Zelle is a service that small businesses and consumers use to make digital payments directly into their bank accounts. Unlike other peer-to-peer money transfer apps, Zelle is embedded directly into the banking software offered by thousands of financial institutions and also is available through the Zelle app, making it incredibly simple to use. While not as common for business purposes as it is for personal use, business owners can connect a business bank account to Zelle to make vendor payments and accept payments.
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What is Zelle?
Zelle was created in 2017 as a peer-to-peer payment platform to compete with other services like Venmo and PayPal. It was founded by a group of financial institutions, including Bank of America, JPMorgan Chase, and Wells Fargo, who saw the need for a more seamless and secure way for their customers to send and receive money.
Originally known as clearXchange, the platform was rebranded as Zelle in 2017 and expanded to include over 100 financial institutions as partners. This expansion allowed for wider accessibility and a larger user base. Zelle is available through many U.S.-based banks and features an app available on both Android and Apple.
Zelle’s popularity quickly grew as a result of its ease of use and quick transfer times. It quickly became one of the most popular peer-to-peer payment platforms in the United States, surpassing competitors like Venmo and PayPal in terms of transaction volume.
Today, Zelle is available through most major banks and credit unions in the United States, allowing for seamless and secure transactions between individuals and small businesses alike. Its popularity continues to grow as more and more people discover the convenience of this payment platform.
How Does Zelle Work?
Zelle works by allowing users to send and receive money through a mobile banking app or online banking website. And if you’ve got a business account, you’re able to accept payments for your business. Here’s how it works:
Sign up for Zelle: To use Zelle, you’ll need to have a bank account with a participating financial institution. Enrollment for Zelle often goes through your bank’s mobile app or website.
Choose a recipient: Once you’re signed up for Zelle, you can choose the recipient you want to send money. You can do this by selecting their phone number or email address from your contacts list or by entering it manually.
Enter the payment amount: Next, enter the amount of money you want to send. Zelle has a maximum limit of $2,500 per transaction, although some banks may have lower limits.
Confirm the payment: Before sending the payment, you’ll need to confirm the details of the transaction, including the recipient and the amount.
Send the payment: Once you’ve confirmed the payment, Zelle will transfer the money from your account to the recipient’s account. The transfer typically happens within minutes, although some banks may take longer.
Receive payment: If you’re receiving a payment through Zelle, you’ll receive a notification that the payment has been sent to you. You’ll need to sign up for Zelle to receive the payment, and the money will be deposited directly into your bank account.
Zelle’s transactions are typically processed through the Automated Clearing House (ACH) network, which is used by most banks in the United States. This means that the transactions are secure and protected by federal regulations like the Electronic Fund Transfer Act (EFTA) and the Consumer Financial Protection Bureau (CFPB).
Zelle vs. Competitors
Zelle is one of several peer-to-peer payment platforms that allow users to send and receive money online or through a mobile app. Here’s how Zelle compares to some of its competitors:
Venmo: Venmo is one of the most popular peer-to-peer payment platforms and is often used for personal transactions between friends and family. Like Zelle, Venmo allows users to send and receive money through a mobile app, but it also has a social component that allows users to see and comment on their friends’ transactions. Venmo charges a 3% fee for credit card transactions, while Zelle does not charge any fees.
PayPal: PayPal is a well-established online payment platform that allows users to send and receive money through a mobile app or website. It is often used for online purchases and e-commerce transactions but also has a peer-to-peer payment feature similar to Zelle. PayPal charges a 2.9% + $0.30 for transactions funded by a credit or debit card, while Zelle does not charge any fees.
Cash App: Cash App is a peer-to-peer payment platform that allows users to send and receive money through a mobile app. It also has a debit card feature that will enable users to make purchases and withdraw cash from ATMs. Cash App charges a fee of 3% for credit card transactions, while Zelle does not charge any fees.
Compared to these competitors, Zelle stands out for its focus on quick and easy transactions between bank accounts. Unlike Venmo, it does not have a social component, and unlike PayPal and Cash App, it does not have a debit card feature or charge fees for transactions.
How Small Businesses Can Use Zelle
Benefits of using Zelle for small businesses
Quick and convenient: Zelle allows small businesses to quickly and conveniently send and receive payments from customers and vendors. Transactions typically happen within minutes, so there is no need to wait for checks to clear or for funds to be transferred between banks.
