Screenshot of the Zelle website
Zelle

Watch your back, Venmo. Banks large and small are making it easier to pay friends and family through their own mobile apps.

More than 90 banks and credit unions have agreed to let their customers send and receive funds through Zelle, a person-to-person payment network. It’s available now if you have a bank account with one of the biggest banks, including Capital One, Wells Fargo, Chase and Bank of America.

Existing partners also include community banks and credit unions like First Tech. Some institutions in the network haven’t integrated Zelle into their banking apps yet.

Zelle processed more than 247 million payments in 2017, according to developer Early Warning Services, a payment and risk management firm owned by a consortium of banks and credit unions. About $75 billion flowed through the payment network, up 36 percent from 2016 totals.

More small banks are gearing up to join the Zelle network. So if your bank isn’t on the list of partners, it could be added soon.

An easy way to transfer funds

Zelle offers bank customers several benefits.

Many users won’t have to download a new application. If your bank is an active partner, you can send money from the bank’s mobile app and have it instantly transferred into the account of almost anyone in the United States. All you need is the recipient’s cell phone number or email address.

“It goes direct into your bank account within minutes,” says Melissa Lowry, vice president of marketing and brand at Early Warning, about Zelle transactions. “So there’s none of that awkwardness of, ‘OK, I sent you money,’ ‘Well keep looking,’ ‘Well maybe it’ll be there in a couple of days.’”

That’s not the case with Venmo. The mobile payment app requires users to manually move funds into linked bank accounts. Then, you could wait up to three business days for the money you’ve received to become available, unless you’re willing to pay $0.25 to make an “instant” transfer (which usually arrives within 30 minutes).

Early Warning is marketing Zelle as a service for everyone, not just millennials. Besides using it to split drink costs or rent, Lowry says consumers can split housing costs during weekend getaways or buy gifts for a child’s teacher.

Not a PayPal replacement

Despite the various perks that come with using Zelle, it does have its limitations. If you were to use Zelle to pay a stranger for basketball game tickets, there would be no way to get a refund if you were ripped off. Zelle users don’t have access to the same purchase protections available to credit cardholders or even folks with PayPal accounts.

“If consumers wish to exchange money for goods and services with people they are not familiar with, we recommend using credit cards, which have built in buyer protections,” Lowry says.

Criminals are capitalizing on Zelle’s growing popularity, says Al Pascual, senior vice president of research and head of fraud and security at Javelin Strategy & Research. Consumers who don’t fully understand how Zelle works have fallen for scams.

“The simplest advice for consumers to follow is to only pay people they know and to avoid acting on any communications related to Zelle until they can confirm the message is legitimate,” Pascual says. “If they weren’t expecting a payment, don’t click on a link as it could be a phishing attempt.”

Bank not on the list?

There’s another drawback. If your bank isn’t a Zelle partner, you’ll have to use the standalone app that was rolled out in September. Previously, you would’ve had to visit clearxchange.com — which became Zelle — to register and receive money.

According to reviews of the app, people with banks outside of the Zelle network have had trouble registering debit cards and getting their hands on the money that was sent to them. Early Warning is aware of the problems, which are related to its efforts to detect fraud.

“We have taken extra steps to ensure that money moves safely. This includes precautionary steps during enrollment to mitigate fraud risk for consumers, and to limit losses for our participating banks,” Lowry says. “We’ve taken steps to provide consumers with greater clarity around errors in the enrollment process, but acknowledge there’s still work to be done.”

These sorts of hiccups aren’t surprising, says Mark Schwanhausser, Javelin’s director of digital banking.

“In business, you no longer wait until everything is perfect and then try to roll it out. You can’t anticipate all the problems,” Schwanhausser says. “So you go in with an attitude of roll out the best that you can and then react, revise, and improve quickly.”

If your bank’s not a Zelle partner, you’ll have to decide whether using the app is worth your time, especially if people you know haven’t given it a try.

“Because of the nature of P2P, you really have to have your group of friends or colleagues or whoever you are paying with P2P—it’s who does the sender and the receiver want to use,” notes Jaclyn Holmes, director of Auriemma Consulting Group’s payment insights practice. “If your network of peers are all using one P2P, I think it’s going to be quite hard to break that habit.”

Switching banks can be a hassle, but if a bank or credit union isn’t offering a great digital experience, it may be time to move on. If you’re looking at other financial institutions, don’t forget to compare rates across multiple financial products, including CDs and savings and money market accounts.