Most of the article was pretty good up until the close:
And as word gets around that Zelle and the banks are not helping people who were scammed, it will ultimately damage Zelle’s reputation and send users back to PayPal, where buyer protections exist.
This isn't "damaging" Zelle's reputation - you should never use Zelle (or Venmo) for this type of transaction. Asking your bank to "help" is like asking the US government for a refund when you mail an envelope full of cash to some anonymous person.
On one of Zelle's site pages, it states:
"EASY. FAST.SAFE. DONE.
Forget running to the ATM or mailing a check. With Zelle, there’s a new way to move money. Backed by the nation’s leading banks and credit unions, you can send and receive money with peace of mind and without the hassle."
So, two problems here. It's not "safe." It safely arrives at its destination, but for most people, a safe money transaction is one that's protected from fraud somehow, which this is not. And it's not "backed" by banks so much as it is backed by your bank account. Again, backed by banks sounds like fraud protection. I don't think there's anything wrong with Zelle. It sounds like a useful service. But unless they are sanguine about these kinds of problems occurring then they ought to make it very clear to not send Zelle to a destination you don't 100% trust. That the only guarantee here is for guaranteed delivery of your cash and nothing else. So that's not quite the same as mailing an envelope of cash, which I know from personal experience as a lad is inherently unsafe even if the destination is your best friend's house.
Safe in the sense that me sending money doesn't expose my bank account to being ripped off. We have a huge problem in the office right now in that we don't have any mechanism to pay each other digitally for things like lunch - seriously! A lot of the office feels really weird about giving their banking credentials to Venmo (even though it's pretty popular here in Ann Arbor, MI) and a bunch of people think paypal is shady (I use both of them, but I'm probably a little more open to risk).
Zelle sounds like it will be exactly what we've been looking for - a safe way to send cash to each other, with the exact same risk profile of cash - that is, I give you my cash, and you have my cash, but nothing else.
I 100% agree with you though, that the banks need to make it clear that this is to be used to send money to friends, and family - not strangers - unless you are okay with strangers just taking your cash. Poor communication on their part.
> We have a huge problem in the office right now in that we don't have any mechanism to pay each other digitally for things like lunch - seriously!
Have you considered running an internal credit system? Those who pay for other's shares of a given lunch get credits for those, and those whose lunch is paid for get debits.
When a group of people go to lunch, the person with the persons with high debt should pick up the tab.
Once a week or once a month or something, people should bring cash to settle their debt, with the cash then distributed to those with credit.
We almost did that at an office I worked at...but got bogged down in bikeshedding other features. In particular, our biggest lunch problem was not settling the bill. It was agreeing where to go to lunch. So some people wanted the lunch manager to also handle that, and wanted to do it in a way that was fair.
How to do it fair is not obvious, and no one could agree on the solution.
We used splitwise to do this at work for while. Its designed for splitting roommate expenses, but ended up working pretty well for accounting for who should pay for the next lunch.
When someone would leave the company we would settle up with cash.
I spent the better part of a week trying to get google cash working - submitted passport, utility bills - they kept claiming my passport picture wasn't clear enough. Eventually I gave up and just used paper cash - which is what we, a pretty much 100% highly technical office, use to pay each other.
I love venmo - it's worked well for me. And I use Apple pay multiple times a day, every day. And been a PayPal user for 15 years - but no common thread with colleagues in the office. We just need something that we can be certain everyone can use. Zelle might be that thing.
In a similar anecdote, all 32 members of my law school section use Venmo to submit section dues and dispurse refunds from those dues when someone hosts a gathering, etc. A large group of non-technical users signed up without blinking.
But none of those other things (ATM, checking account) are protected from fraud when you initiate the transaction either? And it must be said of checks that they are "backed by banks." I agree Zelle should do MUCH more to tell customers that they shouldn't send money to strangers.
Your comment makes me want to argue both sides. It does should like they are offering more than the other payment methods, but the idea that a company should "tell customers that they shouldn't send money to strangers" really cracks me up. That seems like something you should learn before you are old enough to have a bank account.
