BOFA P2P CAN SHED SOME LIGHT ON ZELLE: As digital banking grows at Bank of America (BofA), it’s seeing an uptick in digital peer-to-peer (P2P) payments, which it’s been offering through the Zelle network, an Early Warning-operated bank-based P2P platform, since early last year. In Q2 2018, BofA saw 35.1 million P2P transactions worth $10 billion, up from 14.5 million and $5 billion, respectively, in Q2 2017. That’s meaningful growth in and of itself, but it also provides some important insights into Zelle’s overall performance.
BofA could be a harbinger for Zelle’s overall performance.
- Zelle’s volume could be surging. In BofA’s Q2 2018 earnings call, CEO Brian Moynihan said that the bank believes it accounts for “roughly 25% of Zelle’s total volume.” For context, Zelle counts over 100 banking partners, making BofA’s share potentially representative of broader engagement on the network. If BofA’s estimates are correct, Zelle processed about $40 billion in Q2 — a massive jump from the $25 billion it saw in the previous quarter. That could be an underestimate on the part of BofA or reflective of broad P2P gains across the board, but regardless, points to strong Q2 numbers on Zelle’s part.
- And it could be attracting a younger user base over time. Early Warning Head of Digital Strategy and Operations Ravi Loganathan told Business Insider Intelligence that younger customers tend to use Zelle more often, but for lower-value transactions, while older users spend more on a less frequent basis. BofA’s average P2P transaction size fell from $344 to $284 in the past year, which could indicate that usage of the service is skewing toward younger users, though it’s worth noting that these figures are still substantially higher than those of third-party peers.
That isn’t surprising because younger users are more attuned to P2P overall. Zelle found that over 75% of millennials have used digital P2P payments, so they represent an easy target group for these apps. And it’s evidence that Zelle’s recent marketing campaign, which ramped up earlier this year, succeeded across the board, but may have done particularly well among millennials.
But Zelle could see even more substantial growth if it casts a broader net. Baby boomers in particular have much lower digital P2P adoption rates than their younger counterparts. They represent a greenfield for Zelle, especially since they’re more willing than any other group to turn to a P2P service from their bank rather than from a third party or other company. Redoubling its efforts to capture this group could actually help Zelle grow both its average user base, since adoption is lower, and its average transaction size, since baby boomers tend to spend more, in turn accelerating gains and helping it stay ahead of rapidly expanding upstarts.