Bank-owned Early Warning launches Zelle, its in-app real-time P2P payment service, in the US
Apple introduces P2P payments within iMessage
Sources: Techcrunch; The Verge
Point of View
Mobile P2P payments are not new. Since 2015, Facebook has been providing such a service through Messenger, via linked Visa or MasterCard debit cards. And PayPal has been synonymous with P2P payments worldwide for 20 years. Now Apple and bank-owned Zelle are set to enter the P2P payments space.
Like Facebook, Apple is offering payments through its messaging app, iMessage. However, instead of linking P2P payments to a bank-issued card like Facebook, balances from P2P receipts will be stored on the Apple Pay Cash digital debit card, which will sit in Apple’s digital wallet app, Wallet. The feature will be available on the iPhone, iPad and Apple Watch once iOS 11 is released later in 2017.
While Zelle, operated by bank-owned Early Warning, is also an in-app service, it operates via the mobile banking apps of its partner financial institutions and requires only a recipient’s mobile phone number or email address to make a transfer.
Ostensibly, Zelle is similar to the soon-to-be launched Apple Pay Cash as well as other ‘real-time’ mobile payments services, such as PayPal’s Venmo and PayPal itself. However, Zelle provides for real-time funds availability to customers. This occurs because participating financial institutions have agreed to post funds to customer accounts prior to interbank settlement through the Automated Clearing House (ACH).
Facebook and Apple appear to have the same driver behind introducing P2P payments services – to protect their core business. Facebook looks to be taking the lead of the fintech giants in China, where Alibaba and WeChat use in-app payments to keep users within their ecosystem. Whereas Apple could be protecting its market share, by making its devices ‘sticky’, as the smart device market saturates.
Osko by BPAY is due to provide real-time P2P transfers when it launches as the first overlay service on the New Payments Platform (NPP) infrastructure in October. In contrast to existing retail payment systems in Australia, the NPP will clear transfers in real time and settlement will occur on a line-by-line basis through the Fast Settlement Service within the Reserve Bank Information and Transfer System (RITS).
The US is much farther behind Australia on this front. The Federal Reserve’s Faster Payments Taskforce has developed a roadmap and made recommendations, although to no one in particular, to introduce a fast payments service by 2020. As all retail payment systems in the US settle on a deferred basis in the US there continues to be an impetus for firms to launch ‘work around’ P2P payment solutions that must leverage the ‘old rails’. Zelle, Facebook, Apple, Venmo and PayPal are all such examples.
With Osko launching, one might expect neither Apple nor Facebook to bother entering the Australian market. However, Apple has banned Westpac’s in-app P2P payments feature and Facebook has been granted a patent to offer P2P payments within Messenger in Australia, suggesting they might introduce their in-app P2P payment services here.
This reinforces the idea that their payments strategy is to protect and grow their core business in Australia, and to generate another source of consumer data. On the other hand, as Osko is a domestic service perhaps Facebook and Apple might seek to cover the cross-border transfers market.