If you use a credit card - you instead instruct your credit card company to initiate a transaction with them - and, if you aren't happy, you file a chargeback and then it's on the vendor to prove that they fulfilled their end of the deal.
I've filed about 5 or 6 chargebacks, and, with the exception of a gym membership, (which, admittedly, did have a contract from me stating I would send them a request via registered mail to quit) I've always been successful.
The police literally do not help with this sort of scam unless the amount is big enough to matter. People run scams like this all the time on craigslist, whether it's for tickets or apartment rentals or whatever. It's so common that police simply don't have the resources to chase them down, and if you call to file a complaint sometimes they'll tell you not to bother.
I previously ran across a scam like this while apartment hunting, and ended up contacting the local police along with the scammer's bank. Neither of them were willing to do anything about it so I left it be. Hopefully they didn't get anyone's money, but they probably did...
But it isn't fraud - you sent them cash. The end. You can take them to small claims court if they failed to fulfill a contract, but there are a lot of reasons why a person won't, or can't fulfill their end of the bargain other than criminal fraud.
This is why credit cards are awesome for this sort of thing - chargebacks.
Zelle exists because the US government hasn't mandated free person-to-person transfers like nearly every other country on the planet. It tries to be a private initative to allow for electronic transfers.
That being said .. it's still just a virtual check. If you write a real check to someone and they cash it and then don't give you what you ask for, you do have to get that person or entity arrested or take them to court somehow.
Even if Zelle was an official US federal reserve system (which it really should be and not this hacked together bank program), I think you'd still have the same exact issue.
Judging from the comments even Venmo appears to have the same issues, even though it's owned by PayPal. Their parent company PayPal has some protection because there's that buffer that exists in the PayPal account before it goes to your bank account (although I though Venmo had this too?) so they can recover money from that layer, but not always when it gets transferred all the way out.
It’s also a difference of expectations. I live in a non-US country where escrow services never took off and consequently nobody expects fraud protection from financial service providers. The banks cover unauthorised use but not authorised transfers for fraudulent reasons. That is dealt with by the police.
PayPal has set some interesting expectations for what a service provider should cover.
I'd argue that it's not just PayPal though, although they've played a part for sure. Credit cards in the US are ubiquitous and offer a very high level of fraud protection that consumers are used to.
Of course, that fraud protection (and the multiple points & cash back systems) are all covered by overhead in the system. Merchant fees are quite expensive, although the consumer never usually sees them except for small things like cash discounts or minimum transaction amounts at small businesses. There have been some interesting court cases about the ability for merchants to pass those fees onto their customers.
My country has free person-to-person transfers between all banks, but it is a separate issue from fraud. If you get scammed the bank will not help you.
I've been scammed in reverse by the precursor to zelle, quickpay. I accepted a transfer and released goods, then the transfer was reversed.
I was told multiple times by chase reps that transfers were not reversible once initiated, but they never reimbursed me even after I filed a complaint with the CFPB. It wasn't enough to be worth suing over.
Well, no fraud protection other than, you know, the law. It's still quite illegal to defraud anyone, especially "over the wire". Since Zelle is all cozy with the banks I'd expect there wouldn't be too much pushback when the police ask who was responsible for some fraud...
Perhaps they ought to spend time on actual crime (e.g. a $200 ticket) rather than non-crimes like which particular natural substances someone chooses to burn and/or ingest? It seems to me that police departments could earn a good return on investment simply by, y'know, chasing down criminals who defraud others. Maybe I'm a starry-eyed optimist.
The user agreement specifies that the service is for “payments between friends and people who trust each other,” and that there is no buyer or seller protection.
That sounds the same as Zelle, with the exception that Venmo might help you if scammed. Sounds like you're very unlikely to get help on the Zelle platform.
This makes sense to me as a Venmo equivalent, but doesn't Chase have a QuickPay feature that uses Zelle? Is it more secure from there or corner-cutting?
