Let’s face it: people like using cool technology. They want the latest iPhone, the hottest games and the newest social platform. One can argue the relative merits of this obsession, or the need for the brightest and shiniest object, but the reality remains: everyone wants the latest, most up-to-date products and apps. Anyone who remembers moving from Myspace to Facebook knows this reality. And one of today’s “cool” apps is Venmo, the person-to-person payments app that boasts over 40 million users, 50 percent of them being millennials. That’s a big problem for Zelle®?, but it doesn’t have to be.
Digital payments platforms—the person-to-person kind—aren’t especially new. PayPal and Square have been around for more than 10 years, Stripe is newer, but still well established, and long-forgotten startups like Brodia and Qpass existed even before then. But somehow Venmo, a PayPal subsidiary after a recent acquisition, managed to become so hip that the company name actually became a verb. Think of it as the fun, cool little brother of the PayPal behemoth. Unfortunately, they were so successful that traditional financial institutions started wondering why they were being shut out of the incredibly lucrative mobile peer-to-peer payments market. That’s how we ended up with Zelle, which was launched in 2017 with the express purpose of beating Venmo at its own game.
At face value, Zelle checks off all the boxes. It was built for a specific task and does pretty much everything it’s supposed to do. But where it has succeeded on the technical side, it’s still coming up short where it really matters: user adoption. Chalk it up to any number of factors, from security concerns to Venmo’s massive head start, but the reality is an inescapable one: Venmo is cool and Zelle isn’t. Venmo is what millennials use while their parents use Zelle, or so the perception goes. That may not matter to C-level executives at banks, whose aspirations run far beyond what is cool, but it’s a huge determinant of success or failure in the marketplace.
The good news for Zelle is that this problem can be fixed. The bad news is that it’s going to take some heavy lifting to change consumer opinion and drive adoption by people who see Zelle in the same way that seventh graders see the assistant principal at the school dance. Even if he has the best moves in the room, he’ll always be a square.
It might be tempting to see this as a marketing problem, but if Zelle is going to gain market traction—and silence the naysayers—it’s going to need to make some technical changes to make it better, and more useful, than Venmo.
First, some low-hanging fruit. Venmo explicitly prohibits money transfers for the purchase of goods or services unless one is a Venmo verified merchant. It is meant for person-to-person payments. For Zelle, this is a massive opportunity to gain adoption where Venmo fears to tread. And because it’s backed by banks, they have the data and the AI capabilities to pull it off with much less risk than an independent player—even one as large as Venmo.
It could also be argued that if one can’t win on the cool factor—and cool is so intangible as to be ethereal—can a company really make a cool app? No, coolness flows from something as a result of its utility. Yet, one can win in other ways.
Be Friendly. For starters, apps need to be open and inviting. Big banks have a sometimes well-earned reputation for being fiercely competitive and protective of their turf. Millennials—or to be more broad, consumers under age 35—want openness, not interoperability. Though it’s an advantage, systems and tools that are perceived as playing nicely with other ecosystems are unnecessary. Big banks making the news for increased difficulty for consumers trying to set up Venmo is not the way to win favor with the target customers. Adopting Open Banking is.
Be open. Give consumers a choice. The banks that combined forces to create Zelle are all but forcing their customers to use it. With more banks in the queue to have Zelle as their primary P2P payments tool, more people will become Zelle users by default, not by choice. As a marketing strategy, this won’t work. Yes, adoption will grow, but customer satisfaction will drop. If the end game is a broader use of the bank and all of its products and services, Zelle is but one tool among many, not the end all, be all. Banks would do well to focus on the war to gain customers, not the battle to win users.
Simplify. When in doubt, software engineers and designers should focus on this one point. Although under-35-year-olds are known to be capable of understanding and learning technology easily, this doesn’t mean that they want to spend hours working through the app interface. When designing the app, remember that less is more. Simplify, eliminate options and remember KISS.
Integrate. Better yet, integrate with social media. Yes, Zelle has tried to copy this element of Venmo’s success, but somehow it feels awkward. Social media integration needs to be a priority, and it needs to be done well, something that Zelle still seems to be missing.
In the person-to-person payments discussion, there are many factors to consider. In the end though, this is just a skirmish in the broader contest for consumer-banking relationships. By forcing users to adopt, and adapt to, Zelle, banks are taking away agency from the consumers. This will inevitably result in Zelle never becoming the “cool” payments app. Banks need to consider that larger picture in this conversation, and that goes far beyond what app is victorious in the battle for what’s cool. This is not likely to be a winner take all situation, rather a gradual war of attrition, with many winners, and more losers.
Banks would do well to remember this.
Chuck Fried is president and chief executive of TxMQ. Prior to TxMQ, Chuck founded multiple businesses in the IT and other technology services spaces. Before that, he served in IT leadership roles in both the public and private sectors. In 2020, he was named an IBM Champion, affirming his commitment to IBM products, offerings and solutions.
