Fraud Is Flourishing on Zelle. The Banks Say It’s Not Their Problem.

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Fraud Is Flourishing on Zelle. The Banks Say It’s Not Their Problem.
The New York Times, March 6, 2022
By Stacy Cowley and Lananh Nguyen

“Zelle, the payments platform used by millions of customers, is a popular target of scammers. But banks have been reluctant to make fraud victims whole — despite owning the system.”


Justin Faunce lost $500 to a scammer impersonating a Wells Fargo official in January and hoped that the bank would reimburse him. Mr. Faunce was a longtime Wells Fargo customer and had immediately reported the scam — involving Zelle, the popular money transfer app.


But Wells Fargo said the transaction wasn’t fraudulent because Mr. Faunce had authorized it — even though he had been tricked into transferring the money.


Mr. Faunce was shocked. “It was clearly fraud,” he said. “This wasn’t my fault, so why isn’t the bank doing the right thing here?”


Consumers love payment apps like Zelle because they’re free, fast and convenient. Created in 2017 by America’s largest banks to enable instant digital money transfers, Zelle comes embedded in banking apps and is now by far the country’s most widely used money transfer service. Last year, people sent $490 billion through Zelle, compared with $230 billion through Venmo, its closest rival.


Zelle’s immediacy has also made it a favorite of fraudsters. Other types of bank transfers or transactions involving payment cards typically take at least a day to clear. But once crooks scare or trick victims into handing over money via Zelle, they can siphon away thousands of dollars in seconds. There’s no way for customers — and in many cases, the banks themselves — to retrieve the money.


Nearly 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020, according to Javelin Strategy & Research, an industry consultant.

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About the Authors:

Stacy Cowley is a finance reporter with a focus on consumer issues and data security. She previously reported on a variety of business topics, including technology and economics, at CNN Money, Fortune Small Business and other magazines and websites.

Lananh Nguyen covers Wall Street. She previously spent more than a decade at Bloomberg News in New York and London, where she wrote about banking and financial markets.

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