A digital payments powerhouse educates consumers on avoiding scams

Zelle has gone Hollywood. The brand known for helping move money almost instantly recently announced that actress and producer Christina Ricci will star in a campaign.

Instead of a rom-com or a murder mystery, this one is designed to educate consumers on how to spot and avoid financial scams when a criminal pretends to be an authority figure—such as a bank representative, the government or even a business—to convince consumers to provide sensitive personal information or money.

The announcement follows an even bigger plot twist from Early Warning Services LLC, Zelle’s network provider: “As of June 30, 2023, our bank and credit union participants must reimburse consumers for qualifying imposter scams,” a spokesperson said. “The change ensures consistency across our network and goes beyond legal requirements.”

The new standardized rules apply to all 2,100 participating bank brands on the Zelle Network. Bank and credit union participants must reimburse consumers for qualifying imposter scams, the spokesperson added. The news was cheered by industry watchers. “The rule changes are a positive step toward protecting consumers and fostering trust in Zelle,” said Harman Singh, director at Cyphere Ltd., a cybersecurity services company. “Initial adjustments are expected. The long-term impact will be beneficial for both consumers and banks.”

The decision “reflects a positive step toward enhancing consumer protection,” said Mark Stewart, an accountant for Step By Step Business. “Acknowledging the financial toll of such scams, this move goes beyond legal requirements, showcasing a commitment to addressing emerging challenges in peer-to-peer payment security and safeguarding users against fraudulent activities.”

Singh sees bigger changes ahead: “The new rules are likely to drive innovation in the P2P payments space. Enhanced security measures could attract new users and increase overall market adoption,” he said. “Long-term benefits are anticipated. Enhanced consumer protection and clearer liability guidelines should ultimately reduce overall fraud losses.”

Zelle’s popularity has exploded in recent years: That’s meant increased convenience for consumers who can almost instantly pay for everything from food to fashion. But it has also meant increased fraud as scammers found creative ways to trick consumers, many who found there was little recourse.

In March 2022, The New York Times published a story titled “Fraud is Flourishing on Zelle. The Banks Say It’s Not Their Problem.” The article cited statistics from Javelin Strategy & Research, an industry consultant, stating that “nearly 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020.”

In April 2022, two U.S. senators wrote a letter to Al Ko, then CEO of Early Warning: “Given the rise of increasingly sophisticated scams on your platform and the widely documented difficulties consumers have faced in seeking relief from banks, we seek to understand the extent to which Zelle allows fraud to flourish and the steps your company is taking to increase consumer protection and help users recover lost funds.”

U.S. Senator Elizabeth Warren of Massachusetts followed with a blistering report stating that:

Fraud and theft are rampant on Zelle—and are increasing;

­Banks are not repaying the vast majority of cases where customers were fraudulently induced into making payments on Zelle. “Overall, four banks that provided data reported over 190,000 cases of scams—cases where customers reported being fraudulently induced into making payments on Zelle—involving over $213 million of payments in 2021 and the first half of 2022. In the vast majority of these cases, the banks did not repay the customers that were defrauded”; and

­Banks are not repaying customers who contest “unauthorized” Zelle payments—potentially violating federal law and Consumer Financial Protection Bureau rules.

While Zelle points out that “from 2022 to 2023, we’ve seen more than 99.9% of Zelle transactions reported without fraud or scams,” that small number of problematic transactions creates big issues for consumers. “These modifications have been largely spurred by mounting pressure from lawmakers and numerous consumer complaints about payment scams,” said Scott DePeralta, president of Scott DePeralta Consulting LLC.

“These changes underscore Zelle’s dedication to service improvement and address the fraud issues it has grappled with. It’s crucial for the industry to keep abreast of these developments and adjust their practices as needed to ensure better protection for consumers.”

According to Singh, “Banks need to transparently communicate the new rules and fraud risks to their customers. Multi-channel educational campaigns can raise awareness and promote safe Zelle usage.”

Enter Christina Ricci: In November, Zelle announced the S.A.F.E. Squad – which stands for the Scam and Fraud Elimination. It’s designed to educate U.S. consumers about safe payments usage and raise awareness about payments safety.

Ricci stated: “As someone who has been targeted by scammers, I am thrilled for the opportunity to partner with Zelle to help educate people, raise awareness about fraudulent payment schemes and arm consumers with ways to protect themselves before they fall victim to a scam.” With the announcement, Zelle is essentially making consumers the star of their own fraud-prevention movie.

Dawn Wotapka is a contributing writer for BAI.

A version of this article first appeared in the BAI Executive Report “Safeguarding Against Fraud.” Read more on fraud and related topics.