BofA's Zelle numbers don't add up — but they do make sense

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Early Warning's Zelle has been good for Bank of America’s P2P traffic, with the bank reporting eye-popping numbers every quarter. But the bank and the Zelle network have different ways of counting their volumes.

Each quarter since the bank-led P2P service launched in September 2017, BofA's count of its Zelle transactions soared from a pre-launch base of 11 million in the fourth quarter of 2016 to 53 million for the last quarter of 2018 (BofA was a founding member of Zelle's predecessor, clearXchange). Based on Zelle’s latest tally of 135 million transactions during the fourth quarter, it would appear that BofA contributes 40 percent of Zelle's volume, but that’s not the case.

BofA reports not only transactions initiated by its own customers, but also transactions it receives from customers at other banks. At first blush, this seems like double-dipping; analysts estimate BofA’s share of Zelle’s transactions is probably about 20 percent when other banks’ transactions are subtracted from BofA's total.

BofA declined to explain why its total counts payments from other banks or to break down which transactions originate from its own customers, but analysts say there’s a logic to this method.

“BofA is charged by Zelle for ingress and egress of funds," said Richard Crone, a principal with Crone Consulting LLC. “BofA is rightfully counting what they get charged by Zelle as an originating and receiving bank.”

P2P is growing for most banks, but it’s still a cost center, and banks need to have that recognized by Wall Street, Crone said.

“Zelle is a hard dollar expense for financial institutions, but the cost is justified as a competitive requirement to acquire new accounts and retain existing ones, the same as for free bill payment and other services,” he said.

PaymentsSource also queried other Zelle banks — JPMorgan Chase & Co., Citi, Wells Fargo and Capital One —about their share of Zelle's overall transaction volume, but none responded by deadline.

BofA chose a method of reporting its Zelle numbers that errs in its favor, said Sarah Grotta, director of debit and alternative products at Mercator Advisory Service. One factor is liability; Zelle allows customers of banks outside its network to send payments to member banks, placing liability on the receiving bank.

“It’s not entirely a wrong way to count these transactions, because they have effort and liability when both parties are BofA customers,” Grotta said. “But in other aspects, counting transactions received from other banks is somewhat inconsistent and seems to blur the market data. BofA is of course incented to make its digital banking and P2P transactions look as large as possible, and it’s a good number to project to investors."

All organizations may not agree on BofA's methodology for counting or qualifying total transactions, said Talie Baker, a senior analyst with Aite Group.

“I don’t know if you can definitively say there’s a right way or a wrong way to count P2P transactions. Zelle doesn’t count sent and received transactions separately because they originate on the Zelle network and thus are the true number of total transactions,” Baker said.

Baker's own research indicates some of the other large banks are counting Zelle transactions internally using the same methodology as BofA, she said, noting that these banks aren’t sharing their Zelle transaction volume publicly yet.

For a forthcoming report on P2P transaction trends, Aite asked more than 2,500 U.S. consumers whether they have a Zelle account and how they access the service to gain insight from a narrow slice of users.

About 13 percent, or 322, of respondents to Aite's survey said they use Zelle. Seventy-eight percent of those said they initiate transactions from their bank’s app or website and 20 percent said they use the standalone Zelle app.

Among those who access Zelle from their bank, 26 percent said they use BofA, 22 percent use Wells Fargo and 20 percent use JPMorgan Chase & Co., according to Aite’s research.

Based on this data and fact that BofA counts all P2P transactions sent and received, Baker guesses BofA currently handles about 20 percent of all Zelle transactions and Wells Fargo and Chase each process about 10 percent to 15 percent of the whole Zelle pie.

“It makes sense that BofA customers are heavier Zelle users because of the bank’s digital emphasis,” Baker said.

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