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Venmo won my heart, but can it keep it?

I’m not sure what people did before Venmo. Seriously, what did you do when you went to brunch with six other people? By offering users the ability to seamlessly transfer money from one user to another, Venmo certainly seized on inefficiency in the market – which, I’m sure, brought sighs of relief from waiters everywhere. But a new app, backed by over thirty banks and counting, could disrupt Venmo’s success in mobile finance.

Zelle, short for gazelle, is a new person-to-person (P2P) payments network that allows consumers to send money to one another, online and via mobile app, using the email address or phone number registered with their financial institution. This real-time payment network is currently backed by some top U.S. financial firms, including JPMorgan Chase, Bank of America, and Wells Fargo.

Although this partnership between some of the world’s leading banks is certainly something to take notice of, Zelle’s mobile banking feature only became available on June 12, so it may be too early to tell how much competition they will be for Venmo. The more than thirty banks backing the app do, however, have 86-million U.S. mobile banking consumers between them. By contrast, Venmo is estimated to have a little over 7 million active monthly users. This translated to $18 billion in transfers last year, however.

In addition to its obviously large user base, Venmo may also have something Zelle (currently) does not: a social component. Dan Schulman, the CEO of PayPal (which acquired Venmo in 2013), regards this social component as crucial to Venmo’s success. “The thing that makes Venmo unique is it’s not a payment transaction, it’s kind of an experience,” Schulman stated at the Goldman Sachs Technology and Internet Conference in February. An experience is created, Schulman asserts, because:

“…90%-plus of all Venmo transactions are open to somebody’s friend, network, and 90%-plus have a some sort of emoji or written commentary on that transaction. So if I want to see what you’re doing, who you’re dating, what you did, I can just go into your Venmo feed and see it… So it is not a payment transaction but an experience for people….”

Thanks to the public nature of these transactions, and users’ ability to personalize and comment on them, Schulman reports users are opening the app multiple times each week just to “to see what their friends are doing.” And, although app usage reached record-high levels in 2016, these rates may continue to rise as “Pay with Venmo” – a new feature on the Venmo app that allows users to pay for products on and offline at physical retail stores – is released later this year.

Perhaps one competitive edge for Zelle, however, is that banks affiliated with the service are embedding the app’s transfer capabilities in their individual mobile banking apps, which are already quite popular among consumers; 53% of smartphone users with a bank account reported using mobile banking services in 2016 and this number is expected to continue to “steadily increase” in the coming years.

While adding a social component may be one way for Zelle to compete with Venmo – especially since users spend an increasingly significant amount of their time on mobile devices on apps with social components – targeting older demographics may also be a worthwhile strategy. Studies show that, among people with a mobile phone and a bank account, mobile banking usage is high for people in the 18-29 age range (67%), but not as much so for 30-44 year-olds (58%) and individuals 60 and above (18%).

Recent comments by Lou Anne Alexander, the president of payments for Early Warning (the creator of Zelle) seem to reflect this very strategy. “This is a great time for us to move [person-to-person payments] from millennials to mainstream,” Alexander observed. And, when asked why Venmo’s emoji and messaging capabilities are absent in Zelle, Alexander replied: “While appealing to some ages, it’s not really appealing to all.”

Steady gains in the percentage of people using social media may, however, prove otherwise.  With the exception of those 65 and over, all age groups (18-29, 30-49, and 50-64) increased their usage of social media in recent years.

With its mobile app released just a week ago, however, it’s still too soon to say what kind of competitor Zelle will be for Venmo.


New technologies are constantly emerging that promise to change our lives for the better. These disruptive technologies give us an increase in choice, make technologies more accessible, make things more affordable, and give consumers a voice. And the pace of innovation has only quickened in recent years, as the Internet has enabled a wave of new, inter-connected devices that have benefited consumers around the world, seemingly in all aspects of their lives. Preserving an innovation-friendly market is, therefore, tantamount not only to businesses but society at large.