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Podcast Episode 2: Exclusive look at Zelle's new verification features with Early Warning's Group President of Payments

| by Will Hernandez

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Intro & News

Welcome to Episode 2 of the Mobile Payments Today podcast. I am your host, and editor of Mobile Payments Today, Will Hernandez. Well, we are off and running with this podcast, and I wanted to thank everyone who listened to last week's episode. We got a great response from it, and we're excited to see what comes next. We have another good interview this week with Lou Anne Alexander from Early Warning, the company behind Zelle. Zelle is blowing up and brings some interesting questions relating to a news item I'm going to get into right now. 

There is something going on in Washington D.C. right now, worth keeping an eye on. Last week, we published a news brief from a Washington Post story about how D.C. council members have introduced a bill that would require establishments to accept cash payment for goods and services. Their concern in bringing up the bill is limiting payment to bank cards, discriminates against the 1 in 10 D.C. residents who are either "un" or under-banked and thus cannot pay via plastic. And that's an argument we always hear when we discuss a cashless society, what do you do about the financially under-served consumer? I have yet, personally, to hear a great answer from a payment exec, about how they will address this issue. With the success of platforms such as Zelle, Venmo, and P2P payments, along with the adoption of mobile wallets; the financially under-served consumer is something the payments industry is something they will have to address sooner rather than later. But, there may be some pushback from consumers in general about the cashless society. A lot has been made about how some fast casual chains are going cashless. And Shake Shack, has actually received some pushback from some consumers, from one particular location in New York City that was exclusively using self-order kiosks. The Shake Shack pushback comes back again and again in the cashless society discussion. And it's happening in other restaurants. A couple of years ago, Sweet Green, went cashless and they received pushback as well. It's going to be something as a topic we will keep and eye on with the podcast, and will be a future Q&A.

On that note, stay tuned with my interview with Lou Anne Alexander from Zelle. And then I will come back with the editor of ATM Marketplace, Suzanne Cluckey. Stay tuned after this quick break....


Early Warning/Zelle Q&A, Lou Anne Alexander

Will: Welcome back to the podcast. I am hear with my guest this week, Lou Anne Alexander. She is the Group President of Payments at Early Warning. For those who are unaware, Early Warning is the company behind Zelle, which is the popular P2P service that all the rage at the moment. First, Lou Anne, welcome to the podcast, and thanks for joining me this week.

Lou Anne: Thanks for having us. It is exciting to be able to talk about Zelle to this audience.

Will: As I mentioned earlier, just the success of Zelle. I think obviously, the numbers speak for themselves if you look at the first quarter this year. 25 billion in transfers, and that was up 15% from the 1st quarter of 2017. And eMarketer, which does a lot of research in the field, predicts that Zelle will overtake Venmo later this year in terms of users. The first question here is, what do you think has been one or two key reasons this has worked out for the banks so far?

Lou Anne: You know Will, I have been in the payments business for quite some time. What I've learned is it's very hard to get consumers to change their payment habits. But that's what we're doing with Zelle, we're really changing the way people move money. So I think consumers are finding more uses in their daily lives for Zelle. They have smartphones in their hands. They have instant access to their banking applications where Zelle lives. There's no need to download another application. So it's really that consistent user experience, also across our financial institutions where consumers can teach one another no matter where they bank, how to send and receive money with Zelle. So again, the numbers do speak for themselves. Our average dollar amount today is about $300, we have over 140 financial institutions signed up, and thirty five live. And of course if your financial institution isn't live, you can download the Zelle app and participate.

Will: That's pretty amazing, just in terms of the word of mouth, and how people are finding it easy. I mentioned this on Twitter, over the weekend, I met up with my sister, she had to pay me back for a gift for my mom. She asks me, you have Bank of America? I said I do. She had transferred money with Bank of America before, Zelle came out. She says, I'll 'Zelle' you the money. I started laughing because I usually don't have these payments conversations with my sister. How does that speak to the marketing and the ease-of-use people are so aware of this so quickly.

Lou Anne: Back in January, we had a very wide-reaching nation-wide marketing campaign. We featured Daveed Diggs, of Hamilton fame, who did spoken rhyme as part of the Zelle launch. Frankly, with those commercials, we had more than 3,000 ads for the first quarter; cable networks, print publications. We did take-overs in subway stations. We even had Godzilla in the middle of Time Square, to get that awareness out. It really worked for us. We had almost 8 million visits a month, during our campaign. We were adding and still are adding over 100,000 consumers tokens a day, to the network. It really worked very well for us, to get the awareness of Zelle out, for the folks to start talking about it to one another, as a faster, and safer way to move money.

Will: What does that say about the marketing aspect of it? I spoke to Rose Corvo earlier this year about that for Mobile Payments Today. Talking about the use that kind of sparked; but keep in mind the banks have been doing their own marketing. We've seen it with Wells Fargo, and Bank of America. How much as that helped, where if someone goes to a Wells Fargo ATM or Bank of America ATM, they're seeing the Zelle advertising. How important is it that banks are doing their own marketing.

