Drawbacks Requires a bank account with Zelle-supported banks. Jones: Yeah, absolutely. I’m a big Square Cash fan, I’ve used that a few times. I think the long-term growth opportunities definitely lie with Venmo and with Square.
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Shannon Jones: Welcome to Industry Focus , the show that dives into a different sector of the market every day. It’s Monday, Sept. On today’s Financials show, we’re talking about the wallet of the future: peer-to-peer payments, the top mobile players within the space, what they do, how they make money, and how the bigger moneymaking opportunities could still be ahead for these popular platforms. To tackle this subject and more, I’m joined by financials guru, certified financial planner and peer-to-peer payment late adopter, Matt Frankel. Matt, how are you? I am on the mend recovering from a bad case of allergies. Hopefully, with rain coming through, that should all change here in the next couple of days.
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Shannon Jones: Welcome to Industry Focusthe show that dives into a different sector of the market every day. It’s Monday, Sept. On today’s Financials show, we’re talking about the wallet of the future: peer-to-peer payments, the top mobile players within the space, what they do, how they make money, and how the bigger moneymaking opportunities could still be ahead for these popular platforms.
To tackle this subject and more, I’m joined by financials guru, certified financial planner and peer-to-peer payment late adopter, Matt Frankel. Matt, how are you? I am on the mend recovering from a bad case of allergies. Hopefully, with rain coming through, that should all change here in the next couple amke days. There’s been a cold going around down here, so I feel your pain.
Jones: Yeah, absolutely. But wigh was not enough to keep me away from this week’s Industry Focus. I’m really excited about this particular topic, peer-to-peer payments.
Personally, I’ve bakns just about every major peer-to-peer mobile app you can think of. Matt, I know I joked around earlier, said you’re kind of a late adopter. Before we dive in, let’s talk a little bit about what this entire industry is and how they make money. I used Venmo for the first time about two months ago.
But now I use it all the time. I definitely see the utility. I’m mzke big Square Cash fan, I’ve used that a few times. Zelle is integrated into my bank account, the one that we’re going to talk about in a minute. Basically, these are all ways to play a trend known as the war on cash. The war on cash is the new term for the trend toward a cashless society. More people are using credit cards and debit cards than ever.
This is a rapidly expanding trend. Debit cards and credit cards took care of a lot of the issue, but there was still a need for certain transactions to be able to be made cashless.
For example, when you’re out to dinner with friends and you want to split the bill, a lot of places won’t split a check and let you pay on your debit card for your portion. What these are apps allow you to do is, in those cases, send money for your portion of the bill directly to your friends.
Venmo, Zelle, Cash. This has dl a really underserved part of the payments industry until very recently. That’s why a lot of apps have sprung up. I know AmazonApplea bunch of all the big ones have their own person-to-person payment apps.
But the three big ones have definitely become Venmo, Zelle, and Square Cash. It’s really picking up in America, and there’s still a lot of room for growth. This is definitely a big trend and worth paying attention to. Just to reiterate, the opportunity is huge, particularly with millennials who have been really among the first to adopt these new payment platforms. It’s really no wonder why you see so many jumping on to the P2P space.
It comes down to speed, it’s also convenience and ease of use across many of those platforms that you mentioned. Matter of fact, last week, I actually did some workshopping.
Here at The Motley Fool, we’ve got a Slack channel just dedicated to selling things that maybe we have no use for or want to get rid of. I very easily was able to pay a colleague simply by knowing what her phone number was for a particular piece of furniture. The ease, the convenience, the simplicity of the entire space is a huge opportunity, and you’re really starting to see it pick up even more steam.
Now, one thing I would also mention, too, is, one of banjs biggest advantages, one of the biggest draws into the space, really comes down to the cost factor. For me, and using Venmo, using Zelle, using Square Cash, the cost in some cases are either completely free or I’m paying a percentage of the transaction.
Matt, can you talk a little bit about how many of these platforms and these providers are finding ways to monetize these peer-to-peer payments? Frankel: Well, most of them aren’t really monetizing them. I know Square very well, I’m pretty sure Square’s actually losing money on its Cash app, and a pretty significant.
We’ll talk about the long-term money-making opportunities a little bit later on. But the point to take away for right now is that these companies really aren’t making money. As you mentioned, generally, this is free. There are some fees.
But, other than that, there really aren’t that many fees associated with. In and of themselves, these are not giant moneymakers for these companies — at least not.
