As Bloomberg reports, a cabal of bankers are joining forces — which is very rare — to create a new mobile payments system to compete with an onslaught of third party apps:
Nineteen banks, including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, are teaming up to start Zelle, a web site and app that will let users send and request money much like Venmo does. Bank of America says it is the first to incorporate all of Zelle’s capabilities—including the ability to split bills between users—into its own mobile app, starting today. A standalone Zelle payment app should be available to anyone with a debit card, regardless of where they bank, by the middle of the year.
For the past several years, third-party apps like Paypal and Venmo, which allow users to send money and split payments on items like dinner checks, have gained a whole lot of steam. These apps integrate with users’ existing bank accounts and credit cards to allow for payments and receiving monies from other users and businesses.
That’s simply won’t fly with Big Finance, which remains intent on controlling every aspect of the U.S. banking system that it can. And the big banks have a feature at their disposal that other online payment systems will never be able to match:
Zelle’s not-so-secret weapon is its connection to the big banks where millions of Americans keep their money. Request $40 from a roommate over the Zelle network using BofA’s app and the money shows up in your account within minutes of when he agrees to send it. On Venmo, that $40 would show up in your Venmo wallet right away, but then it stays there. To get the cash in your hands, you need to log into your Venmo account, cash out your balance, and wait—sometimes days—for the money to show up in your bank account.
Reports indicate that Zelle will be rolled out gradually to customers in phases. Initially, banks will integrate Zelle features on their own. Next, they’ll roll the features out to their own banking apps. Finally, a standalone Zelle banking app will come out later this year.
The end game will likely be great for consumers and banks alike, as person-to-person payments become more mainstream and ubiquitous.
The Financial Select Sector SPDR Fund (NYSE:XLF) was trading at $24.58 per share on Wednesday morning, down $0.01 (-0.04%). Year-to-date, XLF has gained 5.72%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.