network participants to help you grow your users and the brand. We also recently launched a brand new national media campaign to keep interest in Zelle growing. I recommend, as you decide the best approach, you think about your long-term plan versus the short-term one.

Growth:When we measure the growth of Zelle, our methodology has always beenmand continues to be counting originated transactions only. Our growth is coming from a combination of factors, from more participants joining the network, but also from a significant consumer base using the service more often. We see evidence of this in the growth of transactions per active user, but also in a declining average payment amount, which we feel is indicative of consumers using the service for “everyday” use cases. 

Data Contribution:A key differentiator for the Zelle Network is how we use shared data to secure the network, prevent fraud, reduce false positives and ensure a frictionless customer experience. Every participating FI must contribute data, which is used to help secure transactions and authenticate customers. The data is never used for the purposes of marketing.

Competitors: Yes, there are several competitors in the market place, and it is likely your members may use more than one. But you should really ask yourself, “What will happen if I don’t offer my members what they want?” Fintechs are offering consumers more and more choices for digital payments and continue to offer more financial products like debit and credit cards. The benefit of Zelle for your members is their banking credentials remain confidential, and their money is not stored in a third-party app waiting to be moved to their account. It is with you, their trusted credit union, ready for them to access when they need it.

Zelle was truly built for financial services companies of all sizes to help the industry to modernize its faster payments capabilities, enhance their brands and keep up with consumer demand. We want to make it easier for you to make a digital investment so you can focus on what you do best - serve your members. 

Jamie Armistead is VP and ZelleBusiness Line Leader with Early Warning.

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