Finance

How Does Zelle Make Money Using The Current Business Model?

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Zelle is a famous peer-to-peer payment platform that makes it quite a breeze to send and receive money from friends, family, and other accounts like Venmo, Cash App and PayPal. With its popularity growing every day, have you ever wondered how does Zelle make money? Let’s find out!

What Will We Talk About Here?
  • Zelle does not charge fee for money transfer or sign up but the linked banks do earn revenue through it.
  • The app supports transactions through Visa or Mastercard debit card.
  • Zelle is safe to use but you must check the credentials of the account that you are sending money to because it is not possible to retrieve funds.

…and Much More!

How Does Zelle Make Money?

The source of Zelle’s profit are the payments that it facilitates with banks. Although the platform does have a revenue stream of its own, the participating banks earn money when accountholders use Zelle to make payment through them.

  • Zelle does not generate revenue individually but it facilitates payments without charging banks a third-party fee.

This is actually quite an interesting point about its ongoing business model. As a result, users can enjoy low-fee peer-to-peer payments without the worry of paying a commission every time a transfer is made.

Note! Zelle authorities have shared that they intend to keep the app free of cost and nothing contrary has been hinted for the foreseeable future. However, only time will tell.

Additionally, Zelle has launched a feature recently that allows users to pay merchants via app. However, the merchants, in this case, need to cater to fee of 1% to process the payment. This amount of charge goes directly to the bank running the payment network.

Moreover, Zelle has not yet introduced any debit card system that might make it more convenient to pay online or in-store retailers.

So, how does Zelle make money? Well, nothing can be said for sure. However, the masses assume that Zelle may be charging banks for maintaining the app. Again, there is no official information to back this up.

How Zelle Works – Everything You Need To Know 

Zelle comes under the ownership of Early Warning Services LLC. This is a Fintech firm with headquarters located in Tempe, Scottsdale, and San Francisco. It was launched with the combined effort of Bank of America, Wells Fargo, and JP Morgan Chase.

Initially, a number of people complained about its slow payment processing and it felt like it would be a project failure. However, the company changed its operation in 2016 when it was bought by Early Warning.

Note! In 2017, Zelle rolled out to 30 partner banks and was able to expand its business considerably.

Although there have been a lot of queries going on about Zelle Canada, currently, Zelle is available to US accountholder only. Although it does not support international transfers, there is a large network of US banks working in partnership with the app.

Moreover, you can register with Zelle within minutes. After that, you only need to enter email ID or phone number to transfer funds to others. It uses Mastercard Send and Visa Direct payment rails as payment processors, same as majority of the outstanding US banks.

Future Growth Trends for Zelle App

There is no denying that number of users signing up with Zelle are growing rapidly. This largely owes to the fact that majority of the population now relies on digital payment methods and Zelle seems to be one of the most convenient option.

Attention! According to a survey, more than 100,000 sign up with Zelle every day.

One of the main reasons why the growth trend for Zelle in the future is showing no decline is that the app links user directly to their bank account. This creates a seamless platform for money transfers. Consequently, it is reliable enough to cater to more than 1 billion transactions so far.

Moreover, Zelle also supports payments to other apps like Venmo and PayPal. This means that the accountholders will not only enjoy transaction with people with bank account but also be able to exchange funds with other payment app users.

Extra Reading

Zelle and Its Origins 

Zelle was launched in 2011 and was initially branded as clearXchange. It formed primary partnership with Bank of America, Wells Fargo, and JPMorgan Chase. From the start of its launched, Zelle faced strict competition with other apps like PayPal and Venmo.

The major drawback for the app was that it could only score partnership with a few banks in the start. Moreover, the features were very variable which further complicated the use especially for the newbies.

  • The turning point for Zelle occured in 2016 when it was purchase by Early Warning Services.

Its popularity picked up pace and finally it came on par with competitors by the start of 2017. Soon afterwards, Zelle signed partnership with more than 30 US banks and rolled out accounts to approximately 100 million users.

The company owners also dedicated $1 million investment to merely TV advertisements to boost popularity and customer reach. For further improvement, its use was standardized across all platforms making it super easy for users to learn the service. Below is a quick overview of what the app was able to achieve in the near future.

  • Zelle became US largest peer-to-peer payment service in just 2 years of its launch.
  • It also complete over 800 million transactions in the first 2 years.
  • Zelle experience a positive growth with users relying on it pay for essential goods and services on day to day basis.

However, the growth journey was not without its share of problems. As is quite common with scamming issues on Cash App or Venmo, Zelle users also reported accounts getting hacked and having issues with retrieving money that they lost to fraudsters.

Send And Receive Money With Zelle – Step By Step Guide 

When you open Zelle app, the option to Send, Request or Split the payment are mentioned on the main page. This makes the whole process quite easy and straightforward.

