Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Zelle App Shuts Down, Shift to Bank Integrations
Payments | April 7, 2025
Image: Freepik/wayhomestudio
Zelle App Shuts Down, Service Still Going Strong
In 2017, Zelle, a U.S. payment service launched by a consortium of major banks and credit unions to compete against fintechs, enabled people to send money directly between accounts, instantly and securely. It's similar to Canada's Interac e-Transfer service but built for U.S. markets and has larger volumes.
Last October, Zelle updated consumers on their plan to shut down the Zelle app because most users were already using Zelle transfer services from within their banking apps. In fact, according to Early Warning Services LLC (the consortium that runs Zelle), 98% of Zelle's $1 trillion of transactions in 2024 took place through participating financial institutions and only 2% using the Zelle app.
See: Bank CEOs Defend P2P Payments Network Zelle in Senate Hearing Over Consumer Fraud Handling
Zelle’s payment network now connects over 2,200 banks and credit unions, and has 151 million American users that trust it to send money directly from their accounts. The story isn't all sunshine though, as Zelle faced significant scrutiny over fraud and scam concerns. In late 2024, the U.S. Consumer Financial Protection Bureau (CFPB) sued several large banks over their handling of fraud on the Zelle network. The complaint was dropped in early 2025, but the questions around user protection remain.
Implications and Lessons
There are some key lessons for Canadian fintechs and credit unions with the news that Zelle is shutting down its dedicated app and continuing to grow through banking apps.
First, it shows that deep internal integrations within banks still work. Each financial institution that offers Zelle builds it directly into their own mobile or online banking platforms. They all use shared infrastructure provided by Early Warning Services LLC, the company that runs the Zelle service, which is owned by the banks themselves.
While the bank integrations of Zelle's payment services seems like embedded finance, it's not the same how fintechs are using the term today. Zelle isn’t being embedded into third party platforms or consumer apps, such as non-financial e-commerce sites. There’s no third-party fintech providing the payments layer. Instead, Zelle operates like a closed payments network run by banks, where each institution manages its own compliance and risk but share the same rails.
See: Zelle’s New Refund Policy Might Set New Standard
The model proves that bank collaborations can scale, allowing them to compete with financial technology competitors. By integrating Zelle into their own systems (legacy or otherwise), banks offered users a trusted way to send money without requiring the setup of another application. So, even though Zelle had a brand, a good UX/UI and performed well, users preferred to use the tools available inside their trusted bank app that they already use.
Another key lessons here is that as Zelle grew, so did fraud concerns. Regulators raised alarms about scams and missing consumer protections. The lessons is, the bigger your network gets, the more important it is to invest in fraud prevention, user education, and strong governance and oversight, to support growth.
Lastly, the same group of banks behind Zelle also launched a digital wallet called Paze, designed to make online shopping faster by allowing people to check out without typing in card details. It's part of the same strategy, and another example where banks are providing trusted payment tools within the banking system instead of relying on third party fintech apps.
Conclusion
Trust is fragile. Building a successful payment or fintech service doesn't always require a flashy new app, if you users can use the service where they already are or inside a trusted environment. The Zelle story also highlights that bank-led collaborations can compete with fintech innovation at scale, if well executed and governed.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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