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Zelle Fraud: The Rapidly Rising Real-Time Scam

In 2021, one payment platform oversaw nearly half a trillion dollars in transfers. With double the payment value of the next closest competitor, that platform is also by far the market leader in real-time payments. Of course, as you know, we’re talking about Zelle. And based on its unique nature—from who owns it to the number of accounts that can access it—these stats make sense.

But Zelle, like all real-time payment platforms, is vulnerable to fraud attacks. That puts users as the target of scams and made Zelle fraud cases explode in recent years as a result. To understand why fraudsters love to target Zelle, we need to examine how they pull off attacks. Here’s everything you need to know about Zelle fraud and how it happens.

Understanding what Zelle is

Zelle is a digital payments network in the U.S. that allows users to send or receive money directly to each others’ bank accounts in real time. Using only their email address or phone number, they can transfer funds and have them available within minutes. As with other real-time payment apps, there are no fees for using Zelle.

Who owns Zelle?

Early Warning Services owns and operates Zelle. The fintech company is owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo. Zelle is also integrated with Citibank, TD Bank, SunTrust Bank, and BB&T.

What is Zelle fraud?

Zelle fraud is any unauthorized or fraudulent use of the Zelle digital payments network to send or receive money. Fraudsters use many scams to steal money through Zelle without the account holder’s permission. But because these payments—even ones made as part of a scam—are authorized by the account holder, oftentimes the victim can’t get their money back.

How could someone authorize a payment if they’re part of a scam, you ask? That’s due to the way Zelle transfers process. Money sent on Zelle, as with other real-time transactions, uses the Automated Clearing House (ACH).

These payments are immediate because they require account holder authorization to process. Because the account holder technically authorized the transfer—despite being tricked—the bank will not reverse it.

This is a highly frustrating and unfortunately common occurrence on Zelle.

Zelle does have security measures in place to prevent fraud. They use transaction monitoring and fraud detection systems. They encourage users to set up multi-factor authentication, not share logins, and be cautious of unsolicited payment requests.

But fraudsters can get around Zelle’s security measures in a few different ways. Each method has its own scam.

Can people scam you on Zelle?

Zelle scams are not only possible, they’re a favorite among fraudsters. In fact, Zelle scams and fraud cost users an estimated $440 million in 2021. The most common Zelle scams involve deception—phishing, social engineering, or impersonation.

Fraudsters send fake invoices or payment requests or investment opportunities. They ask for donations to fake charities or crowdfunding campaigns. They even pretend to be overseas lovers preying on lonely people.

The key to staying protected is knowing how these scams work.

Common Zelle payment scams

  • Phishing scams

    Phishing attacks are a favorite of fraudsters, and on Zelle, they can use them in various scams. Most times phishing attacks are the first step in a longer Zelle fraud scheme.

    When a fraudster tricks a victim into sharing their personal or account information, they are phishing. They might fool the account holder into putting their login credentials in a fake form. They also send legitimate-looking emails pretending to be a representative from Zelle or the bank to convince a victim they can share personal details.

    In the end, once they have phished a user’s account or personal information, they have the key they need to steal funds or open the door to more harmful fraud.

  • Money mule scams

    In a money mule payment scam on Zelle, a fraudster recruits the victim—who becomes the mule—to transfer money on their behalf. Fraudsters recruit mules through social media, email, or fake job postings.

    The fraudster’s goal is to get access to the victim’s Zelle account. Once they can access the account, they transfer money to the victim and instruct them to transfer it again to another account. The victim does this assuming they’ll get some of the funds as payment, or that they will be able to meet the person they’ve fallen for in a romance scam.

    The victim has now unknowingly become a money mule, facilitating the transfer of illicit funds and potentially exposing themselves to criminal charges.

  • Zelle transfers “to yourself” or bank impersonators

    A “Zelle transfer to yourself” scam starts with a fraudster pretending to be a banker. They text, call, or email the victim asking them to confirm a possible fraudulent charge. If the victim, says they didn’t make the transaction, the scammer offers a fake lifeline. They tell the victim they can stop further fraud by sending stolen money back “to themselves.”

    In reality, this is a fake account the fraudster controls, created using the victim’s name and personal information. While it looks to the victim like they’re paying themselves, they’re actually sending it to the fake lookalike account.

  • Account upgrade scams

    In account upgrade scams, fraudsters tell their victims they need to upgrade or verify their Zelle account to continue using it. They often rely on scare tactics to pressure the victim into sharing their account login or social security number, claiming the account will be frozen or closed if they do not comply.

    In some cases, fraudsters send victims to a fake Zelle website that looks legitimate but is really a phishing scheme. Once the victim enters their personal information, the phishing site captures it and the fraudster can use it to send money.

