When it comes to fraud and scams, financial institutions that offer P2P payments face two challenges. One, of course, is the very occurrence of fraud and scams. Fraud and scams hurt people, and the industry should take steps to protect consumers from both. The other challenge is one of perception. It is not unusual for fraud and scams to be conflated, although they are not the same, and for incidents to receive outsized levels of attention.
It’s important to differentiate between fraud and scam as used in the digital payments arena:
- When a bad operator infiltrates and uses a trusted payment system to steal funds, that’s fraud.
- When a mark unwittingly gives funds to a bad operator, that’s a scam.
There’s little disagreement that, legally and morally, digital payment service providers should protect users’ funds from fraud and make good when it occurs.
To be sure, industry participants do everything they can to prevent fraud. The result is something of a never-ending arms race: the more secure digital payment systems become, the more fraudsters work to outfox them. Back and forth it goes, an ongoing commitment on both sides.
Still, P2P fraud is not as vast as headlines might lead one to believe. For instance, throughout the history of the Zelle® service, more than 99.9 percent of payments have been sent without any report of fraud or scams.
Since its 2017 launch, barely one-half of one percent of Zelle service transactions have been disputed. Moreover, even as P2P use continues trending up, fraud claims have continued trending down.
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Whereas digital payments fraud requires a good deal of high-tech expertise, perpetuating a scam requires finding and duping trusting or naïve consumers.
Scams are numerous and ever-changing: Nigerian money scams, non-existent product scams, work-from-home scams, advance fee scams, charity scams, inheritance scams, “I need someone I can trust” scams, found-money scams, suspended or canceled service scams, r****** scams, invoice scams, and, as direct marketers so often put it, much, much more.
The wide range of scams is designed to entrap different types of consumers by taking advantage of the different situations in which they might find themselves, and can be quite sophisticated and well-researched using information obtained from sources such as social media.
No matter the type of scam, it us ultimately the account holder who must take action to send the scammer funds. This is as true for P2P payments as it is for cash transactions. And, this is why consumer education is so essential. The ultimate ability for a consumer to protect themselves lies with the consumer, and the better able they are to recognize a scam the better able they are to protect themselves.
Digital payments providers also play a role in helping curb scamming. This can include, for instance, flagging known bad actors and suspicious-looking email addresses (like, say, president@trustme.com). Beyond that, organizations can take an active stance to inform and educate.
In-product messaging can be made unmistakable and intentionally interruptive so that it stands a better chance of being seeing and prompting a user to reconsider a transaction. This goes beyond satisfying a “reasonable effort” standard to help customers better protect themselves.
Accordingly, a Zelle transaction through Fiserv now displays Consumer Safe Usage messaging when a user sends money to a recipient for the first time, regardless of whether or not the recipient is enrolled in the service. The Verify Information popup displays again if the email or the mobile token changes ownership. If the recipient is registered, the full name will display as registered. If not, the sender will be prompted to confirm the recipient’s information. Finally, a full screen page reiterates the receiver information and reminds the sender that, once sent, funds cannot be recovered. The sender must acknowledge having read and understood the information before payment can be completed.
Education and communication will go a long way toward helping protect consumers by empowering them to protect themselves.
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