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Zelle experiencing issues

By Matt Collins Article may include affiliate links

Zelle, a person to person payment service originally owned by some of the U.S.’s biggest banks, is having technical issues Oct. 1, 2021.

The glitch appears to be linked to an update rolling out across the platform.

The service, which lets users send money to each other, much like Venmo or Cash App, but with the ability to integrate inside of existing online banking systems of a participating bank, thus making it possible to use without a separate account or disclosing financial information to a third party.

On Friday, Oct. 1, multiple reports of issues with bank and financial services began to pop up, including FAFSA, but it soon became clearer the issues were most likely linked to Zelle, as opposed to the banks themselves.

Because Zelle is so closely linked to financial institution accounts, it appears that most issues were being reported under participating bank names, as opposed to the Zelle name.

Zelle began life as clearXchange and owned by Bank of America, JPMorgan Chase and Wells Fargo but has since been sold to Early Warning Services, which is, in turn, owned by Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank and Wells Fargo.

Hundreds of other banks participate in the service.

The person to person payment space is hot and dominated by Venmo, a PayPal brand, with an estimated 58% share. Zelle is second with around 36% share and Square Cash App around 31%.

Zelle has a slight advantage in that it’s integrated tightly with major banks, making it essentially “ready to use” for millions of customers.

What’s perhaps more interesting is that person to person payment services such as Zelle, Cash and Venmo, don’t charge for their basic money transfer services.

They can do this, at least partially, because they tend to process transactions as electronic transfers, rather than credit card or even debit card transactions, thus avoiding higher fees (some of the services use a debit card number to determine the underlying bank account information).

They can make money a variety of ways: By offering debit card products linked to user accounts, earning interest off account balances and charging fees for advanced features such as bill pay, checking cashing, affiliate commissions instant transfers as well as interchange and withdrawal fees (each service offers a slightly different combination of ancillary services and thus has a slightly different business model).

Zelle, meanwhile, offers the slimmest line of services but was also seen as a way for banks to maintain at least some control over person to person transactions rather than losing out on them to the likes of Cash App and Venmo.

At this time, Zelle hasn’t ventured into the debit card arena or implemented any way to use its system to pay for online shopping transactions. There are business related services as well, some with extra fees.