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Why Zelle doesn't work with fintechs

Ryan Lawler
Sep 8, 2022
Photo illustration of Al Ko, arrows, and abstract shapes.
Photo illustration: Victoria Ellis/Axios. Photo: Courtesy of Early Warning Services LLC

Zelle has been a useful tool for banks to enable peer-to-peer money transfers, but it has shied away from working with fintechs. To learn why, we caught up with Al Ko, CEO of Early Warning Services, the company behind Zelle.

Why he matters: Early Warning Services has been around for about 30 years, but it launched Zelle in partnerships with some of the biggest banks in the U.S. just five years ago. As CEO of Early Warning, Ko has overseen the P2P app's growth over the last three years.

Five years in, what’s the current state of Zelle and who uses it?

Zelle has 110 million users and is available to customers at over 1,700 financial institutions.

  • About 97% of all people with a bank account can access Zelle, and 80% with a bank account can access it directly through their bank app.
  • More than half of all users have less than $35,000 in income and $1,200 or less in their checking accounts.
  • So this has been a vehicle by which older people, less affluent people, and people in underrepresented minority communities have gotten access to digital payments.

The service is available to a lot of banks, but why not fintechs or some other new financial apps?

We exist to help banks and credit unions by protecting their accounts. We principally work with entities with a bank charter, so you can get Zelle directly integrated into your app if you have a bank charter.

  • We have that rule because a bank charter comes with a set of obligations, regulatory oversight, and a set of standards that you don't always get if you are like a bank, but not a bank.
  • But if any entity, whether it's a direct integration or some of these rent-a-charter institutions, have fraud or scam rates that are out of the norm, we will remove you from the network — because protecting the network is so paramount.

You've come under scrutiny for fraud on the network from some legislators the CFPB. What’s happening on that front?

We welcome the questions and engagement with regulators and legislators alike. Our interests are aligned — we want to keep the bad guys out.

  • I caution against the unintended consequences of some of their actions. Will they reduce the number of scams out there? Or will they just shift the type of scam? And will they harm the overwhelming number of transactions by making them more expensive, slower or more difficult?
  • But overwhelmingly, more than 99.9% of these transactions go through with no issues at all, and those numbers are getting better.
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