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Zelle users are finding out the hard way there’s no fraud protection
- deftturtle 9y agoI've never used Zelle and was quite annoyed when they were injected into my banking data. Very shady nonsense from the big banks. I ended up closing my Bank of America account for other reasons, but suffice it to say BofA is horrible. All major banks are engagd in rampant thievery with their high fees and perverse incentives. The Wells Fargo scandal demonstrates that perfectly.
- toomuchtodo 9y agoJust like there are no “buyer protections” with checks or handing someone cash. It’s an expectations issue, not a technology issue. Can’t get your money back with Western Union or TransferWise either if you’re not making intelligent decisions. Edit: Do not send payments to a stranger unless it’s through a payment system that offers you protection. That is not the role of person to person money transfers.
- scribu 9y ago> It’s an expectations issue, not a technology issue. Nobody said it was a technology issue.
- toomuchtodo 9y agoI believe my point is Zelle can’t fix users doing stupid things.
- shkkmo 9y agoYes, they can. They can make the correct use case clear on their website and in their UI. A warning could be added when sending payment that there is no fraud protection. I blame both the banks and Zelle for implementing this poorly.
- majormajor 9y agoWhy wouldn't "add in fraud protection since that's many people's reasonable default assumption" be the most desirable thing for them to do? Why do we let people get away with such crappy ideas, and then just blame users or implementers (UI designers, in this case)?
- scott00 9y agoBecause fraud protection costs money, and it's useful to have an electronic payments medium that doesn't have it, and therefore avoids those costs.
- majormajor 9y agoSo if Paypal can give it to me for free, per the article, the answer just seems to be "we should tell everybody as loudly that we can that this is a shit product."
- toomuchtodo 9y agoPayPal takes 2.9% and change off the top. Banks do not charge for person to person transfers. There is no skim for expensive fraud prevention to come out of.
- majormajor 9y agoPayPal doesn't take that off the top for person-to-person. They haven't in... five years? I don't know. It's been a while. You used to have to do some sort of "it's a gift" thing, but I haven't seen that in a long time. https://www.paypal.com/us/selfhelp/article/What-are-the-fees-for-PayPal-accounts-FAQ690 https://www.paypal.com/us/selfhelp/article/What-are-the-fees... > There are no fees within the U.S. to send money to family and friends when you use only your PayPal balance or bank account, or a combination of your PayPal balance and bank account.
- deleted 9y ago
- loeg 9y agoIt's hard to hand someone cash or a check over the internet. This is a little more anonymous, which makes it an easier vector for fraud.
- adamsanders 9y agoZelle's biggest hurdle will be growing their community. Currently, there's insufficient feature differentiation from Venmo to warrant migration. None of my friends are on Zelle, so there's no reason for me to be.
- toomuchtodo 9y agoZelle’s user base can be every customer of every bank that supports it. Far larger than Venmo can ever be. And it’s slowly being embedded in each partner bank’s app. http://www.tearsheet.co/payments/zelle-is-winning-the-peer-to-peer-payments-war-sort-of http://www.tearsheet.co/payments/zelle-is-winning-the-peer-t...
- wmf 9y agoI don't know much about Venmo vs. Zelle specifically, but a startup with marketing funded by VC money could easily beat a consortium of banks with little marketing. Zelle recently pivoted to a dedicated app, possibly because being buried inside bank apps wasn't very discoverable.
- toomuchtodo 9y agoVenmo was that startup, acquired by PayPal, and now being trounced by said consortium.
- Fufjeudndh 9y agoI've never even heard of Zelle until now, everyone I know has venmo installed.
- toomuchtodo 9y agoYou may have not heard of them, but their uptake is accelerating, and they are becoming the defacto US peer to peer funds transfer system. "Zelle, U.S. banks’ answer to mobile payment services like PayPal and Venmo, claims that nearly 100,000 consumers, on average, are signing up for its service per day. The company also painted a picture of growing traction, noting it processed over 247 million payments in 2017, an increase of over 45 percent year-over-year, totalling $75 billion in peer-to-peer payments, up from $55 billion the year prior." "Today, Zelle says there are more than 60 financial institutions on board, including 50 percent of U.S. demand deposit accounts, and it has expanded its partner ecosystem to include ACI Worldwide, CGI, D3 Banking Technology and IBM. They joined existing partners FIS, Fiserv, and Jack Henry & Associates." "In PayPal’s third quarter 2017 earnings, the company reported that Venmo processed approximately $30 billion in payments over the past 12 months. Or, in other words, Zelle is now processing more than double the payment volume of Venmo." https://techcrunch.com/2018/01/29/u-s-banks-venmo-alternative-zelle-moved-75b-last-year-says-100000-people-enroll-daily/ https://techcrunch.com/2018/01/29/u-s-banks-venmo-alternativ...
