Electronic funds transfers (EFTs) have been around since the 1870’s. Wells Fargo was the first to implement them and the Federal Reserve Bank started wiring money by telegraph in 1910. Credit cards came along in the 1950’s, giving Americans the ability to spend without having to carry cash. In 1959, American Express introduced the first plastic card for electronic payments.

It’s all established technology at this point. Prior to the launch of digital currencies like Bitcoin, the most recent evolution in electronic money was the 1972 creation of the automated clearing house (ACH) transfer for large batches of transactions. That came with a new regulatory body (NACHA) and opened the door for what would later become known as online banking.

That brings us to digital money transfers. They differ from EFTs or ACH because there’s no waiting period to access your money. Mobile applications can send and receive money with the click of a button.

Zelle, one of the leaders in this space, is the subject of my review today. For those not familiar, I’ve also included a company history and competitor analysis.     

What is Zelle and How Does It Work?

Zelle is a digital payments network. They are owned by a company called Early Warning Services, which is in turn owned by a conglomerate of banks that includes Bank of America, BB&T, Capital One. JPMorgan Chase, PNC Bank, US Bank, and Wells Fargo. This makes them different from other services that are solely owned by private or public companies. 

Zelle was officially launched in 2017, but it’s been around since 2011, when it was known as clearXchange (CXC). The original owners were Bank of America, JPMorgan Chase, and Wells Fargo. Their objective was to easily facilitate digital transfers for person-to-person, business-to-consumer, and government-to-consumer fund movement.

From the beginning, the company connected senders and receivers of money through member websites and bank accounts. They connected directly with the bank, eliminating the need to charge transfer fees. In 2015, they announced the establishment of a “real-time” payment system, which was somewhat of a misnomer because it still took 3-5 days for funds availability.

The modern evolution of the company known as Zelle began in 2016 when CXC was sold to Early Warning Services, another bank-owned entity. Shortly thereafter, CXC stopped doing person-to-person transfers and encouraged all their clients to join the newly established Zelle network. Eventually, all functions of the original CXC network were moved over.

Sending and Receiving Money with Zelle

Today, members of the Zelle network can send and receive money using their email address and member bank account. Money is typically available within minutes and the network itself has grown to include other banks and credit unions. They also have a mobile app available on the App Store (4.8-star rating) and Google Play (over 10 million installs).

When I first learned of this app, I thought it was simply another version of Venmo. That is not the case. Venmo is owned by Paypal, which is owned by eBay. Zelle is owned directly by banking institutions, so the transfers happen faster and are less likely to get held up by internal or aggregation issues with the payment provider. Zelle more closely resembles Popmoney in terms of functionality but still differentiates itself.

I also like the fact that money is transferred digitally from bank account to bank account, with no middleman. That (hypothetically) makes Zelle more secure than other apps. The fewer hands that a money transfer has to pass through, the lower the likelihood of an interruption or hack in the system. For that reason, more businesses use Zelle for larger transactions. 

Setting up to use Zelle is simple. You begin by downloading the mobile app from either the App Store of Google Play. You then assign permissions for notifications and location tracking, followed by entering your mobile phone number. There’s a privacy disclaimer that follows that. Check an affirmative on that and the app will then ask you where you do your banking.

This is where I ran into an interesting feature. My credit union was not listed in Zelle’s database, so I thought they wouldn’t allow me to join the network. Not the case. They simply asked me for my debit card number and then to fill out the standard name and address fields. I was then taken to a screen to choose a password and enable touch id. No extra steps necessary.

When delving deeper into the functions of this app, I was pleasantly surprised to see how simple it is. You can send money or request money. When hitting either function for the first time, the app asks you for access to your contacts, which happens instantly. I was literally set up and ready to send and receive money in under five minutes. 

