The news: US Sens. Elizabeth Warren (D-MA) and Robert Menendez (D-NJ) sent a letter to Zelle operator Early Warning Services for clarity on how the peer-to-peer (P2P) payments app handles fraud.
What’s in the letter? Warren and Menendez noted reports of Zelle fraud cases and asked whether Zelle and the banks that own the service are doing enough to mitigate the problem. Early Warning Services is owned by seven major banks, including Bank of America and JPMorgan.
Warren and Menedez gave Zelle a May 9 deadline to answer questions related to the following:
Why it matters: Zelle has surged in popularity thanks to its fast transaction speeds (it typically delivers payments in minutes) and its direct integration with bank apps—and because it's free for consumers. Zelle had 27.9 million US users in 2018, and that figure is expected to hit 61.6 million this year, per Insider Intelligence forecasts. The P2P provider is on track to process $531.01 billion in US transaction volume in 2022, according to our forecasts.
The big takeaway: While Zelle’s popularity is undeniable, the fraud occurring on its platform may potentially threaten future growth prospects.
Warren and Menedez’s information request could shape future US guidelines and regulations for P2P apps—like recent UK regulation that stipulates stronger payment authentication. New rules could minimize the risk of fraud on these platforms and help strengthen customer trust in P2P apps, boosting adoption and use.
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