- dragontamer 9y agoZelle is basically a thin wrapper over ACH transactions. In fact, my understanding is that Zelle is basically just "One-day ACH". I never really considered the fraud aspects, but clearly a modern payment processor needs to have a proper escrow involved somehow. ACH and Zelle don't look like they'd do the trick. Dwolla was a good middleman for this sort of thing, but it seems like Dwolla pivoted to different services unfortunately. Overall, this is why the USA has credit cards. A Credit Card company is the middle-man that you trust to handle these issues.
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- loeg 9y agoEven ACH has a clawback mechanism for fraudulent transactions. It's ridiculous Zelle does not provide the same protections.
- dragontamer 9y agoI don't think its "ridiculous". Cash, Wire-transfers and Checks (especially Cashier's Checks) do not really have a reversal mechanism IIRC. Once a Cashier's check goes into someone's account, there's basically no way for it to come out. But the thing is: we all know these details already. When working with Cashier's checks, we know its insanely dangerous and to keep track of those little paper-slips. It seems like the general public doesn't know that about Zelle yet.
- ianburrell 9y agoChecks and cashier's checks can be reversed. It is common scam to send forged cashier's check, have victim deposit, and send some of the money by irreversible wire transfer. When the bank, or account holder, discovers the fraud, it will be reversed and the victim is out the money.
- djrogers 9y ago
- rhizome 9y agoI think it's a little odd that they chose a name so close to the name of the Nazi in the movie "Marathon Man."
- JumpCrisscross 9y agoZelle roughly translates to "cell," as in a room or a component or a group of people. (It's also a town near the Austrian border.)
- rhizome 9y agoIt's not the same, no, but visually it's close.
- klipt 9y agoZelle is great for things like splitting rent. Just don't use it to buy things from strangers.
- dawnerd 9y agoIt's pretty clear when you read the docs behind it. It's only designed for people you know and trust. Presumably the banks agreed to this model as a way to cut costs while seemingly provide a beneficial service to customers.
- HedgeSparrow 9y agoThis makes sense to me as a Venmo equivalent, but doesn't Chase have a QuickPay feature that uses Zelle? Is it more secure from there or corner-cutting?
- JoshGlazebrook 9y agoTheir quick pay is literally called "Quick Pay with Zelle". Seems to be the same thing.
- rexf 9y agoThat's interesting. They can include anyone that uses Chase Quickpay in their "Zelle" metrics. Mind you, I'm referring to people who use QuickPay in the Chase app and not those who have downloaded the newer Zelle app.
- oh_sigh 9y agoZelle in their sales pitch even says its great for sending money to friends and people you know, but don't transact with strangers on it.
- ikeboy 9y agoI've been scammed in reverse by the precursor to zelle, quickpay. I accepted a transfer and released goods, then the transfer was reversed. I was told multiple times by chase reps that transfers were not reversible once initiated, but they never reimbursed me even after I filed a complaint with the CFPB. It wasn't enough to be worth suing over.
- otakucode 9y agoWell, no fraud protection other than, you know, the law. It's still quite illegal to defraud anyone, especially "over the wire". Since Zelle is all cozy with the banks I'd expect there wouldn't be too much pushback when the police ask who was responsible for some fraud...
- dawnerd 9y ago> Since Zelle is all cozy with the banks Zelle is owned by the banks. https://en.wikipedia.org/wiki/Zelle_(payment_service) https://en.wikipedia.org/wiki/Zelle_(payment_service)
- guelo 9y agoMost police departments or prosecutors are not going to spend any time on your $200 concert ticket.
- eadmund 9y agoPerhaps they ought to spend time on actual crime (e.g. a $200 ticket) rather than non-crimes like which particular natural substances someone chooses to burn and/or ingest? It seems to me that police departments could earn a good return on investment simply by, y'know, chasing down criminals who defraud others. Maybe I'm a starry-eyed optimist.
