💸 Is Zelle Becoming A Scam Network?
Zelle, the payment app created by 7 American banks as a response to Venmo, is becoming a popular tool for fraudsters. But even in the face of increasing criminal activity, the banks are failing to act on the problem and washing their hands of the matter.
18 million Americans were defrauded via payment apps in 2020, notes Javelin Strategy & Research. And fraud scams for the year reached $43 billion, according to Business Wire.
While banks are very aware of the situation, they're failing to act. Federal regulation holds an individual responsible for money lost if they initiated the transfer themselves—and so, banks argue they shouldn’t be liable for refunds. In a response to the New York Times, Wells Fargo declined to comment on specific cases, saying instead that "we are committed to following all regulations governing transactions…we are actively working to raise awareness of common scams to help prevent these heartbreaking incidents." Citibank responded to the Times similarly.
As The Hustle explains, there are 3 main scam types run on Zelle. The first, which we noted last month, is a "romance scam" that involves making the victim believe they are dating the scammer, then asking the victim for money. The second involves cryptocurrencies, normally convincing the victim of a great investment opportunity in crypto that then never materializes. And the third-most-common scam type is a "me-to-me" scam, which involves the victim giving various personal details to the scammer, therefore, giving them access to their bank account.
It seems that banks are happily resting on their laurels with Zelle. They've managed to build a platform that is double the volume of Venmo. So why fix something that—for them at least—isn't broken? Until customers begin dropping Zelle over this matter, and/or demanding action, banks likely won't act.