The payments service Zelle was launched in 2017 and, in 5 short years, has been catapulted from an unknown brand to the default option for many Americans looking to send money. The numbers are simply staggering: in 2021, Americans sent nearly half a trillion dollars over 1.8 billion payments using the Zelle Network, according to the company’s press releases.
This statistic means that Zelle processed more than double the volume of payments like Venmo, a payments service used by more than 80 million U.S. consumers, in 2021. But just as Zelle’s popularity has risen exponentially, so has the incidence of fraud being perpetrated on the Zelle Network. It’s now become an issue of national concern and evidenced by the fact that Senators Elizabeth Warren and Robert Menendez – each member of the Senate’s banking committee – wrote a letter in April to Al-Ko, the head of Early Warning Services, LLC – the entity that owns the payments network. In this article, we’ll discuss the common tactics being used by scammers and share some tips for how consumers can avoid falling victim.
The Difference Between Fraud and a Scam
One of the reasons why the recent surge in scams has gained a lot of attention is because many consumers that have fallen victim have not been able to get their money back. A woman in Lorain, Ohio fell victim to a Zelle scam that resulted in her facilitating the transfer of $1,200 out of her bank account to the scammer, according to News 5 Cleveland. As of the date of the article, the woman was waiting to file a police report and was waiting for the bank to conduct its investigation. The fact that victims cannot have the lost funds returned to them automatically or within a short period of time is one of the reasons Zelle scams have been particularly damaging. The complexity stems from two areas.
First, there is a nuance between what is considered fraud and what is considered a scam. If someone gains unauthorized access to your bank accounts and facilitates transactions, that is considered fraud. In many cases the process of getting your money back when there’s been fraud is straightforward. With scams, what is happening most of the time is that consumers are being tricked into authorizing payments by scammers. Because the consumer authorized the payment, the process of getting your money back is complicated. You can think about the two situations with a simple analogy.
If someone broke into your house and stole your television, a crime has been committed. However, now imagine if someone showed up at your doorstep and you decided to hand them your television – it is a lot trickier to explain the crime that’s been committed. The difference between fraud and a scam is one of the important distinctions that is important to understand in a lot of these Zelle cases.
The second area of complexity stems from the fact that Zelle payments get processed often within minutes. As a result, by the time consumers have noticed that they have been scammed, it is often too late to do anything about it. Given the ubiquity of Zelle, with the number of banks that use Zelle now numbering well above a thousand, there are many different options for scammers.
How To Protect Yourself From Zelle Scams
The most common scam that occurs involves scammers sending out text messages alerting consumers about charges that have been attempted on their bank accounts. The text message purports to be from the consumer’s bank. The scam artists don’t actually know which banks the consumers have accounts with, but they play the probabilities by choosing many of the popular banks in the United States, such as Citibank, Wells Fargo, and Chase Bank. Consumers that follow the prompts will then receive a phone call from someone pretending to be an official from the bank, and from there, the process of soliciting information begins. The best way to not fall for these scams is to avoid following the text message prompt. In general, it is good practice to avoid responding to unsolicited text messages and phone calls claiming to be from financial institutions, and more importantly, to never provide any information about yourself by text message or by phone.
The rise of cases of Zelle scams is certainly dampening enthusiasm for the payment service. As banks grapple with ways to combat these scams, it is important for consumers to be aware of these common tactics and to ensure that they are protecting themselves. By employing some caution in how they interact with technology, consumers can greatly reduce the odds that they fall victim to these scams.