Payment services like Venmo and Square Cash have enjoyed lots of attention from the younger set. Now there's a new option that's making a pitch for everyone else.
This new peer-to-peer service called Zelle officially launched Monday. Zelle will integrate directly into dozens of mobile banking apps, allowing people to send and request money using their checking accounts for free. A standalone Zelle app will be coming later this year. As an added benefit, funds sent using Zelle will become available to the recipient to spend within minutes.
Thanks to Zelle's pedigree -- it was developed by bank-owned consortium Early Warning -- the service will be available soon to 86 million people in the US. The service will eventually become available through 30 financial institutions in the country.
"We think of Zelle as taking P2P from millennial to mainstream," Lou Anne Alexander, group president of payments for Earning Warning, said Monday, using a nickname for peer-to-peer.
The service joins a crowded field of competitors looking to power new ways of exchanging money. Venmo, owned by PayPal, has become the early standout in peer-to-peer payments. The social network and payments hybrid has gained a loyal following from younger people looking for easier ways to split a dinner tab or pay for rent. Apple jumped in last week, by unveiling its new payments service using Apple Pay and iMessage texts.
The promise from all these services is to make paying for just about anything much easier and safer than cash or checks, potentially bringing on a future when no one walks around with cash, or even a wallet. Still, people have stuck with traditional cash because it's remained reliable for centuries and never runs out of batteries.
"We welcome any development that helps people address the awkwardness of dealing with cash when paying friends or family back," Venmo spokesman Josh Criscoe said in a statement about Zelle.
Zelle, Venmo, Apple Pay and their competitors are likely hoping to not only kill off cash, but grow into critical facets of people's financial lives, helping them also buy items in stores or pay bills online. Because those activities are so critical to banks, it makes sense these companies would eventually come out with their own peer-to-peer service to prevent Silicon Valley from taking over yet another industry.
Zelle has a strong starting point in gaining customers, thanks to its backing from dozens of big and small banks. In all, 86 million customers banking with Chase, Capital One, Wells Fargo, US Bank and others can start using Zelle this month. Venmo, meanwhile, had an estimated 9 million users last year, according to App Annie. Looking to invite in a broader set of people, Zelle avoided including a social feed for its payments, which is Venmo's key feature.
But, with Venmo already available for five years, it's hard to say whether Zelle has enough benefits to get people to switch over. For folks who don't typically use peer-to-peer payments already, Zelle and partnering banks may have to work hard to convince them that it may be time to go digital.
"It's not going to be an overnight success. They have a long road ahead of them," Forrester analyst Brendan Miller said of Zelle. "Things like Venmo have tremendous popularity and usage already, and Venmo is ubiquitous already."
Zelle was built on the foundation of clearXchange, a network banks created in 2011 to transfer money between each other. The name clearXchange wasn't used with consumers and the network was generally used to help the banks, not their customers. Now, Zelle creates the first unified branding and a simpler payment process for customers that sits atop the clearXchange network.
Beyond peer-to-peer payments, Zelle can also handle disbursements from companies and other institutions, such as insurance claim checks, tax refunds or medical bill reimbursements.
Zelle is slowly rolling out its service to financial institutions, with a group of 12 to 15 starting to use it first. The whole set of 30 banks -- which include Bank of America, Citi and TD Bank -- will join over the next five to 12 months, Alexander said.
Some banks, like Wells Fargo, will sunset their current branding for their peer-to-peer services and adopt Zelle instead. Others, like Chase, will integrate Zelle into their branding, such as "Chase QuickPay with Zelle."
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