A community bank in Reading, Massachusetts, is the first to go live this week with
More banks will roll out their version of Chuck in the coming weeks and months, and several are already looking at additional digital banking services the consortium may develop together with Alloy Labs Alliance, which is guiding the group.
The banks behind Chuck considered Zelle to be too expensive and inflexible for their needs. They also wanted to support services like PayPal's Venmo while still managing the service within their own banking apps.
“We didn’t want Zelle because of the pricing and options, and we saw so much more demand for just account-to-account or Venmo transfers that doing our own service made more sense,” said Juliann Thurlow, president and CEO of $662 million-asset Reading Cooperative Bank, which tested the service for weeks before rolling it out.
Adopting Zelle was never a consideration for Reading Cooperative. Industry observers say Zelle — owned by several large banks —
Chuck enables users to initiate P2P payments through a variety of methods the bank chooses, from ACH to Venmo — with plans to eventually add
The new service relies on instant-payments technology from Glastonbury, Connecticut-based Payrailz, which uses artificial intelligence to filter our suspicious P2P transactions. Payrailz, established in 2016, has built a cloud-based platform to support account-to-account transactions including bill payments.
Reading Cooperative chose to get on board with Chuck as a way to fight back against the alternative payment providers that are taking a greater share of its customers' transaction volume, Thurlow said.
“Customers are using more third-party payment services and apps, and we want to increase users' control and visibility over all these payments by letting them initiate them here, through our dashboard," Thurlow said.
Consumers can initiate either a one-time or recurring P2P payment from the bank’s mobile app or online banking portal. Recipients get an email or mobile phone notification of the P2P payment, and choose whether they want to receive funds via their bank account, Venmo or instant transfer via a debit card for a $1 fee.
“Venmo is popular, and the platform is designed so we can add other P2P services later if demand is there,” Thurlow said.
Prior to launching Chuck, the only P2P option Reading Cooperative offered customers involved a complex, old-fashioned process of using microtransactions to authenticate each new recipient, which takes days.
For security purposes, recipients of Chuck payments must input a one-word code, provided by the sender through another channel. Payrailz also uses AI to flag suspicious senders or recipients, and guarantees the security of each transaction.
Thurlow doesn’t see the friction of the security question as an obstacle to adoption.
“So far that hasn’t been a hurdle,” Thurlow said, noting that consumers overall are accustomed to two-factor authentication for many types of transactions.
Mercantile Bank of Michigan, a $5 billion institution based in Grand Rapids, another coalition member, has offered its customers P2P services for 15 years through a customized PayPal integration. But the bank was looking for a more streamlined approach and Chuck fit the bill, according to John Schulte, the bank’s chief digital officer.
“Mainly we want to give our customers wider P2P choices, and with Zelle we saw higher costs and limitations, while Chuck has an open-ended architecture that will let us add on various kinds of P2P solutions over time,” Schulte said.
Mercantile, which has 46 branches, plans to roll out its new P2P option via Chuck within the next month, while keeping the PayPal P2P service going for the immediate future.
What Schulte likes best about Chuck is Payrailz’ technology enabling the bank to quickly freeze any suspicious transaction and retrace it. “We like the control,” he said.
The $2 billion-asset First Northern Bank in Dixon, California, is another coalition member preparing to roll Chuck out to its 35,000 customers at 11 branches, in the next few months.
For several years First Northern has provided P2P services to customers via Acculynk, a niche P2P service offered through Q2, First Northern’s core banking services provider.
“We were looking for a change and we like the open-network concept of Chuck,” said Louise Walker, First Northern's president and CEO.
The bank explored using Zelle, but thought Chuck was more cost-effective, she said.
Early Warning Services, which operates Zelle, said credit unions and community banks continue to join its network and 90% of the financial institutions currently on board are credit unions and banks under $10 billion in assets.
Walker is hoping the bank’s experience with Chuck may lead to additional ventures through Alloy Labs.
“I like the whole idea of working with a group of banks to focus on common issues we’re all facing that our core vendor can’t help us with,” Walker said.
The banks in the coalition are meeting continuously to share their experiences as Chuck rolls out and to explore other potential products.
“P2P is a great use case to begin with, and we’re committed to Payrailz as our chassis, but the next phase is looking at how we can use open banking technology to find other solutions to problems smaller banks face,” said Jason Heinrichs, Alloy Labs’ CEO.
