Zelle’s fraud problem gains steam; I fix misleading ads with rap of my own

Click to watch the ad that claims Zelle is “Backed by the banks, so you know it’s secure.”


  • Zelle fraud problem that I’ve reported is now in the spotlight

  • If you’re a victim, try again to get a refund now that the NY Times is on it

  • Below, I fix Zelle’s bad rap with my own suggestions

“You can send money safely cause that’s what it’s for / It’s backed by the banks so you know it’s secure.”

That line from a Zelle ad rap may rhyme, but it’s not true. Dangerously untrue, actually.

Let’s try this instead:

“Banks will say anything to get you to try / their Venmo-killing app. They’ll even lie.”

Zelle app users are slowly waking up to the reality that their transactions are entirely insecure. Now that The New York Times has taken on this issue, perhaps something will change.

Zelle fraud emergency kit and FAQ

Complaints about scammers flocking to the money-swapping service have piled up as victims learn they have none of the traditional protections they expect from banks — the ability to dispute fraudulent transactions, for example.  Zelle users who’ve lost money are simply out of luck.  Zelle is an app supported by a consortium of large banks, cobbled together in response to the rapid rise of non-bank money-sharing tools like Venmo.  Zelle is already ragingly popular, much larger than Venmo, thanks to the big brands behind it. But Zelle has a dirty secret, buried deep in its terms and conditions, not expressed as a catchy rap.

“These transactions are potentially high risk,” the service says on its Frequently Asked Questions page.

This comes as a surprise, particularly since big banks have worked hard to use their institutional advantage — “Trust us, we’re big, and you’ve heard of us” — when taking the battle to Venmo.  In addition to the “Backed by the banks” and “you know it’s secure” phrasing in its ads, other marketing around Zelle makes repeated use of the words “safe” and “safely.”

So the marketing department clearly understands that security is a key concern for consumers. Unfortunately, the product team doesn’t. (If you are on the product team and you do care, contact me and let me know where the process broke down.)

The Times piece references my earlier complaints about Zelle’s double-speak around security.

“Bob Sullivan, an author who specializes in cybercrime and consumer protection, said he was stunned by how poorly the banks had communicated Zelle’s risks — and by their failure to learn from the painful lessons of the past.”

It also quotes an executive from Early Warning Payments, which operates Zelle for the banks.

“There are very few incidents,” said Lou Anne Alexander, Early Warning’s head of payments. “When there is a problem, we and the banks are proactive. It’s not something we’re putting our heads in the sand about.”

“Very few” is certainly in the eyes of the account holder. It’s trivial to find a pile of sad stories from consumers hit by Zelle fraud. (Just scroll through the Times Twitter feed. Or my old story.)  The Times even found an analyst who claims she heard of fraud rates as high as 90%  at one bank. (UPDATE: After this story was published, the firm that analyst works for, PwC, contacted me to say she spoke in error to the Times. “PwC has determined the 90 percent figure is unsubstantiated,” the firm said in a post on its site.)

What I know is that every single new payments system goes through this “growing pain.”  Features come first, security comes later. Perhaps it’s an oversight. Or perhaps it’s a business plan.  When you launch a payments product like this, early market share is all anyone cares about.  Low-friction network effects are critical.  So making things easy, at whatever cost, is key.  Security can always be added later. So what if a few consumers are hurt along the way?

Here’s my earlier coverage of Zelle’s fraud problem. 

I suspect Zelle will have to address its shortcomings now; the reputational risk for member banks is quite high.  Some are actually granting good-will refunds to consumers (So if you are a Zelle victim, keep asking!  Send a link to my story, and the Times story, to prod the customer service rep).  A very large warning, right on its transaction page, saying “You can lose all your money if you don’t personally know the person in this transaction,” would be a start. So would another catchy ad campaign. Here, let me help with that.

“Should I use Zelle? I don’t know what to do? If you’re not paying a friend, Zelle’s not for you.”


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About Bob Sullivan 1637 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.

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  1. Zelle criminal took $23k from elderly victim; BofA (initially) wouldn't give it back — bobsullivan.net

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