Dive Brief:
- A group of community banks is planning to launch an open network for instant payments called CHUCK in an effort to compete with Zelle, a payment network owned by the nation’s largest banks, according to Forbes.
- The CHUCK network will be integrated into community banks’ mobile banking apps and "will alleviate the need for consumers to move money between apps or log in to their bank account to check their balance" to transfer funds from another application, the publication reported.
- The network will launch with peer-to-peer (P2P) payments and add business-to-consumer (B2C) and business-to-business (B2B) services in the future. Community bank innovation consortium Alloy Labs Alliance will manage the network in partnership with Payrailz, a digital payments company, Forbes reported.
Dive Insight:
"This is a network for community banks, by community banks," said Julie Thurlow, CEO of Reading Cooperative Bank, which was involved in creating the network. "We have an extensive roadmap of applications that will provide community banks with the fast, flexible infrastructure they need to remain competitive over the long term."
The consortium’s participating banks will see significant cost savings, relating to the initial setup, as well as transaction fees, she told Forbes. The CHUCK network is also expected to help banks experience a reduction in fraudulent activity, she added.
It’s not clear how many community banks are participating in the new payments network, but the consortium’s goal to compete with Zelle's extensive payments network will be no easy feat.
The Zelle network is owned and operated by Early Warning Services (EWS), a fintech which in turn is owned by a group of the nation’s largest banks, including Wells Fargo, Bank of America, JPMorgan Chase, Capital One, U.S. Bank, Truist and PNC.
The Zelle app is available through about 1,100 banks and other financial institutions. About 40% of those Zelle providers have less than $10 billion in assets.
The new consortium also aims for the yet-to-be-launched CHUCK network to compete with nonbanks such as Venmo and Cash App.
"We think we can help banks be part of those transactions again, and not abdicate our role in payments to nonbanks," said DJ Seeterlin, chief information officer of Chesapeake Bank, another consortium member. "We can also create compelling use cases to help make our small-business customers’ lives easier. Our support for faster payments like [real-time payments] will play a big part in this."
Seeterlin said he expects many banks will choose to implement CHUCK over Zelle, but added his bank has decided to support both solutions.
"This is part of our strategy to be where our customers are," he told Forbes.
The reported launch of a new payments network for community banks comes as EWS has significantly boosted its marketing budget for Zelle this year.
The digital money transfer service kicked off a new advertising campaign in August, rolling out a series of commercials centered around an American family, according to Banking Dive’s sister publication Payments Dive.
Without specifying a dollar amount, Melissa Lowry, EWS's vice president of marketing and branding, said EWS more than doubled Zelle’s marketing budget in 2021 relative to each of the past two years.
The company’s new advertising strategy also includes a demographic shift. EWS is targeting a narrower, older age demographic, zeroing in on 35- to 54-year-olds, as opposed to its former focus on those aged 18 to 54, Lowry said.
"This group has a high trust in their banks," so Zelle wants to remind these consumers that money transfer isn’t just for splitting a restaurant tab, it can also be used for splitting a payment on kids’ sports uniforms or grocery store bills, she told Payments Dive. "That demographic had been a bit ignored in the (P2P) category."