That's interesting. They can include anyone that uses Chase Quickpay in their "Zelle" metrics. Mind you, I'm referring to people who use QuickPay in the Chase app and not those who have downloaded the newer Zelle app.
It's pretty clear when you read the docs behind it. It's only designed for people you know and trust. Presumably the banks agreed to this model as a way to cut costs while seemingly provide a beneficial service to customers.
PayPal... which has long been the standard for these sorts of anonymous transactions
No sane seller would use PayPal for such a transaction. PayPal offers no seller protection whatsoever for items that are not shipped via a common carrier and with tracking.
Except if you sell on eBay. I have a friend that is routinely ripped off and eBay and PayPal basically tell him to fuck off. He does a 500k in revenue through them and just has to suck it up. Both those companies are scum in my opinion
It strikes me that Zelle is basically repackaging of wire transfers. And banks have always been reluctant to reverse wire transfers. Because, I think, they're intended to be irreversible, and executed between knowledgeable parties.
Well, transfers are "reversible". There's nothing technical stopping a bank to wire money back.
But, banks are not allowed to mess with your funds. If it's in you account, then it's yours. It would be illegal for a bank to simply reverse a transfer. Crooks are protected by the laws as well.
Even if some obvious mistake was made at a e.g. payment provider and funds were wired to the wrong bank account, your bank has to send you a letter asking for your permission to reverse the mistake. Reading a batch file twice is a nice example: You get two credit entries, but the bank is not allowed to reverse one.
What happens with smaller scams is that crooks withdraw funds as soon as they've been booked. So most of the time the money already is physically lost before a (legal) claim arrives. So there's that.
OK, but aren't those just as readily reversible as checks? I've read that banks readily reverse even cashier's checks. Which was the basis of a common Craigslist scam. Maybe it's just the Zelle doesn't care to be bothered.
Every transaction you make with a credit card is an ACH payment behind the scenes, so yes they are readily reversible. The banks are hands off with Zelle though, any payment is like giving call, they have no duty to reverse funds over disputes between you and receiver unlike PayPal type services. You have to trust who you are giving money to.
Zelle is for PERSONAL payments only. It's for sending money to friends and family and people you trust and know. It's free for both the sender and receiver BUT you won't get any protection. Once it's sent, it's sent.
Don't people read? It's on Zelle's website "send money in minutes to your friends and family". I also asked my bank about that and got told there's no protection unless somebody hacked into your account. Yet, if you sent the money, it's your responsibility.
BTW: PayPal really sucks if you receive a lot of personal payments. I got my account frozen because PayPal got nosy and wanted to know more about 15 transactions. It took me a while to get my account unlimited. So, that's why I use Zelle for personal payments and use PayPal only for purchases. I would ditch PayPal but I don't have any option for now.
Banks don't care about customers but care a lot about being compliant with plethora of regulations.
Non-compliance for a bank means the lights can a will be turn off by a governing bodies, of which are many.
Hence - offering a money transfer service within the bank infrastructure and services without consumer protection - is highly likely is a violation of some regulation. Or more than one even.
Supplement the complaint with a proof of "misleading marketing practices" - and this adds couple extra zero's to potential damages.
Someone just need to dig it deeper and then push the button where it hurts. Problem solved.
Regulators will be on consumer side.
Except that'd probably fall into the CFPB remit, which has just been significantly reduced in scope and veracity due to the current administration... :(
Bank-fraud laws existed for multiple decades longer than there was the (arguably unconstitutional) CFPB, so I'm confident that any activities which actually violate the law will, eventually, be curtailed.
Funny story. Someone, let's call him Mr. Unlucky, sent me $1700 via zelle a few months ago. I called my bank and asked them about it and they had no info. About a week later, a guy emails me saying he meant to send the money to his land lord John.d.Doe@gmail.com but instead sent it to me, John.Doe@gmail.com. Both me and this unlucky dude called the banks, called Zelle, etc trying to get the charges reversed. No luck.