- forkLding 9y agoSo Venmo doesnt have real fraud protection either? Any stories of Venmo users being scammed? Interesting to see that the only real form of fraud protection offered by Venmo is a warning in their copy.
- loeg 9y agoPlenty of stories of Paypal vendors being scammed by buyers. Given Venmo is a paypal business, it may have similar problems?
- analogmemory 9y agoOh yeah they've been having the same problems. https://www.theverge.com/2017/11/21/16681292/venmo-scam-iphone-payment-fraud-andy-mai-paypal https://www.theverge.com/2017/11/21/16681292/venmo-scam-ipho...
- gesman 9y agoBanks don't care about customers but care a lot about being compliant with plethora of regulations. Non-compliance for a bank means the lights can a will be turn off by a governing bodies, of which are many. Hence - offering a money transfer service within the bank infrastructure and services without consumer protection - is highly likely is a violation of some regulation. Or more than one even. Supplement the complaint with a proof of "misleading marketing practices" - and this adds couple extra zero's to potential damages. Someone just need to dig it deeper and then push the button where it hurts. Problem solved. Regulators will be on consumer side.
- imajes 9y agoExcept that'd probably fall into the CFPB remit, which has just been significantly reduced in scope and veracity due to the current administration... :(
- gesman 9y agoSending bank fails to disclose irreversability of a transaction implying that typical consumer protection takes place. Receiving bank fails to detect simple fraud pattern: Within short period of time: New account opened, Zelle transfer received, Money withdrawn. Let it rinse and repeat for long enough - and class action will take place.
- eadmund 9y agoBank-fraud laws existed for multiple decades longer than there was the (arguably unconstitutional) CFPB, so I'm confident that any activities which actually violate the law will, eventually, be curtailed.
- refurb 9y agoCorrect me if I'm wrong, but if I send a scammer money through Venmo (which Zelle is competing with) the money is gone. How is this different?
- Larrikin 9y agoThere's no risk of PayPal arbitrarily freezing your funds that you're sending.
- detaro 9y agoYou are wrong, which is why Venmo is used to scam sellers instead of buyers: https://www.thebalance.com/venmo-scams-315823 https://www.thebalance.com/venmo-scams-315823
- refurb 9y agoThe user agreement specifies that the service is for “payments between friends and people who trust each other,” and that there is no buyer or seller protection. That sounds the same as Zelle, with the exception that Venmo might help you if scammed. Sounds like you're very unlikely to get help on the Zelle platform.
- microcolonel 9y agoFederal Reserve Note users are finding out the hard way that there's no fraud protection.
- ghshephard 9y agoMost of the article was pretty good up until the close: And as word gets around that Zelle and the banks are not helping people who were scammed, it will ultimately damage Zelle’s reputation and send users back to PayPal, where buyer protections exist. This isn't "damaging" Zelle's reputation - you should never use Zelle (or Venmo) for this type of transaction. Asking your bank to "help" is like asking the US government for a refund when you mail an envelope full of cash to some anonymous person.
- pishpash 9y agoExactly. Glad this irreversible transaction exists. Paypal doesn't serve all needs.
- zuminator 9y agoOn one of Zelle's site pages, it states: "EASY. FAST.SAFE. DONE. Forget running to the ATM or mailing a check. With Zelle, there’s a new way to move money. Backed by the nation’s leading banks and credit unions, you can send and receive money with peace of mind and without the hassle." So, two problems here. It's not "safe." It safely arrives at its destination, but for most people, a safe money transaction is one that's protected from fraud somehow, which this is not. And it's not "backed" by banks so much as it is backed by your bank account. Again, backed by banks sounds like fraud protection. I don't think there's anything wrong with Zelle. It sounds like a useful service. But unless they are sanguine about these kinds of problems occurring then they ought to make it very clear to not send Zelle to a destination you don't 100% trust. That the only guarantee here is for guaranteed delivery of your cash and nothing else. So that's not quite the same as mailing an envelope of cash, which I know from personal experience as a lad is inherently unsafe even if the destination is your best friend's house.
- discoursism 9y agoBut none of those other things (ATM, checking account) are protected from fraud when you initiate the transaction either? And it must be said of checks that they are "backed by banks." I agree Zelle should do MUCH more to tell customers that they shouldn't send money to strangers.
