The banks behind the Zelle network had more in mind than P-to-P payments between consumers, and BNY Mellon is beginning the network's evolution by targeting the business payments market.
Zelle will help support tokenized digital payments for institutional and corporate clients in a market that is notoriously resistant to automation. BNY Mellon hopes corporates will see the Zelle network's ability to increase control over cash flow through near-instant processing.
"BNY Mellon's focus is on corporates and large institutional clients, so we wanted to focus on the business aspect of Zelle," said Carl Slabicki, director and product line manager for immediate payments at BNY Mellon. "This will allow telecoms, utility, insurance brokers and other companies to use an email or a mobile number."
Even back when Zelle used to be called clearXchange, the network aspired to do more than P-to-P payments. That goal got some early traction when Bank of America added insurance disbursements to the clearXchange network. But in rebranding as Zelle, the network embarked on a marketing campaign focused on its core P-to-P service.
That effort paid off in building a base of more than 60 banks in the Zelle network. This scale provides a consumer audience for businesses to tap into.
"Businesses would only need to know a consumer’s mobile number or email to conduct a payment and they don’t need to have and maintain checking account details on file," said Sarah Grotta, director of the debit and alternative products advisory service at Mercator, adding that use cases include payroll transactions and refunds. The expanded use cases also raise the possibility of added fee income for the normally free-to-use Zelle, she said (BNY Mellon charges a per-transaction transaction fee for business payments through Zelle).
In addition to using the Zelle network, BNY Mellon will use its connection to The Clearing House's Real Time Payments Network to enable B-to-B and B-to-C payments.
"There are rapid changes in the payments space," Slabicki said. "If you want to remain relevant and allow your clients access to new payment systems, you need to be quicker to market with a faster payment solution."
BNY Mellon used Volante's hub to power both the real-time ACH and Zelle projects. Volante develops payments technology at its R&D center in Pune, India. The technology is delivered as a service, which enables it to receive updates as new channels and payment options become available.
"Real-time payments optimization will be important as we go forward," said Vijay Oddiraju, CEO of Volante. "There are so many interactions between different systems that will be coming."
B-to-B and B-to-C payments have remained difficult to automate, with most businesses clinging to at least some check or paper-based payments, despite the higher expense. Multiple companies have attempted to digitize business payments over the years, though BNY Mellon says the timing is better now that there are options for real-time payments.
Volante has another large bank in its pipeline to automate and execute real-time business payments, and it's also working on a blockchain business payments platform to add another option beyond cloud hosting (blockchain is the distributed ledger technology originally developed for bitcoin payments).
"[These are] potentially powerful, simultaneously simplifying process flow and speeding transaction speed dramatically," said Thad Peterson, a senior analyst at Aite Group. "The question is how entrenched are the existing alternatives, and what is the economic value of migrating to a new platform? If it doesn’t add economic value, banks aren’t going to do it unless customer demand drives it."