So lucky for this unlucky guy, I had been receiving John.D.Doe's email for about a decade on and off. I had sent the guy mistaken emails and sort of had a dialog with him. I knew he was in real estate. I emailed him and he confirmed that this unlucky guy was indeed renting from him, and his rent was this $1700 amount. So I took a leap of faith that this guy hadnt been playing a long con on me and forwarded the money. It was reckless and probably stupid but it wasn't my money and I felt bad for Mr. Unlucky. Zelle was no help, had no protection, and allowed this silly mistake to be made. Mr. Unlucky sent me a nice note and we both commiserated about the flaws in Zelles systems. I don't think I would use them.
People below are rattling off lists of alternatives, PayPal (fees), Venmo (requires another account setup), Google Wallet, Apple Pay, and so forth.
I'd hate to be that guy, but the cryptocurrency blockchain technologies have some potential for something none of these other technologies have, which is elimination of vendor lock-in. It's annoying to have such a variety of places where I have username and passwords to apps which store my account credentials. I forgot LevelUp which I use for (it turns out) just ONE coffeeshop. I have accounts on all the others (linked to my bank account) minus Venmo because I guess I decided, enough is enough.
The account proliferation due to inefficient competition and lock-in of vendors is absurd. So in comes Zelle, perfectly positioned to solve that problem, but for 'friends and family' only? My tenant pays me through it, and I don't think we're related.
Banks are slow, conservative dinosaurs allowed to constantly play CYA with consumers.
You don't need a username and password to pay by PayPal. For Apple Pay you only need to use your username and password when setting it up, if I recall correctly. When you use it to pay you only need your fingerprint (or face if you have a phone with FaceID?).
Cryptocurrencies (at least the currently popular ones) only sort of match what Venmo does from your list. The rest do things that cryptocurrencies do not do, and that most consumers want.
PayPal (if you pay with a credit card), Google Wallet, and Apple Pay provide you the protections that a credit card provides. Seller doesn't provide the goods? Call your card company and they reverse the transaction. If you have a PayPal account as a buyer and pay through a balance on the account, I think you still get protection.
With Bitcoin and I think the other popular cryptocurrencies in actual use for real world purchases you don't have protection. Like Venmo (and Zelle) they are like sending cash, except unlike Venmo and Zelle cryptocurrencies are essentially a foreign currency which adds some headaches to using them.
Zelle doesn't say it is for friends and family only. What they say in their FAQ is:
> Zelle is a great way to send money to family, friends, and people that you are familiar with such as your personal trainer, babysitter, or a neighbor. If you don’t know the person, or aren’t sure you will get what you paid for (for example, items bought from an on-line bidding or sales site), we recommend you do not use Zelle for these types of transactions.
Presumably your tenant is familiar with you, and so Zelle is fine for him to use.
It's essentially equivalent to paying in cash. They should say that somewhere prominent on their site. That would probably clear up a lot of confusion, as I think most people in the United States have a good intuitive understanding of when you should and when you should not use cash.
I don't know enough about this to comment authoritatively, but I would expect KYC/AML rules to apply here. If I send money via any means to a bank account, I think the bank should be able to produce information about the identity of the account holder in response to a subpoena. If they can't, regulators might be rightfully annoyed.
The last time I looked the iOS app had the worst user reviews I’ve ever seen. When I looked at it a few months ago it had a 2 Star average, but I just checked and found its shot up to 4 stars. Curious, I read the user reviews and ...
Just as bad as ever. Can anyone say “gaming the app ratings system”?
Zelle is basically a thin wrapper over ACH transactions. In fact, my understanding is that Zelle is basically just "One-day ACH". I never really considered the fraud aspects, but clearly a modern payment processor needs to have a proper escrow involved somehow. ACH and Zelle don't look like they'd do the trick.
Dwolla was a good middleman for this sort of thing, but it seems like Dwolla pivoted to different services unfortunately.
Overall, this is why the USA has credit cards. A Credit Card company is the middle-man that you trust to handle these issues.
I don't think its "ridiculous". Cash, Wire-transfers and Checks (especially Cashier's Checks) do not really have a reversal mechanism IIRC.
