Can Zelle Fraud Be Halted by a Tech Fix? Some Say Yes.

Number of the Week: $5 billion (explanation below)

Can Zelle Fraud Be Halted by a Tech Fix? Some Say Yes.

For most of 2022, FIN has been regularly covering the issue of fraud on the Zelle payment network. The first volley of coverage came in early March, with the New York Times’s foundational story showing widespread fraud on Zelle and, more important, the refusal of several of Zelle’s big bank owners to reimburse Zelle customers who get ripped off. (Whether Zelle is significantly more prone to fraud than competitors like Venmo or Cash App is still up for debate.)

That was followed by a legislative assault, particularly from Elizabeth Warren (MA), Robert Menendez (NJ) and a few other US Senate Democrats. Warren, for example, has dubbed Zelle “the preferred tool of fraudsters and other bad actors who abuse Zelle’s instantaneous, easy-to-exploit transfers to steal from and defraud consumers.” In addition to putting pressure on Zelle’s owners—who were less than eager to provide the Senate with details about Zelle fraud—this sustained attack actually moved the story forward by surfacing victims who demonstrate just how perfidious Zelle fraud can be. In October, for example, Menendez touted the plight of an East Orange constituent who “was scammed out of $3500 by a professional scammer who had told her he would help her refund an unauthorized Amazon purchase.” Her bank declined to reimburse her. According to Warren’s office, at the four banks that provided data, there will probably be about $255 million in Zelle fraud this year, most of which will not be reimbursed.

The response from America’s financial institutions has been largely unsatisfying.