Chances are you've heard of Zelle and likely used it as a consumer when splitting the check at dinner or sending money to a friend. It's because they're associated with almost every major baking app in the United States. They're so popular that they handled 2.9 billion transactions totaling $806 billion in 2023 alone. This is simple and noninvasive enough. But what if you're a business looking to offer convenient recurring payments for the gym? This gets a little more complex than it does for the bi-monthly bar tab.
Does Zelle Support Recurring Payments?
The simple answer: Despite their huge number of users, Zelle does not support any feature that would accommodate recurring payments natively. A user has to be able to manually initiate each given transaction. This is not so convenient for payments that should be made on a regular schedule; for instance, monthly subscription fees, or even quarterly donations. Some banks will allow you to schedule recurring payments using Zelle as the payment method but it's not a feature within the app itself.
Does Zelle Plan To Offer Recurring Payments?
At this time there appears to be no plan for Zelle to start offering recurring payments natively. Some banks like U.S Bank offer scheduled payments via Zelle but they have to be done through the bank’s app by the user. That's just more reason to start considering alternatives. Fortunately, there are options available to you utilizing Open Banking and ACH protocols.
What is Zelle?
Zelle is a digital payment network allowing users to send and receive money from their bank account directly to another person or businesses bank account within the U.S. Zelle is so popular because they likely have a partnership with your bank or credit union account. Not only are they directly in-bedded in major U.S banks like Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank, and Wells Fargo they also work with hundreds of smaller financial institutions
How Zelle Works
Using Zelle is relatively easy: people sign up using a mobile number or email through their bank's app, select a recipient, type an amount and send money. Typically transactions process within minutes if the recipient is also signed up. For businesses, Zelle allows their customers to send instant payments, allowing a frictionless flow of transactions for goods or services, with the funds automatically showing up in their account.
Benefits of Using Zelle
- Speed: Transfer of funds takes place within a few minutes.
- Convenience: Direct integration into banking apps means no other software is required.
- No Fees: There is no fee charged to send and receive money.
Drawbacks of Using Zelle
- No Cancelation: Once the money is sent, the amount sent to a registered user cannot be canceled.
- Irreversible payments: Mistaken transactions can only be reversed if the recipient agrees to do so.
Where Can You Use Zelle?
Zelle only works for bank account holders in the United States which makes sense because their partnerships and integrations are built around the structure of major banks and credit Unions of the United States.
Making Sense of Recurring Payments
Before examining alternatives it is necessary to have an understanding of how recurring payments allow for businesses and consumers to easily engage in regular transactions and in that way maintain a more predictable and consistent financial process. There are a couple of key nuances to recurring payments, notably understanding the difference between customer and merchant-initiated transactions, and understanding how these payments work with bank accounts.
What are Recurring Payments?
Recurring payments are automated payments that happen on a schedule, typically monthly for things like electricity bills or yearly renewals for a gym membership. Automating that payment ensures they always happen on-time and reduces administrative overhead in accounting for them. For instance, imagine that you're the owner of a gym, and you have 1000 gym members who pay $50 a month. That would be a flat $50k a month in revenue, but billing everyone every month in a non-automated way would take considerable time. Not to mention, this would be too many missed payments and administrative time. If you set up recurring payments to collect $50,000 every month from your members, what it would do for you is make your revenue look a lot more steady.
What is a Customer Initiated Transaction (CIT)?
A Customer Initiated Transaction is one in which the customer sets up the recurring payment, likely at the beginning of a service agreement or subscription. For instance, when a customer subscribes to a streaming service, they enter their payment information and authorize a charge for a certain amount at monthly intervals.
What is a Merchant Initiated Transaction (MIT)?
In a Merchant Initiated Transaction, the merchant charges a pre-authorized payment method on a recurring schedule. This is usually used with services requiring periodic payments, like utility companies or a gym membership, where the merchant processes the transaction without direct input from the customer monthly.
How do recurring payments work with bank accounts?
Recurring payments will generally make use of ACH (Automated Clearing House) when they're going out from a bank account. The customer hands over their banking information, and the merchant sets up automatic withdrawals in the amount and according to the schedule the customer agrees to. This makes paying bills easy for the customer and secures cash flow for businesses.
Best Zelle Alternatives for Recurring Payments
There are plenty of other services providing this type of recurring payment functionality for businesses out there. Here are some of the most obvious options:
- PayPal: Best for businesses whose customers come from all around the world. Accepts payments in multiple currencies and uses a service most customers aren't afraid to use. For instance, an online magazine with subscribers from all over the world can use PayPal for easy subscription management.
- Stripe: Offers full-featured tools suited for recurring billing that allows e-commerce businesses a lot of tools within their suite. They follow an API-first principle, making whatever they offer highly customizable to fit businesses whose needs may not get fully supported through an out-of-the-box solution. This makes it a perfect fit for SaaS businesses in need of a flawless mix between their websites and apps. Using Stripe, the monthly software subscriptions for a tech startup are handled efficiently.
- Square: Square's features for easy recurring billing and invoicing work for small businesses and freelancers that need a way to get paid. Its UI is user-friendly, and its tools are simple, so it remains accessible, no matter how much back-end dev knowledge you have. A freelance graphic designer can use Square to set up recurring payments for their client projects.
- Adyen: The solution is flexible and can be adapted to any business: both growing and large-scale companies that need to process recurring payments. This service supports over 250 payment methods, from the widest used credit cards to something more exotic, like different kinds of e-wallets, providing a good chance to maximize your recurring revenue. A fitness app accessible through a subscription could use Adyen to accept payment methods from all over the world that their user base would have preferred.
- Braintree: Ideal for a company that would like a wide range of options to facilitate one-time and recurring payments. They accept a wide variety of payment methods, including credit cards, PayPal, Venmo, and digital wallets. So, it is quite versatile to suit different types of transactions. An online merchant could use Braintree to easily manage everything from simple sales to complex subscriptions, ensuring a seamless process for customers.
Benefits Of Accepting Direct Bank Payments Instead of Credit Cards
Accepting bank account payments instead of or in addition to credit cards for online card not present transactions can be beneficial:
- Lower Fees: Direct bank account transfers usually cost less than fees on the credit card. A few go as high as 3.5%. Avoiding those would have a direct effect on your bottom line.
- Instant Access: Money sent directly to your bank account is available for use right away.
- Incentive Flexibility: Lower processing fees for bank account transfers imply that you will be in a position to offer more discounts and incentives for customers who pay directly.
How Spreedly Can Help Enable Recurring Payments
While Zelle does not offer any features for you to set up and support Recurring Payments, a platform like Spreedly can help you bridge such gaps by connecting your business with a number of gateways that accept multiple payment methods and are, therefore, suitable for recurring transactions. You could set Spreedly to accept single transactions through PayPal and repetitive payments through Stripe, all while storing both sets of cards in the agnostic vault to enable you to transact easily across both gateways. Meaning that you could increase transaction authorization rates while keeping your customers' data safe.
Zelle is terrific for instant, fee-free transactions, but it creates a void for users who really need to send and receive funds on a more consistent basis. Layering in platforms like PayPal, Stripe, and Square on top of your payment stack, with Spreedly's payments orchestration layer, can provide the functionality needed for a real proper financial management system.
Reach out to Spreedly to learn more about setting up recurring payments for your business, and opening up your payments stack today.
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