Once a Cashier's check goes into someone's account, there's basically no way for it to come out.
But the thing is: we all know these details already. When working with Cashier's checks, we know its insanely dangerous and to keep track of those little paper-slips. It seems like the general public doesn't know that about Zelle yet.
Checks and cashier's checks can be reversed. It is common scam to send forged cashier's check, have victim deposit, and send some of the money by irreversible wire transfer. When the bank, or account holder, discovers the fraud, it will be reversed and the victim is out the money.
Zelle has similar protections as ACH. There are different kinds of "fraudulent transactions". It protects against account compromise but not fraudulent sellers. Same difference as between checks and credit cards.
Shouldn't use Zelle as the seller because could be from stolen account and reversed.
I've never used Zelle and was quite annoyed when they were injected into my banking data. Very shady nonsense from the big banks. I ended up closing my Bank of America account for other reasons, but suffice it to say BofA is horrible. All major banks are engagd in rampant thievery with their high fees and perverse incentives. The Wells Fargo scandal demonstrates that perfectly.
LOL Zelle. Never heard of it until a month ago until a massive market push bythr massive banks started shoving it down my throat. I've never wanted to avoid an app more
Zelle's biggest hurdle will be growing their community. Currently, there's insufficient feature differentiation from Venmo to warrant migration. None of my friends are on Zelle, so there's no reason for me to be.
> Currently, there's insufficient feature differentiation from Venmo to warrant migration.
Well, it doesn't require a venmo account and doesn't require three days of waiting. Right there removes any reason for me to use venmo ever again.
I just used it this week to help a friend with rent! Just signed into my bank, punched in his phone number, and sent the money. Couldn't be happier, which is huge considering I normally hate my banking software.
Alternatively, I never started using Venmo because I never trusted a third party to have my banking data. Now I use Zelle because it's backed by my bank, and since basically everyone I know now has it by default from their bank, I have seen pretty high adoption rates with my friends.
After being extremely hesitant to do it for years, I set up bill pay through my bank, partly to save on stamps (some of my utilities have truly atrocious online payment systems that drove me away). It has no fees, and for some utilities, it actually connects with their billing systems well enough for it to notify you of bills and let you view them, right through your bank's website, and then schedule the payment. With my municipal bill, I still get a paper bill, but I can enter the amount and my bank will handle issuing the payment, still without a fee.
Reading this makes me realise how good Australia is in this regard.
We have 'BPay', which every* bank supports from within their apps, and almost all bills support. We have instant intra-bank transfers and next-day inter-bank transfers.
Additionally, the big 4 banks (yup, we have just 4 big banks) have mobile payments, so you can link your mobile number to an account and receive payments into it. It's painful if you're with different banks, but the net result is that no-one* here uses PayPal, et. al, to transfer money to each other.
And now, we've just had PayID roll out, which is instant payments based on email or phone number to any of the banks (I think most banks in AU are participating, but it's backed by our Reserve Bank), which is a huge game changer and pretty much negates the need for a third-party to do this for us.
> Reading this makes me realise how good Australia is in this regard.
I'm from Sweden, I started paying bills through my internet bank over 20 years ago. And it was never difficult or a big deal, because the existing giro-based bill system that every vendor uses and has been using since the 1960's, slotted right into it, with zero technical integration required from the payees.
Moving to the US was like stepping into a time machine when it comes to dealing with banks and bills, it's ridiculously backwards. And Americans generally have no idea how behind they are. It's so fucking frustrating having this discussion every single time.
LOL. Spend some time dealing with French banks and then we can talk about American banks. France is a place where people actually write checks for things and you have to physically visit your specific branch to accomplish certain transactions. The concept of “branch banking” hasn’t made it to France yet. Even withdrawing cash from a bank requires an appointment (if you want to withdrawal over a few hundred Euros for instance.)
French banks are a nightmare conpared to American ones.
Traditional bill pay services have probably reached peak adoption, and will slowly tail off. Paying bills directly with the vendor / service provider with a credit/debit card is growing (in the U.S.).
