Will Wells Fargo hurt Zelle by improving on it?

The irony of the explosive growth of mobile P2P is this: As consumers get more comfortable with paying one another through mobile devices, they're thinking of P2P less as a service that one should find within a bank's app.

This is a problem for Early Warning's Zelle, the bank-run P2P network whose main selling point is its integration with banks. It's a sharp contrast to rivals such as Venmo, which styled itself on a social media app; and Facebook and Apple, which took their own messaging platforms and blended P2P payments into the interface.

Wells Fargo on Thursday showcased a sweeping overhaul to investors that tightens the relationship between Zelle and its mobile banking app. But in doing so, it runs the risk of breaking one of Zelle's fundamental rules: Its interface should be the same across all the banks that support it.

"Pay with Wells Fargo is an expedited path to payments through mobile banking," said Richard Crone, a payments consultant. "A transfer requires an authentication, but if you can fast-path that, you have a greater likelihood of bank-sponsored payments being used."

Patrick T. Fallon/Bloomberg

The Pay with Wells Fargo feature takes the bank's most frequently used payment programs, including Zelle, and makes them accessible before signing into the mobile banking app.

Wells Fargo is not alone in locating Zelle alongside other mobile payment and banking features. Chase has held on to its QuickPay brand, and Bank of America and U.S. Bank both support Zelle, but not as a primary brand. "Zelle is in tiny letters when you look at the bank pages," Crone said.

By building a fast track to Zelle, Wells may create problems for other Zelle banks that don't have a similar shortcut to the P2P page.

Ian Macallister, vice president of strategic partnerships at Early Warning, said at SourceMedia's 2017 Card Forum that inconsistent branding was "the biggest hurdle we had at clearXchange," the predecessor to Zelle.

It was impossible to expect widespread adoption when one bank called its version SurePay and another called it QuickPay, because consumers would have no idea that these bank-owned brands operated on the same platform, Macallister said. Not only would users have to guess that these systems were compatible, they would also have to locate them within the app, and each bank had its own approach to positioning the P2P service.

If the interface is nearly identical from bank to bank, one Zelle user can walk another through the process of sending money regardless of which bank each person uses.

In an email, Wells Fargo's PR office said it has not yet piloted Pay with Wells Fargo and the interface designs are not final. The bank added it is "all in" on Zelle.

Pay with Wells Fargo is part of a larger mobile overhaul at the bank that will eventually include direct mobile donations to nonprofits and Control Tower, a digital experience that will provide consumers with a representation of their digital footprint. Control Tower will begin a pilot next month and Pay with Wells Fargo will test with employees next month and with consumers later this year.

"Wells is making P2P and mobile very easy to access, so a transition from one to the other is effortless as possible and is seen as comparable to the Venmo experience," said Sarah Grotta, director of the debit and alternative products advisory service at Mercator.

Zelle's transaction volume consistently beats Venmo based on the size of the large banks that support it, including Wells Fargo. In a release the bank reports Zelle transaction volume has grown 64% in the past year and the average transaction volume per active Zelle user has increased 19%.

But Zelle has faced some challenges. It has been responding to reports that its service can be exploited for fraud, though at least one case was determined to be exaggerated. Zelle may also face headwinds in its effort to reach downmarket for community banks and other financial institutions. Zelle and other digital P2P apps can rely on consumers gradually migrating from paper-based and other traditional P2P methods for organic volume growth.

Meanwhile, Venmo is reaching out to addressable market of millions of retailers, which it can then tie into its owner PayPal's dominant base of online payment users. That gives Venmo and PayPal a way to pair real-time, social-driven P2P transfers with omnichannel shopping and payments in a way Zelle cannot.

Daniel Wolfe contributed reporting to this story.