Zelle’s small-business transaction volume surged 180% in Q1, aiding overall business growth

The bank-operated peer-to-peer (P2P) payments firm recorded 392 million transactions totaling $106 billion in Q1. Zelle, which is owned by Early Warning Services, saw payment volume climb 61% year-over-year (YoY) and transaction value rise 74% YoY. Meanwhile, small-business volume surged 180% YoY. Zelle’s recent quarter is on par with pre-pandemic levels: In Q1 2019, the firm’s payment volume and value grew 72% and 54% YoY, respectively. The company’s Q1 2021 reflected broader industry growth in the last year: US mobile P2P payment transaction value rose 59.8% YoY in 2020, according to Insider Intelligence forecasts.

Zelle benefited from its integrations with banks—as well as a surge in P2P payments. These integrations likely elevated Zelle’s volume considering banks have been placing greater emphasis on digital tools during the pandemic. And consumers have been using similar offerings more frequently: 54% of consumers said they used digital banking tools more in 2020 than they did the year before, per JPMorgan. Zelle also benefited from the growth in P2P payment adoption in the last year, which likely translated to more volume for the firm in Q1: The number of US mobile P2P payment users rose 35.6% to reach 121.1 million in 2020, according to our forecasts.

Small-business engagement might be key to helping maintain Zelle’s growth going forward. P2P payments are expected to continue their ascent in 2021—transaction value is expected to grow 37.9% this year—and targeting a specific segment within the industry could help Zelle tap into that growth. Since small businesses were a key growth area for the firm in Q1, it might make sense for Zelle to target that group more directly. Some of Zelle’s partner banks already bundle Zelle’s services with their small-business solutions, but introducing offerings like transaction management and insights tools within its own platform can help Zelle build a more robust repertoire of small-business solutions, like PayPal’s Venmo for Business. This could help drive more volume growth for Zelle since small businesses’ appetite for digital payment tools will likely stick around for a while. It’s also worth noting that small businesses make up more than 95% of all businesses in the US—giving Zelle a large addressable market to work with.