Agreed. Also, incorrect charge? Call the utility. If that fails, call the credit card, and ask for a “charge back”, and tell them you called the bank. Problem solved, and the bank extracts a cut of the reversed charge from the vendor. (In the US)
Also, you probably get cash back on the normal payments, and other bill pay methods let the utility pocket that (plus the credit card company’s cut).
Having said all that, I wish the govt would ban credit card transaction fees, and provide a secure anonymous alternative, but I don’t make the rules, and, as a consumer, I pay the 1-3% transaction fee tax either way...
I pay bills using credit cards whenever possible. For the very few that don't, or that charge exorbitant fees for doing so (e.g. rent), I use Chase's bill-pay service.
Always use a throwaway account for third party services with debiting privileges and keep no money in it normally. Yes ACH has a trail but why take the risk of having to fight it out.
Zelle’s user base can be every customer of every bank that supports it. Far larger than Venmo can ever be. And it’s slowly being embedded in each partner bank’s app.
You may have not heard of them, but their uptake is accelerating, and they are becoming the defacto US peer to peer funds transfer system.
"Zelle, U.S. banks’ answer to mobile payment services like PayPal and Venmo, claims that nearly 100,000 consumers, on average, are signing up for its service per day. The company also painted a picture of growing traction, noting it processed over 247 million payments in 2017, an increase of over 45 percent year-over-year, totalling $75 billion in peer-to-peer payments, up from $55 billion the year prior."
"Today, Zelle says there are more than 60 financial institutions on board, including 50 percent of U.S. demand deposit accounts, and it has expanded its partner ecosystem to include ACI Worldwide, CGI, D3 Banking Technology and IBM. They joined existing partners FIS, Fiserv, and Jack Henry & Associates."
"In PayPal’s third quarter 2017 earnings, the company reported that Venmo processed approximately $30 billion in payments over the past 12 months. Or, in other words, Zelle is now processing more than double the payment volume of Venmo."
It's being shoved down people's throats with a massive marketing push combined with Wells Fargo (and maybe other banks) disallowing you to transfer money to another wells fargo account (not owned by you) unless you use the app. Basically forcing you on the platform
I don't know much about Venmo vs. Zelle specifically, but a startup with marketing funded by VC money could easily beat a consortium of banks with little marketing. Zelle recently pivoted to a dedicated app, possibly because being buried inside bank apps wasn't very discoverable.
With Venmo do you still have to wait a few days while it transfers to your actual bank account? That's a big enough reason for me to always use Zelle or physical cash. With Zelle it's literally seconds until I can see the funds.
Just like there are no “buyer protections” with checks or handing someone cash.
It’s an expectations issue, not a technology issue. Can’t get your money back with Western Union or TransferWise either if you’re not making intelligent decisions.
Edit: Do not send payments to a stranger unless it’s through a payment system that offers you protection. That is not the role of person to person money transfers.
Yes, they can. They can make the correct use case clear on their website and in their UI. A warning could be added when sending payment that there is no fraud protection.
I blame both the banks and Zelle for implementing this poorly.
So if Paypal can give it to me for free, per the article, the answer just seems to be "we should tell everybody as loudly that we can that this is a shit product."
PayPal takes 2.9% and change off the top. Banks do not charge for person to person transfers. There is no skim for expensive fraud prevention to come out of.
PayPal doesn't take that off the top for person-to-person. They haven't in... five years? I don't know. It's been a while. You used to have to do some sort of "it's a gift" thing, but I haven't seen that in a long time.
> There are no fees within the U.S. to send money to family and friends when you use only your PayPal balance or bank account, or a combination of your PayPal balance and bank account.
And as word gets around that Zelle and the banks are not helping people who were scammed, it will ultimately damage Zelle’s reputation and send users back to PayPal, where buyer protections exist.
This isn't "damaging" Zelle's reputation - you should never use Zelle (or Venmo) for this type of transaction. Asking your bank to "help" is like asking the US government for a refund when you mail an envelope full of cash to some anonymous person.