I can choose to invite friends to join the network or simply wait until there’s a need and have an email sent when I initiate a funds transfer. There are no pop-up ads and from what I can see no solicitation to purchase any other services. I was concerned that I’d be headhunted by the banking partners, but I haven’t seen any of that type of behavior yet.  

Banks and Credit Unions currently using Zelle

There are nine hundred twenty-four banks and credit unions on the Zelle network. That’s too many to type out here, but you can see the complete list by visiting the Get Started page on their main website. The full list is not available on the mobile app. You can do a search and, as I mentioned above, connect using your debit card if your bank is not a member. 

If you run a small business and want to use Zelle to process payments, your bank must be in the network. You can check with your bank to confirm this or check the master list in the get started section of the website. Banks wishing to join the network can contact Zelle directly, so suggest this if you like to have the ability to use Zelle for business. 

In 2020, the Zelle network had a total volume of $133 billion, representing 519 million transactions. They do all this through their member institutions, but they also have processor partners, network partners, technology partners, and mobile device and risk partners. A list of each of these can be found on the Partners page of their website. 

These numbers are expected to rise in 2021, so expect the partner network at Zelle to grow even larger. According to the Federal Reserve, over two thirds of non-cash payments this year were done via electronic or digital transfer. Cash isn’t obsolete just yet, but it’s definitely become a less popular medium for exchange. Digital is where the future lies. 

Zelle Fees & Competitor Analysis

Surprisingly, Zelle doesn’t charge fees for sending or receiving money. However, your bank or credit union might. Before initiating a transfer of any kind, check with your bank to make sure you don’t get surprised by an extra charge. This goes for small business accounts also. Your bank may charge you for digital transfers, but Zelle will not.  

Venmo, which is Zelle’s closest competitor, doesn’t charge fees for transfers either, provided you have money in your Venmo account to cover the transfer. If you do not, and have to use a credit card, there’s a 3% charge. Transferring money into a Venmo account takes one business day, so many customers get stuck paying the fee if they need the money immediately.

Though not a fee per se, Venmo also has a social media component, which allows friends within the same network to track each other’s activities. Some customers find this to be annoying, while others embrace it. I’m only bringing it up here to make readers aware of everything they need to watch out for when signing up for these apps. There’s more on this below.

Zelle Transfer Limits by Bank

Most banks and credit unions have digital transfer limits on the amount you can send and also the number of transfers you can do per month. Zelle doesn’t list all of these out per institution on their website, but we’ve tracked down the daily and monthly limits for some of the largest banks.

If you’re banking with an institution that does not offer Zelle, you will have a limit of $500 per week on transfers. If your bank or credit union does, then you might be able to transfer larger amounts. You will need to contact your financial institution for specific spending limits.

On the receiving end, Zelle does not set any limitations to how much you can accept.

Zelle for Business

Customers and small businesses alike are increasing their usage of Zelle. In the first half of 2020, a total of $133 billion was sent through the Zelle Network on 519 million transactions as of June 30, 2020.

That said, this is still an area where I would urge caution when choosing Zelle or any other digital transfer app(s). The New York Times had a feature piece on Zelle and fraudsters exploiting weaknesses in the banks’ security back in 2018.

So while it seems to be great for personal use and even perhaps occasional business transfers, I wouldn’t rely on it as a sole means of transferring money while doing business. There are other, more reliable and secure methods of doing this. Speak to your bank or accountant about those.

In today’s fast-paced world, the desire to move money instantly is understandable, but caution should be exercised when you start dealing with larger amounts. Breaking a transaction into multiple milestones is a good idea for service projects. Asking for other options besides digital transfer may be the right route also. Perhaps an ACH would be a better option.

How Safe is Zelle?

Any application can be compromised by a dedicated hacker. Zelle is not an exception to this. Is it safer than its competitors? Many would say no. The lack of two factor authentication and the simplicity of the setup process make it simple for “ghost” users to set up accounts and scam money from unsuspecting consumers. Security is in the hands of the user. 

