Peer-to-Peer Fraud: Scammers Adapt as Payments Go Digital

Decades-old payment and credit card regulations have clarified consumer rights and protections from fraud and theft. Banks became adept at managing the risks and losses within one of their most lucrative profit centers.

A new breed of peer-to-peer (P2P) payment apps is raising questionsabout the reach of the old rules, and the resoundingly popular, bank-owned Zelle is under fire from lawmakers as a result.

Operated by Early Warning Services (EWS), which is owned by seven major banks, Zelle offers a way for account holders to “send and receive fast, free and easy payments with family, friends and people they trust, across a network of over 2,100 participating banks and credit unions,” Mark Monaco, head of Global Payment Solutions, Bank of America Corp., told the U.S. Senate Permanent Subcommittee on Investigations.

Before Monaco and executives of EWS, JPMorgan Chase & Co. and Wells Fargo & Co. testified on July 23, the Senate panel’s chairman, Richard Blumenthal, released results of a staff investigation finding that “Zelle’s three largest owner banks reimbursed victims who report [unauthorized-transaction] fraud only 38% of the...