Venmo increases its fees for instant transfers; BofA touts Zelle’s results – Digital Transactions


In the hotly contested market for person-to-person transactions, PayPal Holdings Inc.’s Venmo unit has rarely failed. But over the weekend, the popular service said it would increase its fees from 25 cents to 1% for so-called instant transfers made by users to transfer money from their Venmo account to a bank account. , with a minimum of 25 cents. the move, which will go into effect on Nov. 6, has surprised at least some users and could prove to be a competitive advantage for Zelle, a fast-growing banking service, observers say.

the Venmo The instant transfer service allows users who want to quickly transfer money to a bank account to have the funds in their bank within 30 minutes or less using a Visa or Mastercard debit card. Venmo introduced the service in January with a fee of 25 cents. Standard transfers, which can take a few days, are not affected by the change, nor are P2P transfers to other users.

But Venmo’s move has sparked a storm of comments on social media, where users have spoken out against Venmo while others indicate a misunderstanding of what the fees apply to. “Hot: this may be the worst idea they’ve ever had,” read an October 12 post on Twitter. “Venmo’s rate increase is a massive communications failure. So many users don’t know what’s going on and what transactions will and won’t be impacted, ”read another article on Saturday. Not all reactions are negative: “Does this seem like a reasonable thing to charge at first glance?” Said a Sunday night message.

A PayPal spokesperson did not immediately respond to a request for comment. But for a while, the company looked for ways to make money on Venmo, where growth has been rewarding but costly, as free P2P movements have reduced PayPal’s overall take rate, or the money it makes. ‘it keeps on every transaction.

Venmo reported second-quarter volume of $ 14.2 billion, up 78% year-on-year, but PayPal take rate for all commodities slipped 14 basis points to 2.77%.

Some observers now see an opening for Zelle, the 16-month P2P service owned and operated by Early Warning Services LLC, a software company based in Scottsdale, Ariz., itself owned by several of the nation’s largest banks. The big advantage of Zelle, they say, is that transfers take place directly between bank accounts, and at no cost. Instead, the service sought to earn money on disbursements from companies to consumers.

“I expect Zelle and Zelle’s financial institutions to insist that they pay off,” says Sarah Grotta, director of debit advisory services at Mercator Advisory Group, Maynard, Mass.

At the same time, however, Venmo’s move could encourage users to keep their funds “in the Venmo world,” she says, making more money available for merchant transactions, where PayPal collects merchant fees. PayPal introduced Pay With Venmo to allow users to transact online and the Venmo card, co-branded with Mastercard, for in-store purchases.

Meanwhile, Bank of America Corp. reported Monday that its customers made 42.5 million Zelle person-to-person payments in the third quarter, up 139% from 17.8 million transactions a year earlier. The value of payments doubled to $ 12 billion.

BofA, based in Charlotte, North Carolina, said 4.3 million of its customers have used Zelle since the bank launched the service in the second quarter of 2017. BofA is one of the co-owners of Early Warning Services. The bank probably accounts for a third of all Zelle transactions, said Thomas McCrohan, payments analyst at Mizuho.

In related payments metrics released with its third quarter earnings report, BofA said its debit card holders made $ 79.9 billion in purchases, an increase of 7% from 74. $ 8 billion in Q3 2017. BofA’s U.S. credit card holders totaled $ 66.5 billion in purchasing volume, up 7% from $ 62.2 billion a year earlier.

With additional reports from Jim Daly

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