Zelle records explosive Q2 growth but faces tight competition from peer-to-peer payments rivals

• Zelle processed a whopping 436 million transactions worth $120 billion.

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Bank-operated peer-to-peer (P2P) payments network Zelle processed 436 million transactions worth $120 billion in Q2. The number of transactions processed increased 58% year over year (YoY), and payment value rose 68% YoY.

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Compared with Q2 2019, Zelle’s transaction volume surged 155%, and its payment values exploded 172%—reflecting just how rapidly digital payments grew during the pandemic. The company also highlighted small businesses as a key growth area in Q2: The segment’s transaction volume grew 157% YoY.

Zelle had a stellar quarter, but competitors like PayPal’s Venmo reported equally impressive results. Venmo’s total Q2 payment volume grew 58% YoY, hitting approximately $58 billion—reflecting strong demand for P2P payments across the ecosystem.

• The US P2P payments sector is projected to expand 37.9% and hit $785.19 billion this year, per Insider Intelligence forecasts. Providers will want to grab a bigger piece of the market: According to our forecasts, Venmo is expected to dominate the US market this year with a 57.5% share of P2P payment users, followed by Zelle (35.6%), and Square’s Cash App (30.8%).
• Going forward, differentiation may be key to grabbing customers—something Venmo and Cash App have been heavily leaning into with their various moves into the cryptocurrency space, for example. Zelle doesn’t have many features that make it stand out from competitors, but its direct tie to banks can help offset that: Its position as a bank-based supplement may help customers view the app as more secure, especially for specific types of transactions, like rent.

Zelle can use the small and medium-sized business (SMB) market to capture a bigger piece of the payments market.

Zelle’s tie to banks could be useful for attracting SMBs as they look for easy ways to accept digital payments, a segment Venmo is also moving deeper into. Banks could decide to bundle Zelle with their own SMB tools to give their customers more value and gain their business.

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