Zelle: ‘We’re doing over $1 million a minute’ in transactions, Early Warning Services CEO says

Early Warning Services CEO Al Ko joins Yahoo Finance Live to discuss Zelle notching over $5 billion in payments over the last five years, nearly 1,700 banks using the Zelle transfer service, growth for Zelle, and the future of fintech.

Video Transcript

- Money sharing app Zelle is marking five years in the fintech space and more than 5 billion transactions on the platform since its launch in 2017. Joining me to mark the milestone to discuss the future of fintech space, we've got the CEO Al Ko here with me in studio. Al, it's good to see you in person. What is it, 500 or 5 billion transactions here that we're looking at right now. That's a pretty significant milestone when you consider that Zelle was kind of a latecomer when it comes to peer-to-peer transactions.

AL KO: That's right. A lot of the top peer-to-peer applications have been around for over a decade. Zelle just celebrated its fifth birthday. And we've been very fortunate to have amazing distribution and amazing products. So we're doing over $1,000,000 a minute, if you believe it. Over $1.6 billion a day. And so that's what adds up to a run rate of over half a trillion dollars in the last 12 months.

- Yeah. I was just saying this morning how often I use Zelle to sort of pay out family members or whatnot. But, increasingly, I found that a lot of businesses are doing transactions on Zelle as well. So when you look over the last five years, how has that market expanded for you?

AL KO: Yeah. So if you go back to the origins, it started out as a peer-to-peer solution. And that's what it was designed for, integrated into a consumer checking account. Fast forward to today. We've got 750 banks and credit unions live. That covers about 80% of the population. And here's the surprise. And I was once a product manager. Even though it's P2P, a lot of businesses were using it. And the average Zelle transaction is $275. And so think of your dog walker, your hairstylist, paying rent. Those are very common use cases for Zelle.

- And how much of that is the advantage that Zelle doesn't necessarily charge a fee? When you think about something like Venmo, there is a fee that's attached. The Cash App as well. How much of that has been a big driver for you?

AL KO: Well, the key advantages of Zelle, first, it's already integrated to your bank account. So you don't have to download anything else. It's got the safety and security associated with your bank. The money moves within seconds. And then, of course, it's free. So it's all of those. But people really like that it's tied to their bank and their checking account.

- How do you get from 5 billion to 10 billion? Where do you see the market potential moving forward?

AL KO: Well, we expect to continue to see a lot of growth in business and small business in particular, particularly in those service-based businesses where Zelle is better than the alternative, cash and check.

- When you look at the fintech space broadly, you've got a pretty good pulse, especially on how small businesses are right now. There's a lot of concern about whether, in fact, we're headed to a recession, how big the slowdown is going to be. What are you seeing from where you stand?

AL KO: What's interesting is, from our data at least, we're not seeing a big slowdown. So, of course, we're subject to the overall economy. For example, during the omicron surge, we definitely saw a little bit of a pullback. But right now, we're seeing consumers be robust. So we're not seeing any kind of slowdown right now.

- There's been a lot of changes in the space. We talk so much about the huge growth that we saw in buy now, pay later players, especially during the pandemic. It feels like there's a bit of a reckoning happening, not just when we look at the stock moves and the pullback, the layoffs that we've heard, but also a lot of consumers saying, look, now it's time to pay up. And this has not necessarily been a good solution. How do you view that part of the fintech space?

AL KO: Yeah. I think there's definitely a market for it. But as with everything, ultimately, the best product wins. And I think initially the novelty and the ability to obviously pay over time was attractive. But today, people are really focused on interest rates, are really focused on making sure that they have their financial house in order. So it's not a surprise that there's been a bit of a correction.

- Yeah. Could we see potential consolidation? I know you're not necessarily in that position.

AL KO: Yeah. It's hard to speculate. But very likely whenever there's a little bit of an economic downturn, there are some companies that get over their skis, for sure.

- In terms of what consumers are seeking out right now, I mean, Zelle obviously has had a lot of success over the five-year period. But as we move more towards online transaction, digital, everything on your phone, what do you think is that next leg we should be watching for?

AL KO: Yeah. Again, part of the beauty of Zelle, almost everyone has mobile banking. And so even those who previously were left out of the digital adoption are using Zelle because they already have a bank account and it's already in there. And so they're starting to use it for more and more use cases. So, of course, it started out P2P, splitting dinner. Of course now paying rent. Then paying the pool guy or the housekeeper. And pretty soon to pay invoices and other capabilities. Those are all trends that we're seeing.

- Yeah. A lot of businesses, as you said, small businesses increasingly really just running their whole operation off of that.

AL KO: And they love it because it's so fast. And so as soon as you send it, you get the notification. It's in your contacts. And so just a couple of taps and you're done.

- OK. Well, it's good to have you here in studio today. Early Warning CEO Al Ko joining us today.