Chuck, the small banks’ answer to Zelle, is online | PaymentsSource

A community bank in Reading, Massachusetts, is the first to go live this week with Mandrela peer-to-peer payment service developed by a consortium of 12 smaller banks as a cheaper and more versatile alternative to Zelle.

Other banks will be rolling out their version of Chuck in the coming weeks and months, and several are already considering additional digital banking services the consortium could develop with Alloy Labs Alliance, which is guiding the group.

The banks behind Chuck considered Zelle to be too expensive and too rigid for their needs. They also wanted to support services like PayPal’s Venmo while managing the service in their own banking apps.

“We didn’t want Zelle because of the pricing and options, and we saw so much more demand for account-to-account transfers or Venmo that doing our own service made more sense,” said Julianne Thurlow, president and CEO. management of $662. Reading Cooperative Bank, which has one million assets, tested the service for weeks before rolling it out.

Adopting Zelle was never a consideration. Industry watchers say Zelle – owned by several major banks – Bank charges 45 cents to 90 cents per transaction, with smaller, low-volume financial institutions paying the highest fees.

Chuck allows users to initiate P2P payments through a variety of methods chosen by the bank, from ACH to Venmo – with plans to eventually add FedNow – for half or less the cost per transaction of Zelle, say participants of chuck. FedNow, expected to roll out in 2023, is a new instant payment service the Federal Reserve Banks are developing.

Banks using Chuck can allow consumers to pay themselves from a mobile app using a system that requires a secure one-time password as a second authentication factor.

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The new service is powered by instant payment technology from Glastonbury, Connecticut-based Payrailz, which uses artificial intelligence to filter out our suspicious P2P transactions. Payrailz, established in 2016, built a cloud-based platform to support account-to-account payments, including bill payments.

Reading Cooperative chose to partner with Chuck to fight alternative payment providers taking a bigger share of its customers’ transaction volume, Thurlow said.

“Customers are using more third-party payment services and apps, and we want to increase user control and visibility over all those payments by allowing them to initiate them here, through our dashboard,” Thurlow said.

Consumers can initiate a one-time or recurring P2P payment from the bank’s mobile app or online banking portal. Recipients receive an email or mobile notification of the P2P payment and choose whether they want to receive funds via their bank account, Venmo, or an instant transfer via debit card for a $1 fee.

“Venmo is popular and the platform is designed so that we can add other P2P services later if the demand exists,” Thurlow said.

Prior to the launch of Chuck, the only P2P option Reading Cooperative offered customers involved a complex, old-fashioned process of using microtransactions to authenticate each new recipient, which took days.

For security reasons, recipients of Chuck payments must enter a one-word code, provided by the sender through another channel. Payrailz also uses AI to flag suspicious senders or receivers, and ensures the security of every transaction.

Thurlow doesn’t see security friction as a barrier to adoption.

“So far, that hasn’t been a barrier,” Thurlow said, noting that consumers on the whole are used to two-factor authentication for many types of transactions.

Another member of the coalition, the $5 billion Grand Rapids-based Mercantile Bank of Michigan, has been offering customers P2P services for 15 years through a custom PayPal integration. But the bank was looking for a more streamlined approach and Chuck fit the bill, according to John Schulte, the bank’s chief digital officer.

“We primarily want to give our customers broader P2P choices, and with Zelle we’ve seen higher costs and limitations, while Chuck has an open architecture that will allow us to add different types of P2P solutions over time. time,” Schulte said.

Mercantile, which has 46 branches, plans to roll out its new P2P option through Chuck within the next month, while maintaining PayPal P2P service for the immediate future.

What Schulte likes most about Chuck is Payrailz’s technology which allows the bank to quickly freeze any suspicious transactions and trace them. “We like control,” he said.

First Northern Bank, with $2 billion in assets in Dixon, Calif., is another coalition member preparing to roll out Chuck to its 35,000 customers in 11 branches over the next few months.

For several years, First Northern has provided P2P services to its customers through Acculynk, a niche P2P service offered by Q2, First Northern’s main banking service provider.

“We were looking for a change and we love Chuck’s open network concept,” Walker said.

The bank explored using Zelle, but thought Chuck was more profitable, she said.

Walker hopes the bank’s experience with Chuck can lead to other projects through Alloy Labs.

“I like the very idea of ​​working with a group of banks to focus on common issues that we all face that our primary provider can’t help us with,” Walker said.

Coalition banks meet continuously to share experiences as Chuck is deployed and to explore other potential products.

“P2P is a great use case to start with, and we’re committed to using Payrailz as a chassis, but the next phase is to look at how we can use open banking technology to find other solutions to the problems facing small banks,” Jason Heinrichs said. , CEO of Alloy Labs.

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