'Venmo and Zelle May Not Be Free For Much Longer' (bloomberg.com) 49
An anonymous reader quotes an op-ed, written by former hedge fund manager Marc Rubinstein: With new technologies come new rules governing how they are used. Often, policy is framed via analogy: Are social media platforms publishers or are they town squares? Are instant messages water-cooler chatter or are they formal communication? So it is with peer-to-peer electronic payments. Last week a US Senate committee joined the debate over whether they're analogous to cash or to bank-payment channels. It's an essential distinction -- for both consumers and the companies that provide this free service. [...] Yet while no bank would accept liability if a customer lost their wallet to a pickpocket, the senators' debate focused on who's responsible when fraudsters target electronic wallets. Last year, customers of the three largest lenders -- Bank of America, JPMorgan Chase and Wells Fargo -- lost a total of $370 million via Zelle, the platform these banks jointly own with four others. According to the majority staff report (PDF) filed by the Permanent Subcommittee on Investigations, which convened the July 23 hearing, the banks reimbursed only around $100 million of that, leaving consumers to shoulder the rest. While small in the context of overall volume that go through Zelle -- $806 billion last year, of which these banks did 73% -- that's cold comfort for the customers.
Legally, a bank's obligation rests on whether clients fall victim to a "fraud" or to a "scam." In a fraud, money is transferred out of the user's account without their authorization, usually as the result of hacking. Under the Electronic Fund Transfer Act, banks are required to reimburse such losses. As long as the customer authorizes the transaction, though, even if fraudulently induced to do so, banks don't have to pick up the tab. Such scams are growing as fraudsters parade as a bank employee, a love interest or a potential new employer, often via social media. According to a Pew Research survey, 13% of P2P platform users reported sending money, only later to realize they were set up. Persuading your bank you are the victim of a fraud rather than a scam can take some work. [...] For bad guys, the speed of P2P payments makes them a particularly attractive target. A Zelle transfer can take 20 to 30 seconds to initiate. In most cases, by the time an unsuspecting consumer realizes they have been targeted, their money is already gone. Banks argue this is no different from cash. [...]
However, others see P2P transactions more akin to electronic payments and question why reimbursement rates, at 26% in the case of Zelle, are so much lower than for credit-card payments (47%) or debit-card payments (36%) at the three big banks. Despite critical differences, the subcommittee agrees. Its report recommends extending purchase protections standard in credit and debit-card markets to commercial P2P payments, and amending the Electronic Fund Transfer Act to make fraudulently induced transactions subject to reimbursement. Such a move has already been adopted in the UK, where new rules requiring financial institutions to fully reimburse victims of scams come into force in October this year. US bankers aren't keen. "We need to be thoughtful and think about unintended consequences," Adam Vancini, Wells Fargo's head of payments for Consumer, Small & Business Banking, said at the Senate hearing. For now, Zelle transfers enjoy all the benefits of cash. Layer in the benefits of card payments, too, and the no-cost model may disappear.
Legally, a bank's obligation rests on whether clients fall victim to a "fraud" or to a "scam." In a fraud, money is transferred out of the user's account without their authorization, usually as the result of hacking. Under the Electronic Fund Transfer Act, banks are required to reimburse such losses. As long as the customer authorizes the transaction, though, even if fraudulently induced to do so, banks don't have to pick up the tab. Such scams are growing as fraudsters parade as a bank employee, a love interest or a potential new employer, often via social media. According to a Pew Research survey, 13% of P2P platform users reported sending money, only later to realize they were set up. Persuading your bank you are the victim of a fraud rather than a scam can take some work. [...] For bad guys, the speed of P2P payments makes them a particularly attractive target. A Zelle transfer can take 20 to 30 seconds to initiate. In most cases, by the time an unsuspecting consumer realizes they have been targeted, their money is already gone. Banks argue this is no different from cash. [...]
However, others see P2P transactions more akin to electronic payments and question why reimbursement rates, at 26% in the case of Zelle, are so much lower than for credit-card payments (47%) or debit-card payments (36%) at the three big banks. Despite critical differences, the subcommittee agrees. Its report recommends extending purchase protections standard in credit and debit-card markets to commercial P2P payments, and amending the Electronic Fund Transfer Act to make fraudulently induced transactions subject to reimbursement. Such a move has already been adopted in the UK, where new rules requiring financial institutions to fully reimburse victims of scams come into force in October this year. US bankers aren't keen. "We need to be thoughtful and think about unintended consequences," Adam Vancini, Wells Fargo's head of payments for Consumer, Small & Business Banking, said at the Senate hearing. For now, Zelle transfers enjoy all the benefits of cash. Layer in the benefits of card payments, too, and the no-cost model may disappear.
The media is propaganda, now. (Score:2)
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You are off your rocker.
I suppose you want banks to reimburse people who post their bank account login-id and password too.
futile (Score:4, Insightful)
Re:futile (Score:4, Insightful)
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The US govt needs to step in and create a system where you can send money direct from bank account to bank account without fees. Of course this requires the US government growing a pair of testicles and standing up to the banks, Visa and Mastercard.
