Bank Adoption of Zelle, Venmo and Other P2P Payment Apps: Regulatory and Operational Issues, Risk Mitigation

Consumers spent over $100 billion in 2018 using Zelle, the P2P payment system created by the largest U.S. banks. Including Zelle, Venmo and other applications, the total personal payments market now includes about 40 percent of all U.S. smartphone users. Banks and their counsel cannot ignore the growing role P2P payments will play in the banking industry going forward.

Adoption of a payments system includes integrating messaging and putting policies and procedures in place around risk management and customer support. And there are regulatory concerns on several fronts. Banks and credit unions that provide money transmission services are subject to the oversight by the CFPB, the FDIC, the Federal Reserve, the National Credit Union Association, and the Office of the Comptroller.

The CFPB enforces Regulation E, which protects consumers who use electronic fund transfer services. Regulation E subjects financial institutions that process electronic transfers to various requirements, including specific disclosures, periodic statements, resolution of errors procedures, records retention and limitations on consumer liability for unauthorized transactions.

Venmo and similar P2P services are "nonbank money transmitters" subject to the oversight by FinCen, OFAC, the CFPB and the FTC, as well as state licensing requirements and consumer protection laws. Although Venmo is a third-party P2P payment application, banks must still be concerned with compliance and fraud issues when they allow customers to link their bank accounts to Venmo.

Listen as our authoritative panel discusses legal and operational issues associated with bank adoption of P2P payment systems. The panel will discuss the pros and cons of bank-created systems such as Zelle as compared to non-bank services such as Venmo.

1. P2P payment applications--how they work within the banking industry
   1. Zelle
   2. Venmo, Square, others
2. Regulatory framework
   1. Zelle and other bank-provided services
   2. Non-bank money transmitters
3. Operational concerns in adopting Zelle
4. Challenges in transacting with Venmo and other non-bank payment services

The panel will review these and other essential questions:

• How have P2P payment applications impacted the banking business?
• What are the risks to banks and customers in processing payments through services such as Zelle, and how do they compare to risks associated with Venmo?
• What is the regulatory framework surrounding non-bank money transmitters? What kinds of enforcement actions have resulted?
• What are the chief regulatory issues associated with adoption of Zelle?