- djsumdog 9y agoZelle exists because the US government hasn't mandated free person-to-person transfers like nearly every other country on the planet. It tries to be a private initative to allow for electronic transfers. That being said .. it's still just a virtual check. If you write a real check to someone and they cash it and then don't give you what you ask for, you do have to get that person or entity arrested or take them to court somehow. Even if Zelle was an official US federal reserve system (which it really should be and not this hacked together bank program), I think you'd still have the same exact issue. Judging from the comments even Venmo appears to have the same issues, even though it's owned by PayPal. Their parent company PayPal has some protection because there's that buffer that exists in the PayPal account before it goes to your bank account (although I though Venmo had this too?) so they can recover money from that layer, but not always when it gets transferred all the way out.
- sitharus 9y agoIt’s also a difference of expectations. I live in a non-US country where escrow services never took off and consequently nobody expects fraud protection from financial service providers. The banks cover unauthorised use but not authorised transfers for fraudulent reasons. That is dealt with by the police. PayPal has set some interesting expectations for what a service provider should cover.
- ltrcola 9y agoI'd argue that it's not just PayPal though, although they've played a part for sure. Credit cards in the US are ubiquitous and offer a very high level of fraud protection that consumers are used to. Of course, that fraud protection (and the multiple points & cash back systems) are all covered by overhead in the system. Merchant fees are quite expensive, although the consumer never usually sees them except for small things like cash discounts or minimum transaction amounts at small businesses. There have been some interesting court cases about the ability for merchants to pass those fees onto their customers.
- 0xcoffee 9y agoMy country has free person-to-person transfers between all banks, but it is a separate issue from fraud. If you get scammed the bank will not help you.
- amluto 9y agoI don't know enough about this to comment authoritatively, but I would expect KYC/AML rules to apply here. If I send money via any means to a bank account, I think the bank should be able to produce information about the identity of the account holder in response to a subpoena. If they can't, regulators might be rightfully annoyed. Also, shouldn't Regulation E apply to Zelle?
- paulcnichols 9y agoI guess its all about expectations. If this were cryptocurrency we'd be blaming the victims.
- deleted 9y ago[deleted]
- trophycase 9y agoLOL Zelle. Never heard of it until a month ago until a massive market push bythr massive banks started shoving it down my throat. I've never wanted to avoid an app more
- ravenstine 9y agoWhoa, whoa... people use Zelle and Venmo to buy things??? Everyone I know uses those to send money to friends. Banks not protecting mah fraud... better switch back to Western Union for my Nigerian prince money!
- mirimir 9y agoIt strikes me that Zelle is basically repackaging of wire transfers. And banks have always been reluctant to reverse wire transfers. Because, I think, they're intended to be irreversible, and executed between knowledgeable parties.
- uf 9y agoWell, transfers are "reversible". There's nothing technical stopping a bank to wire money back. But, banks are not allowed to mess with your funds. If it's in you account, then it's yours. It would be illegal for a bank to simply reverse a transfer. Crooks are protected by the laws as well. Even if some obvious mistake was made at a e.g. payment provider and funds were wired to the wrong bank account, your bank has to send you a letter asking for your permission to reverse the mistake. Reading a batch file twice is a nice example: You get two credit entries, but the bank is not allowed to reverse one. What happens with smaller scams is that crooks withdraw funds as soon as they've been booked. So most of the time the money already is physically lost before a (legal) claim arrives. So there's that.
- sizzle 9y agoI believe it's ACH payments
- mirimir 9y agoOK, but aren't those just as readily reversible as checks? I've read that banks readily reverse even cashier's checks. Which was the basis of a common Craigslist scam. Maybe it's just the Zelle doesn't care to be bothered.
- sizzle 9y agoEvery transaction you make with a credit card is an ACH payment behind the scenes, so yes they are readily reversible. The banks are hands off with Zelle though, any payment is like giving call, they have no duty to reverse funds over disputes between you and receiver unlike PayPal type services. You have to trust who you are giving money to.
- DrScump 9y agoPayPal... which has long been the standard for these sorts of anonymous transactions No sane seller would use PayPal for such a transaction. PayPal offers no seller protection whatsoever for items that are not shipped via a common carrier and with tracking.
