P2P Payments Fraud Suggests a Gray Area of ​​Liability


Peer-to-peer (P2P) transactions between bank accounts are growing in popularity, as evidenced by triple-digit percentage gains in Zelle and Venmo volumes, due in part to faster payment rails.

The flip side of this consumer love, however, is the rise in fraudsters posing as individuals and businesses, leaving consumers confused if something goes wrong, PYMNTS reported Tuesday (July 12).

Cybercriminals have become more adept at exploiting the instantaneous and irrevocable nature of P2P transactions, while consumers are increasingly confused about banks’ stance on refunding their money if it ends up in the wrong hands.

See also: Law Firm Probes Zelle’s Unauthorized Fraud Reimbursement Stance

“There is still some education that needs to be administered in the banking industry to remind consumers of their responsibility,” Ingo Money CEO Drew Edwards told PYMNTS Karen Webster.

According to the Federal Trade Commission (FTC), losses from consumer scams increased to about $6.1 billion last year from $3.4 billion in 2020. At the end of the first quarter of this year, losses exceeded $1.7 billion.

Read more: Class action lawsuit dropped against Wells Fargo, Zelle

P2P scams vary from romance scams and counterfeit products to college courses and training that don’t exist. In these types of cases, if the consumer has authorized the money transfer, the bank or FinTech is not obligated to issue a refund.

Edwards said PYMNTS P2P is now a “sender distrust model” that includes built-in prompts to help ensure the sender knows the transaction is irrevocable. Senders are also reminded to double check recipient information.

Related: Banks resist refunds for unauthorized Zelle payments

P2P transactions are similar to when someone writes a paper check but mails it to a fraudster or sends a wire transfer to a criminal, Edwards said. If the funds clear, the responsibility rests with the sender.

“Why should P2P be any different,” Edwards asked rhetorically, according to the PYMNTS interview. “Simply put, if the funds are sent to the wrong person but the bank has been instructed to do so – well, that’s the sender’s problem.”

There is a murky area when a consumer’s bank account credentials have been compromised by a third party when access was granted, but the information was used to commit fraud. Use of these credentials was not authorized by the consumer but authorized for use by that third party.

“Is it an open checkbook for third parties, FinTechs, to be less rigorous about their own knowledge of your business (KYB) and fraud systems and protocols?” Webster asked.

Edwards admitted it’s rocky ground, but someone – not the customer – should be responsible, even the bank.

“No one would use a credit or debit card if it didn’t have a capped liability that essentially prevents cards from being passports to emptying bank accounts,” Edwards said.



About: More than half of utilities and consumer finance companies have the ability to digitally process all monthly bill payments. The kicker? Only 12% of them do. The Digital Payments Edge, a collaboration between PYMNTS and ACI Worldwide, surveyed 207 billing and collections professionals at these companies to find out why going digital remains elusive.


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