Zelle allows you to send money to other accounts simply by providing the recipients’ email ID or phone number. The best part? This is the only piece of information you need to share!

  1. Open the Zelle app and enter the amount of money you want to send.
  2. Click on Review to check the data that you have entered.
  3. Then tap on Confirm and then hit Send button.

You can request others to send you money on Zelle. However, this requires you to allow Zelle to access phone contacts. Here’s what you need to do next.

  1. Open Zelle ap and in Transfer section, enter the amount of money that you want to request.
  2. Add a message or request statement under “What’s This For?”
  3. Then tap on Request and you are done!

List of Banks That Use Zelle 

The good news is Zelle works with almost all major banks in the US. Currently, it works with 947 banking firms. You can access the full list on the official website.

You only need to sign up with the app to begin sending and receiving funds through it. Moreover, the sign up process requires you to share email ID and phone number only.

  • You can also share debit card information if you are linking one to the app.

Zelle supports transactions through Visa or Mastercard debit card. As long as your bank supports Zelle, you just have to download the app on your smartphone and begin transactions right away.

Zelle Money Transfer Charges 

The app does not charge any fee for the transfers. Moreover, signing up and opening an account with Zelle also does not carry charges.

This is perhaps one of the biggest advantages that Zelle has over other peer-to-peer payment apps like Venmo or Cash App. These platforms have a transfer fee of 1.5% when sending money via credit card or depositing funds to any other account through instant funds delivery.

Daily and Monthly Transfer Limits

The amount of money that you can send or receive via Zelle largely depends on the bank that you use. For accountholders whose bank does not support Zelle, the cap is set at $500. However, if your bank is on the partnership list, the limit may be much higher.

  • Moreover, there is no cap on the amount of funds that you can receive on your Zelle account.

We have gathered some information about major banks that support Zelle from reliable sources. Below is quick overview of the transfer restrictions that you need to keep in mind when opting for a transaction.

Financial InstituteDaily Limit Monthly Limit
Bank of America$2,500$20,000
Chase Business/Private
Account
$2,000$16,000
Ally Bank $5,000$10,000
Citibank Account/Basic/
Private
$5,000$40,000
U.S Bank $2,500$10,000
PNC Bank $1,000$5,000
Citizens Bank $1,000$5,000
USAA$1,000$10,000

Zelle Money Transfer App – Alternatives and Competitors 

Zelle is obviously not without competition in the market. There are other peer-to-peer payment apps that offer quick transfers and seamless transactions with other accounts. Some of the main options, other than Zelle, that you can consider are mentioned below.

  • Apple Pay: a mobile payment platform for Apple users.
  • Google Pay: a digital payment platform for Android users.
  • PayPal: digital payment app for online money transfers.
  • Square: POS payment and merchant payment tool as well as peer-to-peer payment platform with Cash App.
  • Venmo: a popular alternative to Zelle for debit card, bank, or credit card linked money transfers.

Is Zelle Safe To Use?

Zelle, similar to other mobile money transfer apps, are a safer alternative to carrying cash, checks, or using mail billing. However, there are certain aspects of such apps that need to be kept in mind.

Zelle, Cash App, Venmo, and other payment apps do not host the option of cancelling a transaction once it has been processed. This means that if you end up sending funds to a wrong recipient, there is little that the authorities can do for your refund.

  • Therefore, you must be certain of the account that you are sending money to and preferably double-check the transfer details before hitting send.

Zelle is also pretty quick with the transfers. If you use it to pay for a service or an item, it would be recommended that you obtain the stuff you have bought before making the payment. As we mentioned, the transaction can not be cancelled and you won’t be able to do anything if the other party does not provide you with services/goods that you have already paid for.

Attention! If you have fell into a trap or been victim of a fraud, we advise you to contact your financial institute as soon as possible. You should report it to Zelle customer support service. They will inform you about what can be done.

The Bottom Line

Zelle is a worthy payment processing service being used by millions for peer-to-peer money transfers. However, since it is not equipped with top-notch security features, there is always chances of getting hacked or scammed.

Therefore, experts suggest that you always link a separate, small checking account so the entire balance is not compromised.

Frequently Asked Questions

How does Zelle make money if it does not charge any fee to customers?

Zelle does not generate a direct revenue as it is not a fee-based platform. In contrast, other apps like Cash App or PayPal do charge for sending money. Zelle might make money through banks that it has partnership with.

Are there additional fees for sending money via Zelle?

Zelle does not charge any money for sending or receiving funds. However, you should check up with your bank to be sure about additional charges.

How much can I send through Zelle?

The amount of money you can send through Zelle depends on the bank that you use. Some banks have limits higher than others. However, there is no cap on how much you can add to your Zelle account.

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