No transaction fees: Zelle does not charge any fees for transactions, which can save small businesses money on processing fees and other transaction-related costs.
Secure: Zelle uses bank-level encryption and authentication protocols to protect transactions and user information. This can give small businesses peace of mind knowing that their transactions are secure and protected from fraud.
Wide availability: Zelle is available through most major banks and credit unions in the United States, making it easy for small businesses to sign up and start using the platform.
Easy reconciliation: Zelle transactions are automatically recorded in a small business’s bank account, making it easy to reconcile transactions and keep track of expenses.
Can improve cash flow: With quick access to funds, small businesses can improve their cash flow and have better control over their finances.
How small businesses can sign up for Zelle
To sign up for Zelle as a small business, follow these steps:
Does your bank or credit union offer Zelle? Zelle is integrated into many major banks and credit unions in the United States, so check with your bank with your business checking account to see if they support Zelle. If your bank does not support Zelle, you must sign up for a different payment method.
Enroll in Zelle: If your bank supports Zelle, enroll in the service by following the instructions provided by your bank. This typically involves logging into your online banking account or mobile app and selecting the option to enroll in Zelle.
Provide business information: Once you’ve enrolled in Zelle, you’ll need to provide some basic information about your business, such as your business name, address, and tax identification number. On top of that, you’ll need to provide an account and routing number for a U.S. bank where you hold your deposit account, your mobile phone number, and several other disclosures.
Set up payment preferences: Next, set up your payment preferences in Zelle. This may include linking your bank account, choosing which employees have access to Zelle, and setting transaction limits.
Verify your information: Finally, verify your information with Zelle by following the instructions provided by your bank. This may involve confirming your identity or providing additional documentation.
Once you’ve completed these steps, you can start using Zelle to send and receive payments from customers and vendors. Keep in mind that Zelle is primarily designed for individual-to-individual transactions, so it may not be suitable for all types of small business transactions.
Tips for Using Zelle
Here are some best practices for using Zelle for business customers.
Verify recipient information: Before sending a payment through Zelle, verify the recipient’s phone number or email address to ensure that you’re sending the payment to the correct person.
Keep track of transactions: Keep a record of all Zelle transactions in your accounting system to ensure that you can reconcile your bank statements and track expenses. It should be noted that if you send money with Zelle, it won’t be automatically recorded in your accounting software and you’ll likely need to manually record these transactions. Helpfully, Zelle allows you to attach an optional note to each transaction, which can make tracking easier.
Set transaction limits: Set transaction limits for Zelle payments to ensure that you’re not sending or receiving more money than you can afford.
Protect your login information: Small business owners should keep their Zelle login information secure and change their passwords regularly to prevent unauthorized access to their accounts.
Be aware of scams: Be aware of common scams involving Zelle, such as fake payment requests or fake customer service representatives. If something seems suspicious, contact your bank immediately.
Use two-factor authentication: Consider enabling two-factor authentication for your Zelle account to add an extra layer of security to your transactions.
Use a dedicated account: Consider using a dedicated bank account for Zelle transactions to ensure that you can easily track and reconcile your transactions.
Zelle Scams and How to Avoid Them
There are several scams involving Zelle that small businesses should be aware of. Zelle doesn’t currently offer purchase protection, meaning that when you make payments, Zelle may be unable to assist. These scams include:
Fake invoices: Scammers may send fake invoices to small businesses to request money through their Zelle business accounts. To avoid this scam, verify the invoice and the sender’s information before sending any payments.
Phishing scams: Scammers may send emails or texts that appear to be from Zelle or your bank, asking you to click on a link or provide personal account information. To avoid this scam, never click on links or provide personal information in unsolicited emails or texts. Ensure you know the sending U.S. mobile number before you click.
Social engineering scams: Scammers may pose as employees or vendors of your business and request payments through the Zelle network. To avoid this scam, verify the identity of the person requesting payment before sending any money.
Fake customer service scams: Scammers may pose as Zelle customer service representatives and request personal or financial information from small business accounts. To avoid this scam, never provide personal or financial information to unsolicited callers or emailers claiming to be from Zelle.
Be vigilant and cautious when Zelle is a payment option. Verify the identity of the sender or recipient before doing any payment processing, and be wary of unsolicited emails or texts asking for personal or financial information. Additionally, report any suspicious activity to your bank or credit union immediately.
