One of the most exciting announcements to come out of Apple's (NASDAQ:AAPL) WWDC keynote earlier this month was the introduction of peer-to-peer (P2P) payments coming to Apple Pay. By integrating P2P capabilities directly into iMessage, which serves as many iOS users' primary messaging service, Apple has the opportunity to immediately carve out a dominant position in the P2P payments space at a time when PayPal's (NASDAQ:PYPL) Venmo is enjoying robust growth in total payments volume (TPV).
Of course, Apple partners with the big banks and other financial institutions to develop and enable its payments offerings, and they don't want to be left out of the picture.
Many of the largest financial institutions (over 30) have partnered to create Zelle, which was officially unveiled earlier this year. The banks have spent six years developing the digital payments network, mostly focusing on back-end infrastructure. The defining feature of Zelle payments will be how quickly they can be processed. Typically, when users send payments over Venmo or other similar services, it still takes a couple of days for everything to be processed and recorded in the users' bank accounts.
For example, Venmo bank transfers are processed as common ACH transfers, which take a couple of days to process but carry low fees (that Venmo covers). Presumably, when users transfer funds from their Apple Pay Cash accounts to their bank accounts, it will also use ACH transfers. Zelle says that P2P payments that are processed through its network will be recorded in both source and destination accounts within minutes.
Zelle announced today that its service is now live within many prominent mobile banking apps, with more coming over the next year. There isn't a stand-alone Zelle app quite yet (it is due out later this year), so for now users are expected to go their mobile banking app of choice based on where they have accounts, and process P2P payments from there through Zelle's network, which covers 86 million U.S. banking consumers.
Can Zelle's speed be good enough to make a difference?
Zelle, Apple Pay P2P, and Venmo all have different advantages. Venmo was the first mover and adds a social element to its P2P service, displaying a feed of payment activity among friends (PayPal even refers to Venmo as its "social payments platform"). Apple Pay P2P will probably be more intuitive, easier to use, and more secure due to Touch ID; it will also immediately reach massive scale once iOS 11 is deployed across hundreds of millions of iOS devices later this year. Zelle will be fast.
What remains to be seen is which of these differentiators users will value the most. Zelle may lack a consistent experience since it is being implemented across different apps, although the dedicated forthcoming app may address that fragmentation. None of these services are mutually exclusive, and more options are always good news for consumers at large.