One of the ways that banks have tried to compete with digital banking services and financial apps is via peer-to-peer (P2P) payment systems. In other words, a bank might partner with another financial institution, like a credit union or small local bank, allowing users to send money from one person’s account at one institution to another individual’s account at a different institution. This type of P2P system has many advantages for consumers: There are no fees, and there’s no need to give your personal information when you make a P2P transaction. Plus, it allows you to deposit checks directly into your bank account at just about any branch location in the country. A P2S system, also known as an external transfer service (ETS), operates similarly to Zelle — but there are some important differences between the two services that you need to be aware of if you have accounts at both Zelle and your bank.
How Does Zelle Work?
When you send money to another Zelle user, you are actually sending it to the bank that holds the recipient’s account. Zelle partners with major banks, including Bank of America, Chase, Citibank, and Wells Fargo, to provide the service. Each bank will have its own set of fees and rules for sending and receiving money via Zelle. Zelle uses End-to-End Encryption, so your money is safe and secure. Once a recipient’s bank account details are linked to your Zelle account, you can easily transfer money to that person via the internet or phone app.
Why Is Zelle Important?
P2P payment services have become increasingly popular in recent years, but Zelle is particularly notable because it’s one of the first consumer-focused P2P payment services to succeed. Zelle was launched in early 2017 and has since been used by more than 50 million people, according to the company. The success of Zelle has led other banks and credit unions to also launch P2P payment services. For example, in early 2019, BBVA and Capital One became the latest financial institutions to launch their own P2P payment services. And like Zelle, these services are also powered by blockchain technology.
What Are the Differences Between Zelle and Your Bank?
Zelle and your bank have many similarities when it comes to P2P payments, but there are some key areas where Zelle outperforms your bank. First, while most banks also offer P2P transfer services, none of them are as user-friendly and easy to use as Zelle. You can send or receive money via Zelle across all your devices with just a few taps on your phone. And unlike with your bank, you don’t have to have an account with Zelle to send or receive money. Second, fees. Fees can be higher or lower depending on the bank and the type of transfer you’re making, but they are generally lower when using Zelle. And third, speed. If you are sending a small amount of money, like less than $1,000, then it could take several days for the bank to process your transfer. But for larger transfers, like $10,000 or more, Zelle has been shown to be a lot faster. And remember, if you send money to someone who doesn’t have a Zelle account, then the funds will be available immediately. That’s not the case with your bank.
Is Zelle Safe?
Zelle is designed to be safe and secure. When you sign up for Zelle, you provide your bank account information and routing information. You’re also asked to verify your identity with a phone number, address, or government-issued ID. If you sign up for Zelle with a new phone number, the service will generate a unique six-digit code that you enter to verify your identity. And if your phone number is associated with a new account, then the service will automatically send you a text message with the code. And remember, Zelle partners with major banks, including Bank of America, Chase, Citibank, and Wells Fargo. If one of these banks gets hacked, there’s a good chance that your account has been secured as well.