One thing I would recommend is to activate the touch id feature when you set up your account. This makes it more difficult (though not impossible) for someone to use your Venmo account if you happen to lose your mobile phone. I’d also decline the autosave on the password function. Choose a password only you would know and enter it manually when you want to use Zelle.

Security is actually an area where Venmo has a better reputation than Zelle. Criticized over their lack of authentication protocols, Zelle has been misused on a number of occasions by unscrupulous vendors that only needed a phone number and email to set up their account. Scammed customers have no legal recourse, because the money is gone from their accounts.

Venmo is essentially a transfer station where money needs to be parked before it can be sent. That additional step may slow things down a bit, but it offers an additional level of protection for their customers. Zelle doesn’t do that. In some cases, Zelle users have had their entire bank accounts wiped out by not paying attention to their personal password or device security.

Zelle Feedback and Customer Sentiment

I browsed through a number of review sites for this app and didn’t really come back with a warm and fuzzy feeling about them. On Trustpilot, they’re showing an aggregate score of 1.2 out of five stars, with 221 documented reviews. The app store has them at 4.8, but the bad reviews tell a common story. Google Play has them at 4 stars out of a possible 5.

Having done a number of reviews, I generally try to look beyond the aggregate and find where the real issues are. There are a lot of complaints from Zelle users with Chase bank accounts, leading me to believe that Chase might be the actual problem. There are also quite a few complaints about using banks and credit unions outside the network.

What I did not see was a single complaint about the usability of the app itself. That does not surprise me. Simplicity in technology impresses me. Having worked in fintech for over a decade, I can tell you it is not an easy task to make an application simple and user friendly. The folks at Zelle did a really good job at this, so I’ll give a thumbs up in that area.

Security seems to be a big concern. Just for kicks, I did a review search on the App Store for Venmo and found no security-related complaints, though there were quite a few about it being hard to get money out of your account. Personally, I’d rather deal with held money than lost money, but that’s just me. Zelle needs to make some improvements in this area.

Here’s another number for you. Zelle has a 4.8-star rating with two hundred sixty thousand customer reviews. Venmo has a 4.9-star rating with over ten million reviews. Obviously, the latter is more popular, but Zelle actually handles more money per year. That shows a trend for bigger, likely business transactions. Personal accounts are where the problems are.

Final Thoughts

I’m not a fan of either eBay or Paypal, so my first instinct when I heard about Zelle was to find as many ways as possible to show they were better than Venmo. Unfortunately, I just never got there. This app is okay, but I can’t say with any conviction that I’d recommend them over Venmo. I wouldn’t refuse to use them either, but they are not my first choice.

While writing this review, I used the same process I always do. I started with their main website. Like the mobile app, it’s clean and easy to navigate, but I found it to be lacking in certain areas. The digital transfer limits for their partner institutions would have been nice to see, yet there was barely any reference to there actually being any.

Another red flag for me is the blog. There’s no link to it in the top navigation menu and I’m not surprised. After finding the link, way at the bottom of the page, I found nothing but promotional content on the blog. There’s nothing educational that actually adds value for their users. This, to me, shows immaturity in their marketing process.

Make sure you read the “User Service Agreement.” In section 3, titled “Prohibited Uses,” it states that, “The Service is intended for personal, not business or commercial use. You agree that you will not use the Service to send or receive payments in connection with your business or commercial enterprise.” If that’s true, why is there a “Small Business” page?

Maybe I’m splitting hairs, but little things like that tend to get my guard up. I don’t think in this case it’s an intent to mislead, but I do feel that Zelle is organizationally challenged. It feels like it was put in place to be a “members only” money highway, with network expansion only done to raise the volume of assets moving through the system each day.

All that being said, Zelle can be a useful tool when used for occasional transactions. I would feel comfortable sending a close friend or family member funds with this app, but I’d have serious misgivings about using it with strangers or for business transactions. I think it needs to mature as a technology platform before it’s ready for that.