Here's How the Big Banks May Try and Challenge Visa and Mastercard

A recent report from The Wall Street Journal revealed that the cohort of large banks that owns the company that operates Zelle are considering allowing consumers to use the peer-to-peer payment option for retail purchases. The option would enable banks to bypass Visa (NYSE: V) and Mastercard's (NYSE: MA) payment rails, which take a fee on every transaction that passes through their networks.

If implemented, this would certainly come as a challenge to Visa and Mastercard. Let's take a look.

Zelle is an instant payments service that allows consumers to transmit funds to one another through text or email in just minutes. It was created by a private company called Early Warning Services that is owned by most of the largest U.S. banks, including JPMorgan Chase, Bank of America, Wells Fargo, Truist, Capital One, U.S. Bancorp, and PNC. Zelle is also now used in thousands of other small banks and credit unions, covering roughly 100 million people. If a financial institution doesn't offer Zelle, a consumer can download the app and link their bank account to it.

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Source Fool.com