- paulie_a 9y agoExcept if you sell on eBay. I have a friend that is routinely ripped off and eBay and PayPal basically tell him to fuck off. He does a 500k in revenue through them and just has to suck it up. Both those companies are scum in my opinion
- DrScump 9y agoThe only eBay difference is that eBay effectively forces you to accept "returns".
- sametmax 9y agoSo some people use a payment platform that looks like using cash, don't use any of the common sense they would using cash, get scammed and complain ? It's PEBCK in it's purest form. Zelle is secure, as way to wire money. People can't put a gun in your face and still it while you send it. It's exactly what it advertises. I don't see how anybody could be confused by "easy, fast, secure, done" here.
- mancerayder 9y agoPeople below are rattling off lists of alternatives, PayPal (fees), Venmo (requires another account setup), Google Wallet, Apple Pay, and so forth. I'd hate to be that guy, but the cryptocurrency blockchain technologies have some potential for something none of these other technologies have, which is elimination of vendor lock-in. It's annoying to have such a variety of places where I have username and passwords to apps which store my account credentials. I forgot LevelUp which I use for (it turns out) just ONE coffeeshop. I have accounts on all the others (linked to my bank account) minus Venmo because I guess I decided, enough is enough. The account proliferation due to inefficient competition and lock-in of vendors is absurd. So in comes Zelle, perfectly positioned to solve that problem, but for 'friends and family' only? My tenant pays me through it, and I don't think we're related. Banks are slow, conservative dinosaurs allowed to constantly play CYA with consumers.
- tzs 9y agoYou don't need a username and password to pay by PayPal. For Apple Pay you only need to use your username and password when setting it up, if I recall correctly. When you use it to pay you only need your fingerprint (or face if you have a phone with FaceID?). Cryptocurrencies (at least the currently popular ones) only sort of match what Venmo does from your list. The rest do things that cryptocurrencies do not do, and that most consumers want. PayPal (if you pay with a credit card), Google Wallet, and Apple Pay provide you the protections that a credit card provides. Seller doesn't provide the goods? Call your card company and they reverse the transaction. If you have a PayPal account as a buyer and pay through a balance on the account, I think you still get protection. With Bitcoin and I think the other popular cryptocurrencies in actual use for real world purchases you don't have protection. Like Venmo (and Zelle) they are like sending cash, except unlike Venmo and Zelle cryptocurrencies are essentially a foreign currency which adds some headaches to using them. Zelle doesn't say it is for friends and family only. What they say in their FAQ is: > Zelle is a great way to send money to family, friends, and people that you are familiar with such as your personal trainer, babysitter, or a neighbor. If you don’t know the person, or aren’t sure you will get what you paid for (for example, items bought from an on-line bidding or sales site), we recommend you do not use Zelle for these types of transactions. Presumably your tenant is familiar with you, and so Zelle is fine for him to use. It's essentially equivalent to paying in cash. They should say that somewhere prominent on their site. That would probably clear up a lot of confusion, as I think most people in the United States have a good intuitive understanding of when you should and when you should not use cash.
- ryanferg 9y agoFunny story. Someone, let's call him Mr. Unlucky, sent me $1700 via zelle a few months ago. I called my bank and asked them about it and they had no info. About a week later, a guy emails me saying he meant to send the money to his land lord John.d.Doe@gmail.com but instead sent it to me, John.Doe@gmail.com. Both me and this unlucky dude called the banks, called Zelle, etc trying to get the charges reversed. No luck. So lucky for this unlucky guy, I had been receiving John.D.Doe's email for about a decade on and off. I had sent the guy mistaken emails and sort of had a dialog with him. I knew he was in real estate. I emailed him and he confirmed that this unlucky guy was indeed renting from him, and his rent was this $1700 amount. So I took a leap of faith that this guy hadnt been playing a long con on me and forwarded the money. It was reckless and probably stupid but it wasn't my money and I felt bad for Mr. Unlucky. Zelle was no help, had no protection, and allowed this silly mistake to be made. Mr. Unlucky sent me a nice note and we both commiserated about the flaws in Zelles systems. I don't think I would use them.
- valuearb 9y agoThe last time I looked the iOS app had the worst user reviews I’ve ever seen. When I looked at it a few months ago it had a 2 Star average, but I just checked and found its shot up to 4 stars. Curious, I read the user reviews and ... Just as bad as ever. Can anyone say “gaming the app ratings system”? Specifically to Apple?