Lou Anne: It is vitally important. The advertising that we've done with Daveed and others has been to build the awareness. So when my bank says 'hey, here's how you enroll in Zelle', that we get that adoption. But it's that invitation from my financial institution, from the application they are already using, that is really driving consumer adoption of Zelle.

Will: I know during those commercials, one of them had the fact, iterated from Daveed, "hey this is safe, because the banks are backing it".  I know Zelle hasn't shied away from addressing the fraud issues. I call them "so-called" fraud issues. I think it's a fine line when we call that stuff fraud. It seems like the majority of those instances have stemmed from human error. But that doesn't stop from people from using the platform, overall. My question is, can you help set the record straight with Zelle's security? Whether, in the future, more can be done to lessen the human error aspect of some of these fraud claims?

Lou Anne: This is something consumer's safety, and soundness of the network; their satisfaction is something we take very seriously. Just so folks are aware, if your account is in some way access and someone introduces an unauthorized transaction, you're covered. Your bank covers you for that today, and your use of online and mobile banking. So, what I call true fraud, that unauthorized access, consumers should not worry, the banks have their back if that ever happens to them. But there has been some reported cases that have been customer mistakes. Mistyping, mis-keying a mobile number, might mis-direct a payment. We are introducing additional features within the service which will verify that you are sending money to the person you think you are sending money to. So, if I think I'm sending money to Will, but Zelle tells me I'm sending it to Nancy, I'll have the ability to very quickly cancel that transaction and re-enter it. You probably have been seeing some of the scams. Zelle, like any other payment method, is susceptible to individuals using that payment method to sell bogus tickets, or sell things they don't put in the mail. And we're really trying to educate consumers, that is a vulnerability. You have to trust the individual that they are sending money to, because these moneys are moving from one checking account to another. Typically, within minutes. So don't buy something from someone you don't trust, and pay with Zelle. You have to treat it as cash.

Will: I'm glad you mentioned the problems we've seen, and some of the Craigslist scams. Because. I wrote an article a couple of months ago, saying sometimes at the end of the day, there needs to be personal responsibility on the side of the consumer. To make sure, they have the email correct, the phone number right, before they send. Is that a fair thing to say? You want the banks to say we've got your back, but at the end of the there is personal responsibility.

Lou Anne: That is fair. We certainly want consumers to make sure they are transacting with individuals they know and trust. And again, if you wouldn't hand them cash, not appropriate use of Zelle. We do take responsibility, and make sure we know who is using the network. So the identification of those individuals, you are transacting with, that is Zelle's and the bank's responsibility. I'm glad to say there is no wide-spread fraud across the network. We are certainly focused on that. We have individuals who monitor it 24-7. every day of the week. Our fraud rates are at or below the industry norms, especially what you expect of a new P2P system. It is a top priority, and we are introducing some additional features, for verifying those phone numbers, to help consumers. And if consumers do find themselves in a place where mistakes have been made, there is a way for them to dispute those transactions. The bank will try to help get those moneys back. And again, with fraud, consumers are protect; we will move very quickly to remove bad actors, so those scams are not continued to be perpetrated.

Will: I'm glad to hear that, because it's been good Zelle has been open about addressing those issues. With it being new, and bad actors, they will always access these payment methods, and try to take advantage of people. It's good that Zelle is being up front about it. One last question. I know you were at Money 20/20, I spoke to you at the Zelle after party. You've been on the stage there, and I'm sure you've been around on the trade show circuit. What has that been like for yourself, to be the in some ways, the face of Zelle?

Lou Anne: Wow, will, I feel very fortunate to be the face of Zelle. If that's what you call it (laughter). I'm representing hundreds of people in Early Warning, and thousands people across our financial institutions, who are very talented and hard working. They've all been instrumental in getting Zelle out the door. One, I can't believe we've just celebrated Zelle's first birthday. I think everyone involved has really felt like we are exceeding expectations for the first twelve months of the Zelle brand. And frankly, one of the things I've enjoyed most is very similar to sharing your story about your sister and sharing money; hearing the stories about how Zelle has change lives. My daughter's favorite transaction on Zelle is "request money", not "send money" (laughter). So some of us are going to be net senders, and some net receivers. Certainly through insurance claims that we see where consumers are out their car, or damage to home, and are getting money put into checking account for those emergency situations, the Red Cross use. The kids are college who needs to get money fast, in fact my daughter has called me in the checkout line, needing to make a purchase she didn't have the money for. I Zelle'd her the money, and she was able to make the purchase without it being denied. So, that's faster payments, if you ask me. Personally, I get a lot of benefit from hearing those stories in the industry.

Will: As a personal user, I can tell you, I am using it more than the other guys. It's been something. The ease of it. Just being able to go into it within the Bank of America app. It's been making live easier, just in terms of getting the money out there. It's been an amazing story, just the success of it, in that first year. And again, thanks for coming on the show this week. And I'm sure we're going to chat sometime down the road.

