Online payments platform Zelle was seen as a god-send when it arrived.
A payment system that allows money transfers between most of the country's large banks just by the push of a button was a game changer for customers weary of being only able to transfer funds to people using the same bank as them.
Related: People Keep Asking Reddit If They're Being Scammed On Zelle And Venmo
However, the consortium of banks behind the business — Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, Wells Fargo — had one major blind spot that would never fly on any of their individual platforms. That blind spot was fraud.
A March 2022 New York Times report on the scams that were endemic on Zelle was used as a springboard for politicians who were paying attention, including Sen. Elizabeth Warren (D-MA), to pressure the company to change its ways.
In August, Zelle announced that it was introducing a new reimbursement benefit for "specific scam types," but now the company is providing details on how its new imposter scam refund policy actually works.
The company hadn't previously provided details due to worries that doing so might encourage criminals to make false scam claims, a spokesperson told Reuters.
Banks have had concerns that covering the cost of authorized transactions will encourage more fraud through false scam claims, but Early Warning Services — the privately held fintech company that is owned by the seven banks that own Zelle — says that it has implemented a mechanism that allows banks to take back funds from the offending recipient's account and return them to the sender.
Lenders are also now required to implement a tool that flags transfers that look fishy, including transfers to accounts that have never been active on the Zelle network previously.
"We have had a strong set of controls since the launch of the network, and as part of our journey we have continued to evolve those controls ... to keep pace with what we see is going on in the marketplace," Ben Chance, chief fraud risk officer at EWS told Reuters.
Of the $629 billion worth of payments processed on the network in 2022, 99.9% were made without a fraud or scam report, according to the company. But previously, consumers had little recourse to recover the $2.6 billion in scam related losses the Federal Trade Commission tracked in 2022.
More than 100 million people, all of whom have U.S. bank accounts, have access to Zelle, according to EWS.
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