Jones: Yes, keyword is «yet. First, let’s actually dive into probably what many would consider the most popular among the peer-to-peer payment apps, moneey that would be Venmo. Matt, what can you tell us about Venmo? It allows customers to link their debit card, credit card, or bank account. They create a separate account for their Venmo payments, and they can easily move money between their account and their friends’ accounts, as you mentioned, just by knowing somebody’s phone numbers, or something like.
They can also link their payments to a Venmo Mastercardby the way. The thing with Venmo, the transfers are not instantaneous, which is the big banls. Anyway, Venmo is about a quarter of PayPal’s total payment volume. This is a big part of PayPal, even nake, like I said, Zelle is a little bit bigger. We’ll get into why in a minute. That’s a lot, but the more impressive statistic is the rate at which it’s growing. If this growth rate continues, it could eventually turn into a pretty big revenue stream for PayPal all by itself, and in other ways we’re going to talk about a little bit later.
Jones: Yeah, and one interesting thing with Venmo is that it has a social media feature male into the platform, as well, which has kind of been debatable in terms of its utility. But really, with social media, basically, when I went in and actually split a gift for my mom with my sister and brother in law, I was able to put in a couple of emojis to signify that this was a gift. By default, when you make a payment through Venmo, it is public. Now, of course, you can change the privacy settings.
But it’s actually kind of interesting to go in and see the feed of all these different users on the platform, and how do banks make money with zelle the quirky and funny things that they put into the feed. I highlight that because I think that is a really interesting play on Venmo’s use of creating that stickiness factor. How do you get people coming back to these apps, not just for making or splitting the cost of a bill for dinner? How do you get people coming back to this more and more?
I think that’s one of the unique features of Venmo, that social media feature. Ultimately, we’ll get more into how they can continue to monetize. Obviously, among the big three, this one is definitely the most well-known. Let’s dive into the next big player in zeole peer-to-peer payments space, and that would be Zelle. Zelle is unique in a number of ways, but more specifically in its relation to the big banks.
It’s even been referred to as the banks’ hiw to Venmo. One of the interesting things about Zelle is, initially, big financial institutions had been pretty muted in terms mke interest in witb mobile peer-to-peer payments space. But with a huge market opportunity, plus, also you’re seeing many of the banks starting to invest heavily in technology, many of hoow are now getting on board.
One key player behind all of that is Zelle. Matt, what can you tell us about how Zelle works and how do banks make money with zelle it’s playing with the major banks? Frankel: Zelle is definitely the banks’ answer to person-to-person payment apps like Venmo and Square Cash. It’s the newest out of the. Mame its current form, Zelle launched just last year in They’re afraid of getting left.
So, if you notice Zelle all of a sudden integrated into your Wells Fargo account, for example, that’s why. Zelle has a few unique features to it in opposition to Venmo. First, you don’t need a separate account to use it.
Venmo, you essentially create a Venmo account where you loan money, like a PayPal account. With Zelle, you don’t need a separate account. It uses your existing bank account to transfer to your friend or whoever you’re buying something from, to transfer to their bank account.
Zelle also has very fast processing times. In most cases, the transactions are processed virtually instantly. Zelle is the banks’ answer. It’s the biggest of the three in terms of payment volume. It’s doing really well so far. It’s really having the intended effect of keeping a lot of person-to-person payments in these banks’ ecosystem. Just to note, that was actually more than twice the amount of money that customers transferred with Venmo, a huge rival.
I really think it comes down to their competitive advantage, which is really their integration.
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But, other than that, there really aren’t that many fees associated with. It uses your existing bank account to transfer to your friend or whoever you’re buying something from, to transfer to their bank account. Is howw a possibility to use Zelle App from abroad without a US phone number? Related Articles. Submit a letter to the editor or write to letters theatlantic. How likely would you be to recommend finder to a friend or colleague? How much your bank allows you to send through Zelle. The fastest transfers are between Zelle-supported banks. Also, going back to eMarketer, the marketing research agency, they actually noted they think Zelle could become the most popular platform by as more and how do banks make money with zelle institutions continue to hlw it into their systems. By Ismat Mangla. This show is produced by Austin Morgan. Hi Laura, Thanks for getting in touch! Trusted the world over, with five-star ratings on Trustpilot. Latest Issue Past Issues. As consumers become increasingly accustomed to splitting dinner checks, paying for their coffee and hailing an Uber without touching paper money, banks are rushing to stake their claim on the wallet of the future.
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