The bank-led P2P service Zelle is on track to move more than $100 billion at its first anniversary in June — a milestone that is at odds with overall consumer awareness of digital P2P options.

Most U.S. consumers have had little or no experience with the technology, according to recent studies. A new study by Aite is a bit more promising, indicating 49%, or about half of U.S. consumers made a mobile P2P payment last year, but that still doesn't indicate overall market growth. The market has remained fairly stable over the last couple of years, measuring about $1 trillion in domestic and cross-border spending last year, Aite said.

By comparison, Zelle accounted for 29 million P2P transactions in the first quarter of this year at Bank of America, with growth exceeding 130% over last year for a total of $9 billion in P2P spending volume (Zelle won't release its first-quarter numbers until later this month).

So where is Zelle’s growth coming from?


Chart: Where is P2P going?

Many digital payment methods say they aren't competing with each other but with physical alternatives like cash and checks. Some of this may be marketing spin designed to make a newcomer seem like less of a threat to the old guard, but in the case of Zelle, Venmo and Square Cash, it's looking to be the reality.

The percentage of consumers using cash and checks for P2P payments fell sharply over the previous three years, and other common P2P methods including gift cards and online banking platforms also declined, according to Aite.

Cash saw the biggest drop, with 49% of consumers in 2017 saying they used cash for at least one P2P payment, down from 79% in 2014. Checks fell to 40% last year from 61% three years earlier, while plastic gift cards used as a P2P method dropped to 33% from 40% and online banking for P2P payments also fell to 27% from 35%, according to Aite.

“Consumers are becoming more comfortable with using their banks’ mobile apps or the range of newer alternative mobile P2P apps, which is taking growth away from older methods like cash, checks, gift cards and [browser-based] online banking,” said Talie Baker, a senior analyst at Aite and the author of the report.

Zelle has more than 100 banks signed up, and "the number of financial institutions on the network will increase even further when our core processor partners activate hundreds of regional and community banks and credit unions," said Rebecca Acevedo, director of executive and employee communications for Early Warning, which owns and operates Zelle.

PayPal remains a top choice for P2P, according to Aite's data—it was the third-most frequently used P2P method last year behind cash and checks, with 18% of transaction volume and 10% of spending volume.

But even though PayPal owns Venmo, its core service could face headwinds in the P2P sector in the near future. Aite measured PayPal as a separate category, with its use as a P2P remaining virtually flat between 2014 and 2017, while mobile P2P usage rose.

All the transaction growth in P2P is coming from mobile apps, Baker said.

Last year 26% of consumers used mobile banking apps like Zelle and Fiserv’s Popmoney for P2P transfers, up from 17% in 2014, and 15% used “alternative” approaches like Venmo, Square Cash, Google Wallet and Facebook Messenger, up from 7% three years earlier. (Apple Pay Cash was introduced in December 2017 after the survey concluded.)

“PayPal is the old guard in P2P, and the market is theirs to lose, as newcomers get more attention, and although it’s still too early to tell how Zelle will ultimately shake out, its early momentum appears to be solid,” Baker said.

U.S. households made an average of 66 domestic P2P payments last year, totaling $7, 738, and cash accounted for 21% of transactions, while checks carried 22% of all P2P spending.

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