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Early Warning Services LLC has for several years now been defending its popular Zelle payments service against allegations that its users suffer excessive losses to scams and fraud.
The issue reached a crescendo three years ago with criticism from U.S. Senators about the peer-to-peer payments service’s fraud rates. With the issue lingering, the Scottsdale, Ariz.-based network on Thursday sent a letter to three key U.S. regulatory agencies regarding its actions to fight payments fraud and setting out five recommendations for concerted action by Early Warning and the government offices.
The letter, a response to a request for information from the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation, argues that Zelle and participating financial institutions use technologies such as biometric authentication as well as data encryption and fraud monitoring to fight fraud. With more than 150 million users, Zelle processes more than 99.98% of transactions “without a report of fraud or scams,” the letter says.
The letter’s recommendations include a national task force to fight payments fraud; standardized information sharing on fraud prevention; stronger efforts to fight the use by fraudsters of artificial intelligence to gull consumers into sending money; increased funding for law enforcement, and harsher penalties for fraudsters; and expanded consumer education.
“We stand ready to work with the Federal Reserve, FDIC, OCC, and other agencies to implement these recommendations and continue advancing the security and integrity of the U.S. payments system,” says the letter, signed by Ben Chance, general manager of identity and payments risk business at Early Warning.
The three agencies could not be immediately reached to determine how receptive they may be to this proposal of collaboration.
The letter lays special emphasis on consumer education, stressing the benefits of electronic payments and explaining network security methods. “Our experience operating the Zelle network and providing fraud-prevention solutions positions us to contribute meaningfully to these critical efforts,” Chance says in the letter. He ends by noting the need for “continued collaboration in addressing the evolving challenges of payments fraud.”
The Zelle network handled 2 billion payments in the first half of the year, up 19% from the same period last year, Early Warning reported Tuesday. Dollar volume grew 23%, to just shy of $600 billion. The network reported the fastest growth is among small businesses, which accounted for 180 million payments up 31%. Overall, the Zelle network links some 2.200 banks and credit unions. Early Warning itself is owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo.
