Criminals are using the banking payment service Zelle to scam unsuspecting consumers.
Created by major banks, Zelle provides easy electronic payments but poses serious security risks.
Continuing fraud may hinder banks' efforts to expand Zelle into retail payments.
Zelle is one of the many ways to send money online, and with over 100 million people using the free payment app to transfer funds directly between bank accounts, it's among the most popular, too. All that popularity, however, comes with some risk. Zelle -- a collaboration between Capital One, JP Morgan Chase and other top banks -- has become a major target for fraud.
Stories of Zelle users losing thousands of dollars in money-transfer scams continue to make headlines.
In an April 26 letter, Sens. Elizabeth Warren and Robert Menendez, both members of the Senate's banking committee, questioned Zelle's parent company, Early Warning Services, about "the extent to which Zelle allows fraud to flourish and the steps your company is taking to increase consumer protection and help users recover lost funds."
The rise of Zelle scams and criticism of its lack of security protections could disrupt plans to enable Zelle as a retail payment system. According to the Wall Street Journal, both Bank of America and Wells Fargo would like to expand the payment options of Zelle to include in-store shopping, while fellow owner JP Morgan Chase wants to focus on consumer protection first.
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