  • Account takeovers

    Fraudsters steal login credentials to take over Zelle accounts. They can steal login information from phishing websites, social engineering tricks, and a host of other scams. In the end, once they have the account they work to transfer as much as possible out before the bank can react.

  • Zelle scammers on online marketplaces

    In these scams, fraudsters pose as buyers on marketplaces like eBay or Facebook. They contact the victim offering to buy an item through Zelle and ask for their seller’s email to send payment.

    Once the seller agrees, the scammer sends a fake email that looks like it’s from Zelle confirming a payment. In some cases, the fraudster sends too much money and asks that the seller return the difference, even though they never sent a payment. In others, they move to an account upgrade scam and write the email to say that the seller needs to get a Zelle business account to receive the money.

    Often fraudsters will go so far with the fraud they will send screenshots of the account upgrade as a success or send a fake payment confirmation.

  • Refund and recovery scams

    Scammers know about the pain Zelle users feel trying to get their money back from a scam—and see it as another opportunity to attack.

    In a refund scam, the fraudster poses as a Zelle representative claiming to have insider knowledge of how to recover lost funds.

    They ask the victim for personal information like login credentials or an account number. They claim this is to process the refund or recovery. In some cases, they ask the victim to pay a fee or provide a deposit to start the recovery process.

    Once the fraudster has the victim’s information or payment, they disappear without a trace. The victim has now been scammed twice with no way to recover their lost funds.

  • Craigslist scams

    Craigslist scams on Zelle can work the same as other online marketplace scams. The most common method though is for fraudsters to post fake apartment listings. When potential victims respond, fraudsters convince them to put down payments to hold the property.

    After the victim sends payment, the fraudster can cut off all contact and make off with the victim’s cash.

Does Zelle offer fraud protection?

There is no Zelle fraud protection program. The service doesn’t offer protection, refunds, or reversals for authorized real-time payments. As their policy states, once you send a transaction it is authorized and can’t be reversed.

Can Zelle refund my money if I was scammed?

Zelle will not refund any payments that the user authorized. If you’re facing Zelle fraud issues, the service clearly states they will not refund payments that users authorized.

Can you cancel Zelle payments?

In nearly all cases, it’s not possible to cancel Zelle payments. Zelle transfers process within minutes, so once the payment has been sent, it cannot be canceled or reversed.

Why is Zelle fraud rising so quickly?

Zelle’s user base has rapidly expanded since 2020. More people using the service creates a larger pool of potential targets for fraudsters.

But more than the growing user base, the nature of Zelle itself, and the approach its owners take toward fraud, make it an ideal target. Here’s why Zelle fraud is rising rapidly.

Real-time payments aren’t reversible

Because Zelle payments are not reversible, payments made by mistake or as part of a fraud scheme are gone as soon as they’re sent. This is the first key reason fraudsters prefer Zelle to other payment methods.

Lack of user knowledge

Fraudsters often use social engineering tactics to trick users into sending money through Zelle. Because Zelle is a newer service and often the first real-time payment experience for many users, it’s ripe for social engineering scams.

Banks aren’t reversing/covering losses

Banks generally have policies in place for fraud and unauthorized transactions. In Zelle’s case, they do not offer protection on payments the same way they would other payment methods. Even in clear cases of fraud, as the New York Times reported, Zelle will not reverse transactions as they have been “authorized” by the account holder.

How to detect Zelle fraud

As a user, you need to stay vigilant guarding against scams on Zelle. But banks share in the responsibility to protect Zelle users from fraud.

All banks that offer Zelle use fraud detection platforms. These platforms use risk-based authentication to assess transactions and flag potential fraud. If a transaction trips this detection system, it flags the transaction for manual review. That’s where a digital fraud investigator steps in to take on the case and determine if there’s fraud.

These systems are also bolstered by machine learning and artificial intelligence.

Catching Zelle fraud with DataVisor

Datavisor is the market leader in real-time fraud detection and prevention. Powered by lightning-fast automated machine learning, the platform detects coerced and unauthorized payments as they happen.

The DataVisor platform also uses linkage analysis to identify fraudsters based on their past behavior. It establishes relationships between transactions on real-time payment networks. These links reveal fraudsters’ digital footsteps while also unveiling crime rings.

With predictive analytics, Datavisor identifies potential fraud before it occurs. It analyzes historical transaction data and identifies the patterns of behavior that lead to fraud. Datavisor can alert banks to high-risk transactions before they process, even in real-time.

DataVisor’s platform catches real-time fraud and protects both customers and institutions. To learn how this powerful tool can complete your fraud prevention toolkit, set up a personalized demo with one of our product experts.