How scammers target Zelle users – and how to stay safe

How scammers target Zelle users – and how to stay safe

Scammers use various tactics to separate people from their hard-earned money on Zelle. Here’s how to keep your money safe while using the popular P2P payment service.

The consumer payments area has undergone a radical change in recent years. A new breed of apps, including Venmo, Cash App and Zelle, now offer a fast, efficient and free way for users to pay friends, family and select small businesses. Launched in 2017 by a US banking consortium, Zelle is one of the most successful of these peer-to-peer (P2P) services, becoming by far the largest provider of its kind in the US by total payouts: $490 billion in 2021 .

Around 10,000 financial institutions now participate in the network, meaning Zelle can be accessed from countless banking apps, as well as downloaded as a stand-alone service. But while it is generally considered a safe way to transfer money, it has been criticized for offering little consumer protection against fraud.

In fact, just days ago Zelle came under fire in a US Senate report, which stated that Zelle users lost around $440 million due to fraudulent transactions in 2021. According to the report, banks are doing little to fight fraud and scams on Zelle and are generally reluctant to refund people who have fallen victim to scammers.

Couple these numbers with the fact that fraud incidents on Zelle are trending upwards, and it’s clear that you should be on the lookout for scams that exploit the trust of others for their own gain and leave victims high and dry.

Zelle scams to watch out for

There is a long list of tactics scammers use to trick victims into sending them money. Here are the most important ones you should watch out for:

1. Impersonation fraud

A scammer pretends to be a family member or close friend and quickly asks for money to help them in an emergency. Or they may pretend to be a representative of a public agency, bank, utility or similar, demanding funds to cover late payment or fines. Anyway, once the money is sent, it disappears.

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2. Overpayment

Facebook Marketplace is a magnet for Zelle scams. In a classic trick, also used to withdraw money via the Cash App and other services, a buyer sends a fake check to a seller for an amount that exceeds the sale price of an item. They will then ask the seller to refund the overpayment via Zelle. If the latter does, they will lose the money before realizing that the check itself is not legitimate.

3. Company upgrade

In another Facebook Marketplace scam, a buyer expresses interest in a product and claims they want to pay by Zelle. They then send the victim a fake email claiming that a payment is pending, but that the buyer is using a business account that they have had to pay extra for. It asks the seller to pay this fee back to the buyer in order for the first payment to go through. But it’s all a lie and the seller ends up with what they paid the buyer in “fees”.

4. E-commerce fraud

Online buyers beware: Scammers are all over e-commerce and various social media, offering to sell in-demand items at extremely low prices, but only for a limited time. This pressure often causes the buyer to abandon their usual online caution. They pay with Zelle and the item never arrives.

To help highlight the risks of buying red-hot products on social media, ESET Chief Security Evangelist Tony Anscombe recently engaged in a conversation with a verified (but apparently hacked) Twitter account claiming to sell PlayStation 5 consoles and asking for payment via Cell.

Conversation with a scammer (click to enlarge)

5. Romance fraud

Romance scammers are past masters of social engineering: the art of deception. They will build a strong relationship with their victim online, befriending them first on dating sites. Once their mark has been absorbed, they start asking for money: for medical bills, plane tickets and more. If it is sent by Zelle, there is almost zero chance that the victim will ever see the money again.

6. False invoice

The victim receives a legitimate message or email from a company they do business with, asking them to click on a link to review an invoice. Doing so will take them to a phishing page faked to look like your business’s website, where they’ll be asked to enter personal information. Once in the fraudster’s hands, these details will enable a takeover of the victim’s Zelle account.

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7. Lottery fraud

This works in the same way as the fake invoice scam, except the victim receives a message telling them that they have won some kind of prize and only need to click on a link to receive the winnings. Doing so will lead them to a fake website and encourage them to re-enter their personal information.

There are many variations of these two scams, all of which result in account takeover.

8. Malicious software

Phishing emails and texts can also lead to hidden malware downloads, if the user is tricked into clicking on a malicious link. This effectively reduces the stage where they enter their personal details. Instead, malware can either steal logins or automatically hijack your Zelle account and transfer money.

9. Fake fraud department

A user receives a test from their ‘bank’ asking if they are trying to transfer money. If they answer, a scammer will call them and pretend they work for the bank. They will then walk the victim through a list of instructions that they say will help reverse the fraudulent transaction. In fact, it initiates a money transfer to the criminals.

10. Victim/refund fraud

When a person falls victim to a Zelle or other online scam, their details are often stored for follow-up scams. Here, a fraudster can call and pretend to work for an agency that can recover lost funds. All the victim has to do is pay an upfront fee. Unfortunately, they will never get this money back either.

Can Zelle fraud victims get their money back?

Zelle doesn’t require users to share any financial information to send money, and individuals are typically authenticated through their bank, adding an important layer of security. However, like Cash App and similar services, it does not offer the same protection as credit and debit cards.

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Zelle itself distinguishes between “fraud” – when an unauthorized third party accesses a user’s account and transfers money without the user’s knowledge – and “fraud” where the user is tricked into sending the money themselves. As for the latter, there is little chance that they will recover the defrauded funds.

In fact, according to the aforementioned report, banks do not refund 90% of cases where people were tricked into making payments on the platform.

How to stay safe on Zelle

The tips for staying fraud-free on Zelle are not unlike those for avoiding fraud on Cash App and other P2P payment services. This means being careful with all unsolicited communications, improving account authentication and only sending money to people you trust. Consider the following:

  • Be skeptical: Never send money to someone you don’t trust, and remember that if an offer seems too good to be true, it usually is.
  • Double check with the alleged sender: If you receive such a communication, contact the alleged sender immediately to double-check whether it is legitimate or not. Never use contact information in the original message.
  • Be beware of phishing Emails, texts and phone calls: They may look legitimate, but will often try to rush your decisions into doing something you’ll regret. Never give out bank details or other credentials to anyone.
  • Improve authentication: If it’s not already enabled, add two-factor authentication to your banking or Zelle app, which will mean that even if fraudsters get hold of your password and username, they won’t be able to hijack your account.
  • Improve mobile security: By downloading anti-malware software from a reputable vendor to your device. This will go a long way towards staying safe from phishing attacks and hidden malware downloads.

The bottom line is, “if you don’t know a person or aren’t sure you’re getting what you paid for, using your credit card may be a better payment option” – that’s according to Zelle herself. If you have even a hint of doubt, ensure that online payments are made via methods that offer greater cardholder protection.

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