How Does Zelle Make Money?

Zelle is a peer-to-peer payment network that indirectly benefits the banks’ consortium that backs it. Zelle also enables users to pay businesses for goods and services, free for users. Merchants pay a 1% fee to Visa or Mastercard, who share it with the bank that issued the card.

Zelle Origin Story

Zelle is a peer-to-peer (P2P) payment network. It allows users to send money quickly and easily to their friends and family from a mobile device.

The platform started life as clearXchange in 2011, a P2P, B2B, and G2C payment service owned by Bank of America, Wells Fargo, and JPMorgan Chase.

The platform was then sold to fintech company Early Warning Services (EWS) in 2016, owned by several American financial institutions.

After the sale, clearXchange was rebranded to Zelle, and more banking partners were added to the network to make it more consumer-friendly.

The standalone app was integrated with almost 1,200 banks and credit unions comprised of Zelle’s owners and other major players such as Capital One, Morgan Stanley, and TD Bank.

Zelle is launched

Zelle’s instant payment service and mobile app was launched in June 2017 and accompanied by an announcement that clearXchange P2P services would be suspended by the end of the year.

While some governmental services would remain on the old platform, clearXchange users were encouraged to migrate to Zelle.

Rather than existing as a standalone app like competitor Venmo, Zelle was initially available within the mobile banking interfaces of participating institutions.

The app moves money from one bank account to another in a matter of minutes, with only the recipient’s email address and phone number required.

This made Zelle a more efficient option than a traditional bank transfer which can take several days and requires users to input bank account details.

For this reason, Zelle’s creators intended the service to be for quick, personal payments such as splitting the cost of a restaurant meal or collecting rent from roommates. 

Like its predecessor in clearXchange, users are identified on the Zelle platform by a unique association between their bank account and phone number or email address.

Since these details are easier to remember than bank account numbers, funds will likely be sent to the intended recipient. 

Growth and expansion

In February 2022, Zelle announced that its users had sent 1.8 billion payments worth around $490 billion in the previous calendar year.

According to EWS, this represented a 49% increase in the number of payments from 2020.

Much of the increase was attributed to businesses such as property managers, health and beauty providers, and contractors, whose usage increased by 162% over the same period.

Universities, non-profits, and some Fortune 500 companies sent payments over Zelle as an alternative to writing checks. 

While it was acknowledged that the market had seen tremendous growth because of COVID-19, the pace of Zelle’s growth had enabled it to become the largest P2P payment network in the USA by total payments value sent.

The platform’s dominance is more than twice the size of the nearest standalone competitor.

This growth has also been facilitated via several company initiatives:

  • Consumer education around the security risks associated with digital transactions. 
  • Collaboration with the non-profit Cybercrime Support Network to educate small businesses on common instances of financial fraud.
  • Investment in tools to help consumers avoid being scammed, and
  • In-app notifications remind users to stop and re-confirm the recipient’s details before hitting the send button.

Zelle has moved almost $1.5 trillion across its network since 2017, with more than 99.99% of those non-fraudulent.

Nearly 1,700 banks, credit unions, and minority deposit institutions (MDIs) now offer Zelle services within their respective apps.

Zelle revenue generation

Zelle is not a fee-based platform, so it does not generate revenue directly. It was created to save banks money. 

Competitor P2P offerings such as PayPal, Venmo, and Square charge banks a fee for every transaction, so keeping these transactions in-house reduces costs.

This also allows the banking institutions to capitalize on a general shift toward a cashless society and avoid maintaining ATMs and branch offices.

Importantly, the app also generates indirect revenue for the consortium of banks that collectively have access to 100 million users in the United States.

This encompasses a host of the add-on and complementary services such as credit cards, mortgages, loans, and insurance.

Generation X and Baby Boomer users have also become a significant growth area for Zelle, many of whom were previously unfamiliar with the P2P concept.

After just two years, the app has become the largest P2P service in the U.S, with users completing around 743 million transactions worth $187 billion.

Although not explicitly stated, Zelle owner Early Warning Services LLC likely receives a payment from participating banks to maintain the integrity of the Zelle network.

B2C and other potential revenue generation models

In 2018, Zelle launched a feature enabling users to pay businesses for goods and services.

For the consumer, Zelle offers this service free of charge. But the merchant must pay a 1% fee to Visa or Mastercard, who then share the resultant revenue with the card issuing bank.

Looking forward, it would not be unreasonable to suggest that other financial products be recommended within the Zelle app.

This would allow partnering institutions to generate revenue through affiliate commissions and referrals.

Zelle vs. Venmo

PayPal owns Venmo. Indeed, since 2002, PayPal has acquired several brands. In 2013, as PayPal bought Braintree indirectly, it also bought Venmo. Braintree acquired Venmo in 2012 for $26.2 million. Therefore, by 2013, Venmo entered into the PayPal family of brands comprising payment solutions like Braintree, Venmo, Xoom, and iZettle products.

Venmo is another P2P platform that makes sending and receiving money easier for consumers.

