Correcting the Record: Banks Are Taking Tangible Steps To Protect Consumers From P2P Fraud

Driven by a desire to send and receive payments seamlessly and instantaneously, millions of consumers and small businesses are increasingly utilizing peer-to-peer (P2P) networks to meet their financial needs. America’s leading banks remain fully committed to protecting consumers’ access to safe and reliable P2P networks, while also taking tangible steps prevent fraud before it occurs across every product and service they provide, including Zelle.

Instead of working in tandem to support longstanding bank efforts to educate consumers and stop criminal activity, some leaders in Washington have responded to rising instances of online fraud by endorsing misguided proposals that would limit consumers’ access to the secure P2P networks they demand and deserve.

Here’s where the conversation misses the mark, and the facts policymakers must account for as they consider future action:

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❌ CLAIM

Banks aren’t doing enough to stop online fraud

✅ FACT

America’s leading banks are deeply concerned about the exponential rise in scammers taking advantage of hardworking Americans.

For years banks have been on the front lines fighting fraud, working to protect consumers in a way that doesn’t chill innovation while simultaneously enhancing the consumer experience, including:

• Investing significant resources to prevent, detect, and mitigate scams through education, monitoring, the use of authentication and risk tools.
• Evolving and adapting consumer protection measures, including real-time safety notifications and alerts, to address the continually changing nature of deceptive activities.
• Working closely with law enforcement to identify, remove, and report bad actors.

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❌ CLAIM

Expanding the current liability framework for banks is necessary to protect Zelle users from fraud

✅ FACT

Shifting liability to banks would do nothing to stop the rise in fraud across all P2P networks and would limit consumers’ access to a valued bank service they rely on to meet their financial needs.

• This proposal would require additional authentication and transaction review procedures, depriving consumers of the ability to seamlessly execute instant transactions, potentially limiting their access altogether.
• A change in the current liability framework would impact not only P2P payment networks, but also other products and services consumers rely on, including ATM transfers and direct deposits.
• Ironically, holding banks liable for all fraud could incentivize even more criminal activity, as scammers have demonstrated that they know and will exploit the rules for bank reimbursement.

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❌ CLAIM

Banks are not doing enough to investigate and reimburse unauthorized transactions

✅ FACT

Banks investigate every instance in which a customer disputes a transaction made via Zelle and already are required by law to provide reimbursement if the transaction was unauthorized.

• Banks devote countless hours every year investigating allegations of fraud, unauthorized transactions, and scams.
• Because the banking industry is the among the most competitive in the world, banks are incentivized to protect every customer relationship, and take the appropriate steps to resolve instances where customers are rightfully owed a refund due to an unauthorized transaction.

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❌ CLAIM

Fraud on Zelle is significantly higher than other P2P networks

✅ FACT

99.9% of the 5 billion transactions processed on the Zelle network in the past 5 years had no associated reports of fraud or scams.

• In partnership with banks, Zelle is continuously evolving and adapting consumer protection measures to address the dynamic nature of deceptive activities, including the introduction of real-time safety notifications within the user experience and payment flow.
• The share of disputed transactions on PayPal is 3x higher than Zelle and 6x higher on Cash App when compared to Zelle.
• As opposed to fintechs operating outside the well-regulated and well-supervised financial system, banks alert each other to fraud on the Zelle network, helping to further protect consumers.

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❌ CLAIM

Banks care more about profiting from Zelle than protecting consumers from fraud

✅ FACT

Banks do not profit from Zelle and the service is generally offered free to consumers.

• P2P networks, including Zelle have soared in popularity, transforming the way millions of Americans move money and conduct digital transactions. In fact, nearly eight million employees, contractors, and consumers received payments through the Zelle network in Q2 2022.
• Bank customers who take comfort in knowing that Zelle transactions are provided by and through their trusted bank.
• Restricting access to this service would harm hardworking consumers and small businesses at a time of significant economic uncertainty, forcing them to meet their needs outside the well-regulated banking system.

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What Banks are Saying

As Citigroup President & CEO Jane Fraser told Senators at a recent U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing regarding the steps banks are taking to reimburse unauthorized transactions:

“What you're hearing from all of us, is that we take fraud very, very seriously. We don't want our customers to be defrauded. We will repay when there is an unauthorized transaction. And we put a lot of investment—all of us—into the tools and the capabilities to try and stop and prevent frauds happening in the first place, and to protect our customers. And it's a responsibility we all take very seriously.”

Expanding on challenges consumers face when utilizing non-bank P2P platforms, PNC President & CEO Bill Demchak said during the hearing:

“Secure networks like Zelle real time payments…allow for direct authentication with the host bank. They also allow members of the network to identify, close, and police against scam accounts. This is not the case with non-bank networks [which] are not held to the same security standards as banks.”

CBA Advocacy

• Earlier this week, CBA and several other leading financial groups responded to a new report released by Senator Elizabeth Warren (D-Mass.) concerning Zelle fraud. To read the full statement released by the groups, click HERE.