P2P bank app Zelle soars in popularity — with criminals, and without fraud protections

Zelle isn’t safe. You’ve been warned (but not by Zelle)

WARNING: Zelle isn’t really a safe way to send money.  Huh? But it’s backed by all these big banks!  Read on…

Every time a new payment app bursts on the scene, there’s a fraud learning curve. Companies never emphasize enough how risky the new app is, and consumers always learn the hard way how little they are protected. There is a better way — the professionals should go out of their way to make clear their new magic-money-transfer tool is unsafe.  But they don’t. So I do it.

In this learning curve, eventually, the software maker usually comes around, but always much later in the game, after it has grabbed serious market share — but not before  a lot of people have gotten hurt. Don’t be one of them.

In case you missed it, Zelle is the big banks’ answer to Venmo and all the other “kid-friendly” person-to-person payment systems out there. It works great. Backed by Bank of America, Wells Fargo, USAA and dozens of other banks, it’s more than a worthy competitor. It’s was used to sling $75 billion around last year, Zelle says. According to CNBC, that now dwarfs the $35 billion in Venmo transactions last year.   That’s not too big a surprise. After all, it integrates neatly with online banking tools many consumers already use.

But here’s the problem.  Consumers are used to rather generous protections that come with most traditional bank services: Credit cards, debit cards, even online banking. You know the drill: Spot fraud, complain, get a “refund.”

Zelle, even though it seems to be a part of “your” bank, doesn’t work that way. If you are scammed out of Zelle-bucks, they’re gone.  If you buy something online and send the money via Zelle, and the thing never arrives, you are screwed. No consumer-friendly Reg E to fall back on. No dispute process.  Not even any eBay-like resolution system.  The money is just vaporware.

If that harsh reality sounds familiar, that’s because it applies to Western Union transactions. “Wiring” money has been the favorite tool of criminals since the dawn of the Internet strictly because of this irreversible quality. If you are old enough, you might recall that PayPal enjoyed similar status with criminals before it beefed up fraud protectons. More recently, so did Venmo. And, now, it’s Zelle. Techcrunch last week did an admirable roundup of complaints about this element of the service. Most damming are the flurry of “sorry, not sorry” Twitter posts by Zelle, responding to victims.

“We are sorry to hear that happened to you,” the firm’s support Twitter accounts says in a recent Tweet. “Zelle is a great way to exchange money with people you know. We recommend against using Zelle to pay for items sold by persons unknown to you. For more info: .”

Another recipient of such a “we’re great” response didn’t take kindly to it.

“You need to step up this. Scammers are explicitly using your app to scam people. There needs to be a disclaimer on your site, highlighted in red,” the victim wrote.”Zelle is a vehicle for nefarious activities on the internet and in the transfer of monies.”

I agree.  Zelle needs a very prominent “Car prowlers frequent this lot; remove your valuables” sign on its front page.  Many years ago, Craigslist posted such warnings all over its site. Venmo missed this step when it took off like wildfire, but at least the service now makes clear it favors “friends and family” transactions on its front page. It could still do more. Zelle needs to do a lot more.

You need to completely avoid using Zelle for anything other than a situation where you would be comfortable handing someone a $20 bill.

For its part, Zelle told TechCrunch to tell users when I’m telling you.  I sure wish Zelle did a better job of telling user this themselves:

“Consumers should not use Zelle for transacting with people they do not know and/or aren’t sure they will get what they paid for – for example, items bought from an online bidding or sales site,” a spokesperson said to the site. “Zelle is not responsible for goods or services that are not received or are received but do not meet expectations.”

I can’t imagine this situation will last long.  Big-brand banks won’t want their reputation soiled by being affiliated with the tool of choice for criminals. Some will feel compelled to start handing out good-will refunds, I’d bet, and that will force them to add better back-end detection systems.  Eventually, when regulators catch up to the situation, they will begin to force banks to extend Reg-E like protections to their new electronic payment services. That’s good for everyone. Credit cards are so popular, in part, because they are so safe.

The alternative can get ugly. Western Union spent a long time neglecting its obvious popularly with criminals, and paid dearly — more than a half-billion in fines. It’s now handing out endless refunds to scammed consumers.

For now, however, know that criminals are a lot more nimble than regulators. So if you use Zelle, use it with great care.  Or else you too will get “sorry, not sorry” note.


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About Bob Sullivan 1648 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.


  1. On April 18 and 19, 2019, eight zelle money transfers were made from my debit card account, totaling $800. I have never used or even heard of zelle before. I have never used my cell phone to do banking. When I called zelle, I was told they can do NOTHING since their records use phone numbers and my phone number is not in their records. So a thief is using their cell number to open a zelle account using my bank account. My banck, PNC, said they cannot block zelle transactions from my account, so I had to cancel my PNC account. They will likely reimburse me. zelle provides means and protection for thieves! They apparently provide a service to people who choose to use their service, but for everyone else who do not use their service, they are a THREAT!

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