When its younger employees made clear they thought Zelle didn’t work well, Reading Cooperative Bank started working with nine other lenders to build an alternative.

When Reading Cooperative Bank began considering whether to join a waiting list to add the peer-to-peer payments service Zelle, some younger employees at the bank had other ideas. 

“A lot of our younger team members actively used Venmo and basically told us that they didn’t want to use Zelle because it was more clunky, it didn’t have the social attributes that they liked so much,” said Julieann Thurlow, president and CEO of Reading Cooperative Bank. “Our Venmo users inside of Reading Cooperative Bank thought that we could actually do better by embedding a Venmo-like experience inside of our mobile app.” 

These discussions led Reading Cooperative Bank to partner with nine other banks to develop an alternative peer-to-peer payments platform known as Chuck, which the bank began using the platform last month. In addition to providing customers with a tool that operates within the banking system, Chuck also looks to give community banks an affordable option for innovating their payment solutions. 

An Open Loop System  

Reading Cooperative’s payment transaction volumes had already shifted toward mobile options, Thurlow said, and 90 percent of the bank’s peer-to-peer payments were going through Venmo rather than Zelle or other tools, like Cash App. The bank had also estimated that the cost to have payments, including checks, transition to Zelle would not be sustainable long-term for a community bank like Reading Cooperative, which has about $661 million in assets. 

Reading Cooperative Bank belongs to the Alloy Labs Alliance, a consortium of more than 50 community and midsized banks that work together on technology solutions. Members form smaller groups to focus on specific issues they would like to address, and a working group of 10 banks, including Reading Cooperative and Southbridge-based Savers Bank, teamed up to develop a peer-to-peer payments solution. 

The group ended up partnering with the Glastonbury, Connecticut-based digital payments company Payrailz. Part of the development involved adding Venmo to the peer-to-peer payment platform Payrailz was already building. 

While Venmo is popular and easy to use, the success of Zelle, which launched in 2017, suggested that consumers wanted a service that came with the safety and security associated with the banking system, said Fran Duggan, Payrailz’s founder and CEO.  

“If it’s as easy or easier than the other service, why would I use the other service,” Duggan said. “I’ll just use my bank because I don’t even have to worry about signing up for another service or providing my financial information to a third-party service, which in today’s world, I think everyone should be concerned about.” 

To make the Chuck platform easy to use, Payrailz created what Duggan calls an open-loop service. Venmo and Zelle operate on a closed loop, Duggan said, because the sender and recipient of the money use the same platform. Zelle does allow recipients whose banks do not use the service to download a mobile app and link a Visa or MasterCard debit card to receive the funds. 

When a bank customer makes a payment with Chuck, the recipient does not need an account at an institution that also uses Chuck. Instead, the recipient receives a text or email and then chooses how to receive the money: through Venmo, to a bank account through the ACH network or to a debit card.  

Reading Cooperative, which launched Chuck during the second week in January, has seen 60 percent of recipients choose Venmo, Thurlow said. The Venmo and ACH options come with no fees, while the debit card transfer has a $1 fee. 

White Label Potential 

Duggan said Payrailz is not a network but instead connects to what’s known as the payment rails. He expects to connect to more services going forward, including The Clearing House’s Real-Time Payments network. Payrailz is also participating in the pilot program for Fed Now, the Federal Reserve’s real-time payment network expected in 2023.  

While Chuck just launched, Payrailz began rolling out the peer-to-peer payment platform to its own bank and credit union clients in April of last year. Duggan noted that he does not consider Payrailz to be competing against Zelle, adding that he has seen financial institutions use both platforms, giving the customer options on which to use.  

The name “Chuck” was chosen through branding exercises by the Alloy Labs group that chose it as a recognizable word with several meanings, Thurlow said, including a tool with the ability to connect with other tools. 

Financial institutions that use the platform will not have to call it Chuck but could instead use a white label approach and create their own branding thanks to Payrailz’ more affordable, cloud-based system, said Mickey Goldwasser, the company’s vice president of marketing.   

Diane McLaughlin

For the group of banks that worked with Alloy Labs Alliance and Payrailz on Chuck, sharing the development costs and intellectual capabilities made finding this solution possible, Thurlow said.   

“The tough thing about innovating at a community bank is innovation is expensive,” she said. “It reinforces the value of the cooperative model of Alloy Labs, because we wouldn’t have been able to do it on our own – it would have been too big of a bet for us.” 

Reading Cooperative decided not to advertise the product during its first few weeks, but customers have found the feature in their mobile apps. Thurlow said Chuck’s use has doubled week-over-week. Early results have found no problems, she added, and customers have even reached out with positive feedback about the experience. 

“What I like most about it – and what we’re hearing from customers that they like the most – is the optionality that’s actually built in, which none of the other payment apps out there offer,” Thurlow said. “In this case, the receiver gets to make a decision, which is important to a lot of people.”