Lou Anne: Thanks for having me, and I look forward to our next discussion.


ATM Marketplace Editor, Suzanne Cluckey

Will: I have on Suzanne Cluckey, she is the editor for ATM Marketplace. Suzanne, thanks for coming the show this week.

Suzanne: Sure Will, it's good to be here, Thanks

Will: We were talking before hand, a little about Networld Media Group has coming up here with the new newsletter we're going to launch. You are going to be in charge of it, so tell us exactly what we'll be looking at in the next couple of months.

Suzanne: So, it's called World of Money. It is going to launch in the next couple of weeks. It is a broad look at payments, financial services, anything to do with the business of money. So, there will be mobile payments, mobile wallets, bitcoin, blockchain, banking, looking for the biggest stories of the day. It's going to be a great daily overview of what's going on in the world of money. It will be a really quick read, something readers can open up, they can skim the headlines, they can see what looks good to them. If there is some news the want to follow up on, it will be there for them.

Will: It sounds like, you aren't going to have a shortage of information. It seems, in general, we're reading something new that's happening in the industry. Is that the feeling you're having?

Suzanne: Absolutely. I was reading the other day, the American Banking Association is really angry because the Fed is allowing the broadening of the definition for credit unions. So, they can can grow their audience, then cuts into the banking audience. There is a controversy there, and so much going on at the government level with Dodd-Frank. Certain rollbacks of Dodd-Frank. Things going on with the Consumer Financial Protection Bureau. Right now, everything is popping. And a tremendous amount going on with technology, with mobile, mobile wallets. There's this amalgamation of things that are coming together, and it's going to be interesting to see where these connections are.

Will: One of the interesting things we've talked about, the idea of cardless ATM transactions. Where I can use a QR code to access an ATM, now with the wallets, you can actually use your NFC phone. There's a NFC reader on the ATM, and I have to say as a Bank of America customer I 'poo-poo'd' the idea in the beginning, but I find myself using it now. It's really been a very convenient technology. What have you seen on your side of things, regarding has the technology has evolved over the years.

Suzanne: Let me say, I'm really jealous. My bank only got RDC last year (laughter). I think we've passed the tipping point, we're seeing more and more FI's get involved. We're seeing the ATM vendors working with banks, and working with processors. We're also seeing reach over into the retail ATM world. That's a little more difficult. Back in the day, you could only use the ATM for your bank. If that didn't happen to be convenient, then took bad, you were out of luck. Then they found a way to make it interoperable. Now, with cardless cash, the interoperability is going to become important. Because people don't always want to use their bank's ATM's. In addition to that, banks are striking co-branding deals with independent deployers — Cardtronix, PAI. So, when that begins to happen, people begin to get frustrated if they can't use the service they really like, with an ATM that happens to be convenient. Cardtonix just rolled out cardless cash access at retail ATM's. I think cardless is going to pick up faster than even mobile payments.

Will: That's an interesting thought. I think in the beginning, what started off as this small idea has gradually become more and more big over the years. To now it's the point, where it's ubiquitous. Is that safe to say?

Suzanne: I think we're on the way there. There's a long way to go yet, again, interoperability being one of the questions. I think it's inevitable, eventually, anyone will be able to walk up to an ATM with their phone and access cash. As much as people say cash is going away, there really is no indication that will happen anytime soon. So people will still want cash, but we're attached to our phones.

Will: Let's touch upon the cash idea. This is something that continues to be discussed, what is really going on with cash use, declining cash use, ATM use. There was a study that just came out in the UK, where debit card transactions overtook cash, cash is still a second place over there. I would imagine this trend is basically the same here. What do you make of the whole discussion?

Suzanne: It's a big discussion. We saw with Shake Shack — you did a great blog post on it — what they ran into when they tried to go cashless. Consumers do not like to be told how they must pay. They want to have choices. The first thing they do when you tell them they can't do something is object, even if they wouldn't do it anyway. I don' t think cash is going to go away. People find it convenient for budgeting. You don't know when you're going to be somewhere and you can't use your card. Sweden is a good example, their central bank is now worried. They've gone so far down the road to cashless-ness, the bank is worried all the control over payments will rest within the commercial sector. It is going to be vulnerable to attack. Electronic payments go down, and then you are toast. Because commerce crawls to stop. We saw this a couple of weeks ago, there was a major outage for one of the card networks. People couldn't pay bills, buy groceries, they were leaving carts of groceries abandoned in Tesco stores in the UK. It was a good indication, how quickly things get chaotic when people can't pay with cash. And cash is always that backstop.

Will: The whole thing that happened in Europe, with Visa, where their system went down, that should be a warning to everyone, to put the breaks on the cashless talk. I'm sure ATM Marketplace, as well as mine, will continue to cover this issue. Suzanne, thanks for taking the time this week. I look forward to our next chat.

Topics: ATM Innovation, ATM & Mobile Banking, Bank / Credit Union, Regulatory Issues

Companies:, Mobile Payments Today

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