How Does Zelle Make Money?

Zelle is a digital payments system that allows users to send money across most US bank accounts with just an email address or mobile number. The company is well backed by a conglomerate of high-profile financial institutions in the USA, but it does not charge its users any kind of subscription to access the platform and even has 0% transaction fees as standard.

So, how does Zelle make money if it’s free to use? This article will dive into that very question and share key information about the business model for Zelle. While it is a private entity with no public access to its earnings, there are some known sources of revenue that will be discussed in depth.

Understanding the Zelle business model

The company behind Zelle, Early Warning Services LLC, is jointly owned by several leading financial institutions, including Bank of America, JPMorgan Chase, Wells Fargo, Capital One, Truist, US Bank, and PNC Bank, and it has also formed operational partnerships with more than 1700 banks and credit unions across the USA.

The widespread availability of Zelle makes it a convenient method for sending digital payments both quickly and at a low cost. The app is free to download, and there are no charges for users seeking to send payments, which means that Zelle relies on other sources of revenue in order to generate income.

Primarily, Zelle’s partnerships with financial institutions and broad compatibility with US banks allows it to charge money on a B2B basis as opposed to B2C. Banks will pay Zelle to integrate the platform into their own mobile banking applications, providing a value-add to their customers thanks to the convenience and ease with which Zelle allows them to transact.

On balance, the Zelle business model mostly relies on monetizing access to the company’s backend processes as opposed to charging transaction fees or introducing a subscription for users. By charging third-party institutions for access to the payment infrastructure, Zelle has grown rapidly in recent years and has now processed more than $1.5 trillion worth of transaction volume since its inception in 2017.

Growth in quarterly transaction volume for Zelle, via Statista

How does Zelle make money?

Zelle makes money in several ways, with almost all of them focusing on its partnerships with financial institutions as opposed to charging its users a fee. There are three main sources of revenue for Zelle: licensing technology, value-added services, and bank-imposed fees. Each revenue source will be discussed in more depth below.

Licensing technology

Zelle charges its partnered banks a fee to offer its services to the bank’s customers. In return, banks are able to integrate Zelle payments with their mobile banking applications and offer their customers a more convenient method for sending payments across many different financial institutions using only an email address or mobile phone number.

Value-added services

The person-to-person (P2P) payment feature offered by Zelle is widely integrated as a value-added service with the company’s bank partners. In essence, the P2P payments system, which represents the foundation of the Zelle business model, is sometimes promoted as an additional, paid service by the financial institutions that have partnered with Zelle.

While this does not mean that Zelle gets payments directly from the users who pay for the service, the value-added service offered by Zelle’s partners enables the partners to pay Zelle for the integration. So, instead of charging users directly, often, the banks that have partnered with Zelle will charge their customers to use the platform instead, which unlocks broader compatibility across financial institutions, including crypto-friendly banks in the US, and generates more revenue for Zelle.

Bank-imposed fees

While Zelle itself does not charge a transaction fee, its partners sometimes do. Like with the value-added services example given above, the ability to charge for extra Zelle features such as business payments or instant settlements means that more financial institutions are likely to integrate their mobile banking apps with Zelle.

In short, Zelle is not a direct beneficiary of any bank-imposed transaction fees, but enabling a source of revenue for the banks makes Zelle more desirable as a digital payment option. Indirectly, this encourages more financial institutions to adopt Zelle and can be seen as a driving factor behind its rapid adoption rate.

FAQs

What is the primary source of revenue for Zelle?

The primary source of revenue for Zelle comes from its partnerships with financial institutions. The platform has partnered with more than 1700 banks and credit unions across the USA, and each partner is required to pay Zelle to gain access to the digital payments infrastructure.

How does Zelle help banks to make more money?

By offering a more convenient alternative to traditional bank payments, Zelle allows partners to provide a value-add service within their own mobile banking applications. Instead of requiring numerical codes as bank details, people can send payments across a huge selection of banks using only an email address or phone number.

While Zelle’s appeal stems from its convenience, the platform is free to use as standard and charges no transaction fees. In order to generate revenue from the value-add service, banks often charge their users for the ability to send easy payments across the digital network. As a result, Zelle helps some partnered banks to generate revenue through additional transaction fees despite the platform itself being free to use.

Does Zelle make money from transaction fees?

No, Zelle does not make money from transaction fees directly. However, partnered banks are able to charge transaction fees for certain Zelle services if they want — this means that Zelle becomes more appealing to potential bank partners which feeds into Zelle’s primary source of revenue, its partnerships scheme.

The bottom line: Zelle’s primary source of revenue is institutional partnerships

As a modern alternative to traditional finance payments methods, Zelle offers a fast, convenient, and simple way to send payments across the US. The company unlocks more utility with direct bank payments because of the breadth of its digital payments infrastructure. The more banks that partner with Zelle, the more appeal the company has as a payments system.

This network effect has served Zelle well in recent years. After being founded as recently as 2017, its digital payments infrastructure has now been adopted by more than 1700 separate banks and credit unions. This forms the backbone of the Zelle business model, as institutional partnerships are the primary way that the company makes money.

To learn more about how other free-to-use applications make money, check our article How Does WhatsApp Make Money?