While Zelle and Venmo have more or less the same functionality, there are a few key differences.

Zelle enables users to transfer funds between the accounts of participating banks for free.

Funds used in these transfers do not reside in a holding account.

Instead, they are withdrawn from (or deposited into) the bank account of a sender or receiver.

Venmo, on the other hand, more closely resembles a digital wallet. In other words, funds are held within Venmo with a balance that can be spent, sent to others, or reloaded.

Transfers are normally completed in 1-3 business days, but there is a 1.5% fee for those who desire instant transfers.

Note also that Venmo offers a branded debit and credit card that can be used to purchase products and services from approved merchants.

With the above in mind, let’s look at other comparisons between the two platforms.


As noted earlier, Zelle is free to use for funds transferred between a linked bank or credit union account. 

Venmo is more expensive to use and charges more fees, mostly because it offers more features.

For example, there is a 3% fee for credit card transactions up to a total value of $15. There is also a $2.50 fee for out-of-network ATM withdrawals. 


Both platforms have built-in security features that make them relatively safe to use.

Both monitor transactions for instances of fraud, with Venmo using data encryption to protect sensitive information.

Venmo also offers consumers the ability to add a PIN for multifactor authentication.


At the time of writing, Zelle and Venmo are only available for residents of the United States. This means that both are unable to send or receive money internationally. 

However, it should be noted that there are various workarounds for users who like to travel, such as using a VPN.

Speed and ease of use

Zelle offers free instant delivery of funds, though many users will find that their particular bank restricts the amount they can transfer.

In many cases, transfers are capped at $500.

In scenarios where transfer limits are not in place, Zelle users may experience delays as the platform works to ensure the transaction is not fraudulent.

Others have also noted that in the case of money that is sent to the wrong account, Zelle cannot reverse the transaction.

Venmo, as we noted earlier, charges a fee for instant money transfers.

Credit cards give users more flexibility to make payments if they are willing to pay a premium for the privilege.

Since the funds in a Venmo account must be sent to a bank account to make purchases, one could argue that the company’s app is slightly less user-friendly than the Venmo app.

Key takeaways

  • Zelle is a P2P network allowing users to transfer money to their friends and family seamlessly. It was created by a consortium of 30 North American banking institutions.
  • Zelle is a free platform that does not generate revenue directly. However, the app was likely developed to maintain market share in the P2P industry and reduce third-party fees from competitors. There is also scope to suggest that Zelle causes increased consumer uptake of add-on financial services.
  • In the B2C space, Zelle shares a 1% merchant fee with Visa and Mastercard. As the service becomes more mainstream, affiliated financial products may be recommended in the app itself.

Read Also: How Does PayPal Business Model

Read Next:

Connected Business Models

Robinhood Business Model

Robinhood is an app that gamifies investing in stocks, ETFs, options, and cryptocurrencies, all commission-free. While the app is commission-free, Robinhood made $1.81 billion in total revenues in 2021, primarily based on transaction-based revenue representing over 77% ($1.4 billion) of the company’s overall revenues. Transaction-based revenues primarily include payment for order flow from routing customer orders for options, cryptocurrencies, and equities to market makers.

Afterpay Business Model

Afterpay is a FinTech company providing the “buy now, pay later” solution as a core service. When a consumer purchases a product, Afterpay pays the seller and asks the consumer to pay 25%. The remaining 75% is paid in three fortnightly installments that are also interest-free. Afterpay, in turn, makes money via merchant and late fees.

Quadpay Business Model

Quadpay was an American fintech company founded by Adam Ezra and Brad Lindenberg in 2017. Ezra and Lindenberg witnessed the rising popularity of buy-now-pay-later service Afterpay in Australia and similar service Klarna in Europe. Quadpay collects a range of fees from both the merchant and the consumer via merchandise fees, convenience fees, late payment, and interchange fees.

SoFi Business Model

SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.

Chime Business Model

Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.

How Does Venmo Make Money

Venmo is a peer-to-peer payments app enabling users to share and make payments with friends for various services. The service is free, but a 3% fee applies to credit cards. Venmo also launched a debit card in partnership with Mastercard. Venmo got acquired in 2012 by Braintree, and Braintree got acquired in 2013 by PayPal.

How Does PayPal Make Money

PayPal makes money primarily by processing customer transactions on the Payments Platform and other value-added services. Thus, the revenue streams are divided into transaction revenues based on the volume of activity or total payments volume. And value-added services, such as interest and fees earned on loans and interest receivable. As of 2021, PayPal processed $1.25 trillion in total transactions, with net revenues of $25.4 billion and $4.3B in operating income

FinTech Business Models

Fintech business models leverage tech and digital to enhance the financial service industry. Fintech business models, therefore, apply tech to various financial service use cases. Fintech business model examples comprise Affirm, Chime, Coinbase, Klarna, Paypal, Stripe, Robinhood, and many others whose mission is to digitize the financial services industry.

Main Free Guides:

Scroll to Top