Can a small business use Zelle (and other tools like it)?

Steve O'Connor2019 Trends, Cashflow, Small Business TrendsLeave a Comment

Cashless payments are emerging in all areas of global commerce because of their safety and convenience.

These cashless payments reduce the risk of cash handling and are compatible with several systems that make global transactions possible and traceable. They can take on several forms, from “primitive” credit and debit cards, and online transfers, to more technologically-forward mobile apps, mobile wallets, contactless cards, and RFID (among others).

In terms of cashless payments, PayPal is one of the most popular options. In terms of use, it is easy, convenient and secure, but certainly has its limitations. PayPal charges steep transaction fees and money isn’t always cleared automatically.

For this reason, PayPal introduced Venmo: a peer-to-peer (P2P) payment app that allows users to instantly send and receive money from their connected bank accounts, credit cards, and debit cards. Payments sent to and from a debit card and bank account aren’t charged any fees to use the service, while there’s a minimal fee associated with credit card transactions. Unlike PayPal, Venmo transactions aren’t covered by a protection program, reinforcing its purpose as a transferring service primarily for transactions with people that you know or in-person transactions.

The research firm Crone Consulting forecasts that P2P payments to businesses in the U.S. will quadruple to nearly $17 billion this year. Furthermore, the market is expected to be worth $74 billion by 2021. Because of this, combined with the popularity of Venmo, it’s no wonder that several alternative P2P payment solutions, such as Zelle, have popped up.

What is Zelle?

Zelle is a digital payments network backed by a number of U.S. banks and financial institutions, which also allows users to send and receive money.

Compared to other P2P networks, Zelle gives users faster access to money. Although it was only just launched in 2017, Zelle is projected to grow over 73% this year and is expected to overtake Venmo. In the second quarter of 2018 alone, Zelle processed over 100 million transactions worth $28 billion.

Zelle for Business Payments

Zelle’s advantage over Venmo is that it is built-into popular banking apps, which allowed it to quickly gain popularity across all demographics. On the other hand, Venmo’s social aspect (the ability to leave messages and share goofy emojis with the people you’re sending money to) is what makes it more appealing to millennials. However, since it popularized P2P payments, Venmo has been able to get a headstart on the retail front.

Venmo introduced a “Pay with Venmo” option, allowing consumers to use it to shop at over 2 million online US retailers including Abercrombie & Fitch, Forever 21, and Lululemon. Venmo also expanded its features to include being automatically able to split GrubHub, Seamless, and Eat24 orders with friends and family. Not to be beat, Zelle has started offering business payments functionality. But, since it is still in its early stages, its availability for small businesses depends on the associated financial institution.

Zelle offers a quick way to send and receive money. However, they encourage users to send payments only to people that they trust, as Zelle does not offer a protection program for authorized payments made with the app. It’s also worth noting that you cannot cancel a payment once it goes through since the recipient receives the money within minutes of sending.

There are some other limitations when it comes to using Zelle for small businesses that you’ll want to be aware of. Specifically, businesses cannot enroll in the Zelle apps with a debit card, and cannot receive payments from users enrolled in the app using a debit card, either. Only users using Zelle through their bank’s mobile banking app can send and receive money with eligible small businesses. Furthermore, there is a limit to the amount of money you can send with Zelle, which depends on the limits your bank sets.

Final Thoughts: Can a Small Business Use Zelle (and Other Tools Like it)?

Cashless payments via peer-to-peer networks are a convenient and mostly safe way for transferring funds, which is why they are being explored as an option for alternative payments by businesses. First movers like Venmo have expanded to offer retail payments, but the bank-backed, up-and-coming favorite Zelle is quickly catching up with functionality that makes business payments easier, as well.

Looking for various options around accessing business capital? Get in touch with the experts at Wellen.

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