Big Banks Back Zelle As Preferred Digital Payment Platform

Hopeful fintech startups have proliferated over the years without deposing Paypal Holdings Inc PYPL’s trendy Venmo payment platform.

But new threats have emerged, and Paypal investors have taken notice.

Following Monday news that a consortium of major banks will soon launch collaborative venture, Zelle, Paypal closed down 2.3 percent and continued trading lower Tuesday.

JPMorgan Chase & Co. JPM, Wells Fargo & Co WFC, Bank of America Corp BAC, U.S. Bancorp USB and Capital One Financial Corp. COF announced their coordinated rollout of Zelle over the next week and the impending participation of more than 25 other banks.

The platform, an Early Warning Services LLC product that took six years to develop, will link consumer checking accounts across participating banks to facilitate free and instantaneous person-to-person transactions.The current model offers a standard interface embedded directly in bank mobile apps, but a specific Zelle app will be available later this year.

“We think the simplicity and shared experience around this will magnify the network effect,” Wells Fargo Executive Brett Pitts told The New York Times.

The Zelle collaborators already dominate the targeted financial service, having processed a total $55 billion in person-to-person transfers last year compared to Venmo’s $17.6 billion, according to Early Warning.

However, the Venmo team appears unshaken.

“Cash is the common enemy,” spokesperson Josh Criscoe told the Times.

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