Refining the P2P Payments Network: Why We Invested in Neural Payments
Who is Neural Payments?
Neural Payments is a comprehensive payments platform that enables financial institutions to process person-to-person payments across any network from sender (the bank customer) to recipient (and consumer), with the recipient able to choose how they want to receive the money.
We are excited about Neural Payments as the answer to many of Zelle’s shortcomings, primarily cost, implementation time and risk management/fraud. With Neural, FIs can connect members across different institutions, with no need for the customer to download a new app or register a card. These payments can be settled via PayPal, Venmo, debit card, FedNow, or crypto wallets. Once the sender pushes the transaction/transfer through their banking app, the recipient will receive an automated text message from the sender containing details of the transfer and a link to accept. This method removes Neural Payments from any regulatory complications around consumer outreach via text message and consumer protection laws. The recipient can also trust the transaction since the text and link will come from the phone number of the sender, providing an additional layer of trust. Through the link in the text, the recipient can select their preferred method of acceptance.
Neural overcomes the limited adoption issue inherent in closed loop P2P payment solutions and is capable of serving the long tail of banks that don’t use Zelle.
The Right Team For the Opportunity
We’ve known the CEO of Neural Payments, Mick Oppy, since his days at Vantiv and WorldPay, where he was the VP of Financial Institution Products and worked closely with our development partner, Ysbrant. We were excited and grateful when Neural approached us about their Series A raise to play a strategic role as part of the financing round. In Mick and the team, we saw a group of payments industry veterans attacking a problem/opportunity we had recognized as important from discussions with many of our bank relationships.
At Commerce, we lean on our relationships with leading corporations to help us understand the most pressing pain points they’re experiencing and identify promising startups tackling them. Near the top of the list of those pain points in recent years has been the limitations that bank-centric P2P networks like Zelle pose. Primarily, Zelle’s bank-centric model requires customers to have accounts with participating banks in order to use the service, limiting its potential user base. This also means that the platform isn’t interoperable with other payment systems — meaning consumers can’t send/receive money from their bank to other payment platforms. This leaves a large portion of US consumers without a P2P payment solution via their banking institution and susceptible to be drawn to other digital challengers for a growing list of services.
We can’t wait to work with Mick and his team as they continue to grow and develop game-changing solutions for financial institutions.
Our Market POV
- Consumers’ trust in digital payments is increasing.
In 2021, consumers and businesses sent 1.8B payments through Zelle, totaling $490B and Venmo total volume reaching $230B. Consumers are increasingly comfortable turning to their apps when moving money to friends and family. As consumers adopt digital peer-to-peer (P2P) payments, challengers (e.g. Venmo) threaten to divert them from using the utilities offered by their traditional banks.
2. Financial Institutions are losing their competitive edge to challengers.
While Zelle clearly has a very large network of FI clients, they acknowledge that more than half of community banks and credit unions have customers that requested a P2P solution. Without the ability to drive P2P payments in-house banks and other FIs are enabling challengers to leverage P2P payments as a wedge before expanding to other services.
3. Existing solutions for banks to compete in P2P payments are limited.
The most common P2P payments platform servicing banks is Zelle. While Zelle has broadened its network to have impressive reach, they still primarily serve banks up market. This creates a huge gap for smaller banks and the plethora of credit unions and community banks in the United States. Beyond Zelle, there are really no alternative independent options. Beyond Zelle, there are really no alternative independent options. The only other player, Payrailz, was sub-scale when acquired by Jack Henry in August 2022.
