September 8, 2017 / 12:30 PM / in 3 months

U.S. banks move to broaden reach of Zelle instant payments app

NEW YORK (Reuters) - A consortium of U.S. banks is taking another step next week to attract a critical mass of users to their Zelle network, a rival to PayPal’s Venmo for handling instant payments between individuals with smartphones.

Starting on Tuesday, the group said it would offer a Zelle payments app for Apple and Android phones for individuals to send and receive funds through U.S. Visa and Mastercard bank debit card accounts, regardless of whether their bank or credit union had plugged into the network.

Until now Zelle had only been available on phones and tablets through bank and credit union apps that 13 financial institutions started rolling out in June. At least 17 more have contracted to join Zelle, but are not yet fully connected, according to Early Warning Services, which is owned by a group of big banks and operates the network.

“It is more likely that you will be able to send and receive payments with your friends and family with the expansion of the network,” Lou Anne Alexander, group president for payments at Early Warning said in an interview.

Banks already connected through Early Warning have a huge base of customers who could use Zelle. The banks handled 100 million instant payments, worth $33.6 billion (£25.46 billion) in the first half of 2017, mostly before the Zelle name appeared, according to Early Warning.

In the same period, Venmo, an upstart bought by PayPal Holdings Inc (PYPL.O) and better known than Zelle, reported moving $14.8 billion.

The banks started teaming up in instant payments more than six years ago, but have picked up their pace because Venmo’s volume is doubling annually and Apple Inc (AAPL.O) is adding tools for payments between users of its devices.

    Sarah Grotta, a payments expert at Mercator Advisory Group, said Zelle needs an app that works well for people with accounts outside of the connected banks. The new app would ideally let them quickly send, and confirm, payments with only an email address or mobile phone number, as people do with Venmo, she said.

    “They have to have a great experience, too, for this to take off,” said Grotta. “It still very much a work in progress.”

    Alexander said Zelle has had “growing pains,” most of which involved first-time users. For example, sending to someone who has not registered an account can result in delays until Early Warning checks for fraud.

    Reporting by David Henry in New York. Additional reporting by Anna Irrera; Editing by Andrew Hay

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