Bank Stocks News: Why Zelle Could Be a Threat to Mastercard and Visa

Today, bank stocks are in focus after a report from the Wall Street Journal indicated Zelle may soon be a checkout option at retail stores. Zelle is owned by Earning Warning Services, which is in turn owned by seven of the largest U.S. banks. These banks include JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Capital One (NYSE:COF) and Bank of America (NYSE:BAC).

Zelle app logo displayed on a smartphone placed on a wooden table with sunlight shining on phone
Source: Thomazini

Zelle operates as a peer-to-peer (P2P) payment platform allowing users to send and receive money straight from their bank accounts. The service is offered by a wide range of financial institutions, helped by its connections to the aforementioned banks. In 2021, sent payment values on Zelle increased by 59% year-over-year (YOY) to $490 billion. Meanwhile, transaction volumes increased 49% YOY to 1.8 billion payments. Finally, the payment platform reported a 162% YOY increase in payments to small businesses.

Here’s what investors should know about the recent Zelle news moving forward.

Zelle Could Threaten MA and V Bank Stocks

Zelle may now be eyeing a new market segment. Per the Wall Street Journal, the banks behind the platform are now debating whether to bring it to retail stores. If Zelle becomes a new checkout option, it could potentially encroach on Mastercard (NYSE:MA) and Visa’s (NYSE:V) share of the digital payments industry.

Banks already earn billions every year from the fees that merchants pay when a debit or credit card is swiped. However, Mastercard and Visa set these fees, taking a chunk of the profit for themselves. Implementing Zelle as a checkout service could allow the banks behind it to avoid fees as well as set their own fee rate.

According to the Wall Street Journal, Bank of America and Wells Fargo are “in favor of expanding the service.” But executives at JPMorgan have been more hesitant. They have cited a desire to protect consumers from fraud first and foremost. Meanwhile, U.S. Bancorp (NYSE:USB) and Capital One remain “undecided.”

Banks who like this move could incorporate Zelle for checkouts themselves. However, Zelle’s owners will still need to vote on the matter “before the service can be activated across all of the banks that use it.”

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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