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September 9, 2024 • Issue 24:09:01

Instant payments: a fraudster's friend?

Banks must do more to combat fraud
Consumers aren't the only ones getting burned, either. The
PSI's report, titled A fast and easy way to lose money: insuf-
ficient consumer protection on the Zelle network, noted that
Early Warning Services actively markets to businesses. For
example, the network partnered with a national property
management company for rent collections.

Spanning nearly 15 months and thousands of pages of doc-
uments and data, the PSI report concluded that EWS and
its three largest bank owners (JPMorgan, Wells and BofA)
aren't doing enough to protect consumers from the grow-
ing risk of scams and fraud on the network. For example,
By Patti Murphy despite Zelle marketing its services to businesses, the three
banks studied don't offer purchase protections similar to
n today's always on economy, instant payment net- those that govern credit and debit card payments.
works have become table stakes for consumers and
businesses alike. As with most good things, however, "Zelle and the big banks who own it know that Zelle's
I there is a downside: instant payment networks have speed and convenience make it a target," said Senator Rich-
become magnets for fraudsters. ard Blumenthal, PSI chair. "They are well aware that every
single day, some of their customers will be hurt. They know
The Federal Trade Commission reported it heard from this and are willing to accept the risk as the cost of doing
22,593 consumers who lost a combined $44 million to business – the cost for their customers, that is, not for them-
fraudsters through payment apps and services like Zelle selves."
and Venmo during the second quarter of 2024. Fraud in-
volving bank transfers and payments registered the most For example, in 2020, JPMorgan reimbursed just three
losses during that quarter: $502.4 million. transactions out of 41,390 scam disputes that year, accord-
ing to the report.
Here's the worst part: consumers who fall prey to scammers
rarely get their money back, according to a report released Zelle is one of a handful of person-to-person platforms that
in July by the Senate Permanent Subcommittee on Investi- allow consumers to send money instantly to other individ-
gations (PSI). Unlike other payment types (like card pay- uals or businesses. It is considered the leading provider of
ments) once a payment instruction is sent via Zelle, for ex- P2P payments services, outpacing other well-known com-
ample, it can't be canceled or reversed, with few exceptions. petitors like Venmo and Cash App.

Federal law requires platforms such as Zelle to reimburse
consumers who lose money due to unauthorized transac- Contributed articles inside by:
tions, what Zelle identifies as "fraud," but not transactions
authorized as a result of scams. Allen Kopelman .....................................................................................15

In 2020, JPMorgan reimbursed just three transactions out of Ken Musante ..........................................................................................17
41,390 reported scams. On the other hand, JPMorgan, BofA Floyd Davis ..............................................................................................24
and Wells, combined, reimbursed an average of 47 percent
of all credit card disputes and 36 percent of all debit card Jaki Kackert .............................................................................................26
disputes from 2019 to 2022, according to the subcommittee's Elie Y. Katz ...............................................................................................28
report.
Continued on page 22