Zelle: The Money Transfer App in Trouble

It’s a fact that, peer-to-peer money transfer is never a bad idea. Venmo’s clear demonstration stated the same and made banks rush to fill the gap.
Then, P2P mobile payment market was hit by Zelle, a bank-backed alternative. Increased in popularity in no time, Zelle was expected to take on Venmo. Now, Zelle is in big trouble. The New York Times report revealed the security lapse in the app, bringing the fraud into play.
It is easy to understand why fraudsters are targeting Zelle, the going through of $75 billion last year tells the entire story. Hence, Zelle has become a big fish for hackers. Though all security systems have some lapse, Zelle has some clear and unexpected weaknesses.
The report also states that some people had never heard of Zelle before it was used to empty their bank accounts. The biggest problem with Zelle is that it does not always notify the users about where the money has been transferred. Some banks send the notifications, but not all of them. This is the disadvantage that needs to be taken care of.
The worst part is that some people who lost their hard-earned money may not get the re-compensation. It means, they were on a rollercoaster without seatbelts. Of course, fraud is substantial; still, there are some patchy protections against fraud.
Some banks such as Bank of America operate under a different kind of belief. If you have initiated the transaction, you must be completely aware of it. Therefore, you do not need a protection.
New York Times, this past Saturday published the article that states- Zelle, the Banks’ Answer to Venmo, Proves Vulnerable to Fraud!
“I know of one bank that was experiencing a 90 percent fraud rate on Zelle transactions, which is insane,” said Genevieve Gimbert, a partner in PwC’s financial crimes unit.
She added- “Most banks have strong authentication and fraud-detection controls for Zelle, but some did the implementation without any protection”.
The problem was under control, says Zelle.
The Early Warning’s head of payments- Lou Anne Alexander says- there have been a few incidents and when problems take place, we and the bank are proactive. We are not hiding about this”.
To transfer money using Zelle, the sender has to enter the recipient’s phone number or email address. Zelle is built on the assumption- each of those identifiers is unique to one person and are fair.
Last November, Mr. Kemm tried to send cash to his mother, Carol Kemm, who is also a Bank of America customer. He entered the mobile phone number Ms. Kemm had been using for at least three years and hit “send.”

“She told me she didn’t get it, and my first thought was, ‘Mom, you’re not being very tech-savvy,’” Mr. Kemm said. “Eventually, after a few days, I realized it really didn’t get there.”
When he called Bank of America’s customer service line, he learned that the $300 had been transferred — to a JPMorgan Chase bank account, whose owner had registered the same phone number Ms. Kemm used. He said he was told that there was nothing Bank of America could do to get his money back.
Mr. Kemm filed a police report and a fraud claim with Bank of America. On Nov. 30, the bank sent him a reply: “Our records indicate that we initiated the transfer in accordance with your instructions. As a result, your account will not be credited for this claim.”
This is one of the cases out of many. Customers have to hunt on Zelle’s website to get to this red flag: “Neither Zelle nor the participating financial institutions offer a protection program for any purchase and/or sale conducted using Zelle.” Some banks, such as JPMorgan, don’t notify customers when new recipients are linked to their Zelle accounts.

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This release was published on openPR.