There’s still a lot of interest in stories of fraud at Zelle, the banks’ Venmo-like instant money-moving app. To review, sending money with Zelle isn’t much different from sending someone cash — there’s no buyer’s protection, and it’s essentially not possible to get your money back if something goes wrong. As with many methods of currency transfers, in this regard, it’s little different from wiring money. So criminals have flocked to the service.
Zelle says its working on changes and working to make consumers more aware about the nature of Zelle transactions. Practically speaking, that means member banks must change their apps — preferably with a big, red warning whenever a new payee is added that says ‘Do you know this person? This transaction can’t be reversed. People can and do lose money.’ But that’s not happening overnight. When I use my Zelle app from USAA, there’s nothing to suggest how risky adding a new payee is.
So in the meantime, the burden is on consumers to know how Zelle works. It’s worth repeating: Zelle is convenient, but it’s a pretty unsafe way to move money, so act accordingly. Only use it to move small amounts to people you know very well.
The folks at MagnifyMoney.com asked me to write up a definitive “What you need to know about Zelle and fraud,” story, which you can read at this link. Below is a short excerpt:
Is Zelle unsafe? Yes and no.
It’s no less safe than sticking cash in an envelope and giving it to someone. If that person is someone you know, and you physically hand them the cash, that’s pretty safe. If you stick that envelope in the mail and send it to someone you don’t know across the country, that’s pretty unsafe.
Zelle should basically be handled the same way. In other words, Zelle should only be used for low-dollar, very personal transactions.
Some of the consumer confusion around Zelle was created by the product’s aggressive marketing, which initially touted its security features. In one TV commercial, performer Daveed Diggs rapped, “You can send money safely cause that’s what it’s for / It’s backed by the banks so you know it’s secure.” Citing such ads, consumer Lauren Driver, who lost $2,000 with Zelle trying to buy Hamilton tickets, said she was surprised that she wasn’t covered for her incident.
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