Zelle Sees Promising Growth in Small Business Payments As It Confronts Senators’ Scam Probe

Early Warning Services LLC, operator of the Zelle peer-to-peer payments network, is celebrating a year just passed in which both dollar volume and transactions processed rose at double-digit rates. But the company also has its eye on promising markets like small businesses and on countering charges from U.S. Senators about scams on the network, according to Allan Hui, a former PayPal executive who came to Early Warning in October as vice president of product management for Zelle.

Small businesses, in particular, have become an increasingly important market, Hui says, as firms see more activity on the network. Indeed, “small businesses are seeing a ton of Zelle payments,” he says, adding the number of transactions in this category grew 77% last year over 2021 as total value jumped 84%. Overall, some 150 million Zelle payments “were attributed to small businesses” last year, Hui tells Digital Transactions News.

Overall, Zelle P2P payments to small businesses last year totaled more than $72 billion, according to data Early Warning released Thursday. Besides receiving payments, businesses are also starting to use the network to pay wages and rent. Senders accounted for 133 million payments worth more than $87 billion last year, with the list of unique small-business senders rising by nearly two-thirds. “This is early days, but small businesses are making up more and more of our payments,” Hui says.

Activity like that, Hui argues, adds to Zelle’s value to banks that support the service. Early Warning is owned by seven of the largest banks in the country, but some 1,800 financial institutions overall offer the service for their customers. “The value proposition to banks is the tools that make them competitive with larger banks,” Hui says. “We’re bringing the value of the network effect to financial institutions of all sizes.”

New sender and receiver markets are opening up and growing, as well, he adds. “What we’re seeing is tutors getting paid, and landord’s rent is huge for us,” he says.

But Washington cast its shadow over Zelle last year as a group of Senators singled out the network for what they argue is a high rate of scams. Scams are seen as cases in which users are induced by fraudsters to authorize transactions. Sen. Elizabeth Warren, D-Mass., sent a letter early in October to Wells Fargo & Co., one of Early Warning’s owners, alleging the rate of Zelle fraud at Wells had been almost twice as high as for “other banks.” Early Warning responded promptly that “Wells Fargo’s rates of reported fraud and scams are extraordinarily low and comparable to the Zelle Network as a whole.”

Hui won’t comment on the scam concern in Washington, but says Early Warning is focused on the underlying issue. “We have whole teams looking at this. It’s by far the largest investment we have made,” he says.

The network works to combat the problem by reminding users to send money only to those they know and trust. “We try to slow down the process [by asking] do you really know the party you’re sending to?” Hui adds. “We’ve been putting out a lot of materials around how to stay safe. We’re continuously trying to get ahead of bad actors. That’s never going to stop.”

Scottsdale, Ariz.-based Early Warning has developed a busy agenda in recent months. Besides its Zelle initiatives, news emerged last month that the company is working with banks including Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo to introduce a digital wallet that could allow consumers to make online purchases against stored Visa and Mastercard credit and debit cards.