Bank Stocks News: Why Zelle could be a threat to Mastercard and Visa

Today, banking stocks are in the spotlight after a report by the the wall street journal indicated that Zelle may soon be a payment option in retail stores. Zelle belongs to Earning warning services, which in turn is owned by seven of the largest US banks. These banks include JP Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Capital one (NYSE:COF) and Bank of America (NYSE:BAC).

Source: Thomazini

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

Here’s what investors need to know about recent Zelle news.

Zelle could threaten shares of MA and V banks

Zelle may now be considering a new market segment. Speak the wall street journal, the banks behind the platform are currently debating whether to bring it to retail stores. If Zelle becomes a new payment option, it could potentially encroach on MasterCard (NYSE:MY) and Visas (NYSE:V) share of the digital payments industry.

Banks already make billions every year from the fees merchants pay when a debit or credit card is swiped. However, Mastercard and Visa set these fees, taking some of the profit for themselves. Implementing Zelle as a payment service could allow the banks behind it to avoid fees and 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 JPMorgan executives were more hesitant. They cited the desire to protect consumers from fraud above all else. Meanwhile, American bank (NYSE:USB) and Capital One remain “undecided”.

Banks that like this movement could integrate Zelle for the checkouts themselves. However, Zelle owners will still have to vote on the issue “before the service can be activated at all banks that use it.”

At the date of publication, Eddie Pan held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.