Banks consider introducing Zelle at retail stores, here's why you shouldn't fall for it

By I-HODL | A Crypto Journey | 8 Apr 2022

As the cryptocurrency revolution continues to gain momentum with more and more people around the world recognizing and embracing the concept of a trustless, decentralized financial payment system that is not controlled by governments or institutions, those with a vested interest in maintaining the status quo have been either scrambling to keep abreast of these developments, pushing for stifling regulation, or struggling to promote an alternative. And so, it comes as little surprise that a number of banks in the US are today considering using the payment processing network, Zelle, as a payment alternative to Visa and Mastercard.

According to a report published yesterday in the Wall Street Journal, banks are considering introducing the peer to peer money transfer service to retail stores, providing consumers with a way to skip Visa and Mastercard fees on debit and credit card transactions. Interesting.

Let's discuss.

About Zelle


Zelle is a financial services network launched in 2017 by Early Warning Services, LLC, a fintech company owned by seven of the US's largest banks: Bank of America, Capital One, JPMorgan Chase, PNC Bank, Trust, US Bank, and Wells Fargo. As a payment processing network, Zelle facilitates quick and easy peer to peer payments and is a direct competitor to other platforms such as PayPal and Venmo, maintaining that it is faster, more efficient, and cheaper- Zelle doesn't charge any fees.

How Does It Work?

 Well, in terms of peer to peer services, if your bank offers Zelle and you'd like to send money to a friend, then all you need is that friend's email address or phone number. If your friend is already enrolled with Zelle, the transaction should only take a few minutes. However, if your friend is not enrolled with Zelle, then it could take up to three business days for them to receive the money you sent after they enrol.

There are limitations to how much money you can transfer using Zelle. This can range from $500 a week, if your financial institution does not offer Zelle, to a maximum daily transfer limit of $3,500 among participating banks.

Currently, Zelle is not offered as a payment service at retail stores.  

Visa and Mastercard's Processing System


Currently, customers primarily use Visa or Mastercard debit and credit cards to make retail purchases across the US. When they do, the merchant pays a fee to  the payment processing company which then shares the revenue earned from this transaction fee with the banks, credit unions, or other financial institution. The payment processing company determines the fee it would pay to the financial institution and retains a chunk of profit. While the banks earn billions from this arrangement, the consideration is that if they were to bypass Mastercard and Visa and use Zelle as a checkout service, they could gain more control over the transaction fees


Convenient Timing?

The timing for this consideration of Zelle, I'm sorry guys, screams catch up. And yes, I understand that the established narrative is that Zelle grew exponentially during the pandemic, however it's interesting that this comes at a time when cryptocurrency payments are gaining popularity among the masses for lightning speed, convenience, and a decentralized nature. There's Bitcoin Cash, of course, and did you hear about the Taro protocol proposed for the Lightning Network? Of course, there are countless others. The opportunities are endless, guys, and it's taking control away from the established order of things.

Of course, Zelle is not something I'd sniff at or dismiss. Given the backing of the major banks, one can expect that conservative shoppers may find it easier to lean towards this as a payment option if it is afforded, than it would be to consider cryptocurrency. I get that. Even so, and this is just my personal opinion, I don't think that this delay tactic will slow down the wave that's coming crashing to shore.

For one thing, Zelle is still very much centralized and one's ability to transfer funds using this network is still heavily reliant on the bank's control and willingness to process the transaction. 

A couple years ago before the pandemic, for example, I had the experience where I attempted to make a transfer via Zelle to a friend. Both of us were banking with Wells Fargo. Unfortunately, for reasons I was never able to uncover, the transaction did not go through. It was dependent on the bank's discretion and the bank, in its wisdom, determined that it did not want to accommodate the transfer.  This is not an issue that you need to deal with in a cryptocurrency transfer. It's trustless, you're not reliant on a third party to process the transaction, and I think this is going to continue to be a key selling point going forward.

Also, while currently there are no fees for a Zelle peer to peer transfer, it is my expectation that if this is offered as a retail payment alternative to Visa and Mastercard, cutting into the billions of dollars in revenue currently earned by the banks, the banks may introduce a fee of some sort to replace this shortfall. Crypto transactions, depending on the currency you choose to transfer with, can be as little as fractions of a penny. And this price is not set by any financial institution. 

Cryptocurrency transactions, depending on the coin, are settled in seconds. 

Further, there are no limitations in terms of the amount of cryptocurrency that you can send from one wallet to another. You can send as little as fractions of a dollar to thousands of dollars in multiple transactions if you so choose, without a middle man stepping in and determining how much is too little or too much. 

Additionally, and here's the zinger: currently, Zelle is limited to US banks, and American consumers. Cryptocurrency transactions are global and the fees don't change.

Well, guys, those are my thoughts. When it comes down to it, I am interested, of course, in this latest move, or rather the consideration by US banks. It's not cast in stone just yet because, as I understand from the Wall Street Journal article, while the move is supported by Bank of America and Wells Fargo, it does not have JPMorgan's buy in yet.

Even so, it's definitely interesting. For me though, the most interesting thing is the timing. But what do you think? Do you think Zelle is the bank's answer to crypto payments? Or do you think it's simply a coincidence that the banks are even considering shafting their relationship with Visa and Mastercard at this time when cryptocurrency is becoming so popular?

I'd love to hear your thoughts on this one. 

Well, my friends, in the meantime, I'm off again. I've heard that Meta hasn't quite given up on its dreams of a crypto coin just yet and that maybe instead of Libra or Diem, pretty soon supporters might have a chance to shore up or spend some Zuck Bucks. Apart from the fact that I don't trust Meta and I think the name's a bit tacky- my opinion- I'm still trying to understand what the buzz is about, so I'm following up on this one, and maybe we can sit down at another time, sip tea, and chew on it.

Until we meet again, my friends, please remember that however you choose to spend, invest, or transfer your assets, you should never lose sight of the fact that it is, ultimately, yours. And so, it's in your best interest to do your research and make the best decisions that you possibly can with the information at your disposal. Please be safe.


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Navigating the ebbs and flows of crypto trading, and writing about it.

A Crypto Journey
A Crypto Journey

There's nothing more exhilarating than navigating the ebbs and flows of crypto trading. I have sea legs today, but truth be told, I've been lost at sea more than I care to remember and I have weathered quite a few storms as a trader. But the crypto-verse has also rewarded my resilience, and so after every dip, I get right back to sailing in pursuit of me buried treasure. I love this digital evolution and am proud to be a part of it. These are the tales of a crypto adventure! 

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