This kind of system is surely the definition of the "facilitating trade" part of gove
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Unless you're a Republican, and then it's "literally Stalinist Russia".
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Facilitate with a legal structure, not by being an actual middle man.
Erm... that's exactly how it works in most countries. Government makes a law "provide an interbank transfer system" and if the banks don't sort it out amongst themselves the government literally makes the framework for them and says "this is exactly how you're going to do it".
Usually the former happens because banks aren't stupid. Greedy, sure, but not stupid (not to mention the obvious benefit that they're no longer beholden to Visa/Mastercard).
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Oh, I thought it would read 'Venmo and Zelle May Not Be For Much Longer'.
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So you're right that 90% of people aren't going to pay US credit card transfer rates in the 2-3% range. Those rates are also absurd compared to EU rates - in part "because of our great reward programs" and in part because of pure and simple corporate greed.
If it was 0.25-0.5% transfer fee capped at ... say 5 bucks (i.e. when sending $1k+) I think you'd see people a lot more open to a transaction fee. If you send me 50 for your restaurant tab and it costs me 25c not to have to keep cash and make change i'd
Did you even read? (Score:2)
The government would force electronic transfers to be reimbursed back to you by these companies in cases of fraud.
Nobody is going to make a free alternative if they're going to be legally liable to reimburse you when you fall for a scam. The company would need very deep pockets just to get started or have some instant income reserved for reimbursements.
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> The company would need very deep pockets just to get started
Which is the real story here.
Make it so there can never be a competing startup.
Entrenched interests love being regulated but the kayfabe is they complain and captured regulators claim victory against the corporations.
Then they all go party together in the Bahamas.
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There is a low cost service called FedNow
https://www.frbservices.org/financial-services/fednow
The problem is it hasn't received widespread adoption due to vested interests refusing to get on board.
Won't someone think of the congressmen? (Score:1)
Interac e-transfer (Score:2)
In Canada, we don't have Venmo or Zelle, but we have something called Interac e-transfer which is run by Interac, a cooperative venture amongst the major Canadian banks.
You used to have to pay a small transaction fee, but it has been free for years now and works reasonably well. Maybe US banks could look at it as a model?
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!!! Is that a Canada only thing? I took it for granted. Some banks and/or credit unions still do charge a fee for use though, it's not free across the board. Typically if you have a "premium" chequing account, the kind that also doesn't have per transaction debit fees, it'll be included as well.
Almost every single country has something similar, EFT in Australia, Faster Payments in the UK. Being able to freely send money from one account to another is almost a basic human right in most of the world. Interbank transfers are an entitlement on the most basic of bank accounts, which are available to everyone. Even someone with multiple counts of bank fraud can get a basic account in the UK, albeit one that is heavily monitored.
I grew up with this and I'm north of 40, I was shocked when I learned the
Re:Interac e-transfer (Score:4, Informative)
... we have something ... a cooperative venture amongst the major ... banks.
That's exactly what Zelle is. And has been since 2001. Zelle is a United States–based digital payments network run by a private financial services company owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.[
Zelle's biggest failing is that for some reason it branded itself similarly to Venmo, and so people think it's an external private company violating their privacy. Americans! You already have instant digital cash-like transfers built into your bank accounts, most likely even in your bank's app!
Its second-biggest failing is also that for some reason it hasn't differentiated itself from Venmo, and people are scammed into thinking they have some sort of consumer protection. Americans! You already have digital cash-like transfers built into your bank accounts! Use it at times you would be comfortable using cash! In-person meetup to pick up an item on Facebook Marketplace? Great! Some random person demanding payment before shipping you something? Depends on if you would be comfortable mailing them cash in this instance (no).
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Forgot the wikipedia link [wikipedia.org] I quoted
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Australia has a similar thing with PayID.
Back to cheques, then (Score:2)
Banks offer a 100% free money transfer service - the paper cheque. Make me pay for zelle/etc. and I'll just go back to that.
Ironically, I'm sure that processing paper cheques costs a bank MORE than processing an electronic transfer, so in the end banks will lose even more money.
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Processing paper checks (and paying for related fraud) certainly costs the banks more (though far less than it did now that they can use digital images).
The big problem with checks is that every single check includes 100% of the information you need to create a fraudulent check or even e-check transfer. In this age of people committing fraud at every opportunity, it's only the obscurity of checks that's really protecting them.
Heck, I had someone cash TWO IRS refund checks fraudulently ... and from what I'm
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Do you think banks set aside a reimbursement fund, invest it, and, more often than not, pay all reimbursements out of profits alone?
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I don't get free cheques. I think I get two free a month and then I have to pay a transaction fee for each cheque I write.
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All a paper check (using the US spelling) means that one is going to get scammed via another route. It used to be common for scammers to have cashiers checks that would actually verify and cash... until a couple days later when they do bounce, and result in the bank account holder having to pay a bunch of fees. Usually the cashier check guy has the amount written well over how much the transaction is, so wants the difference back in cash, which is how the scam keeps going.
At least I know with Venmo, PayPa
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Banks offer a 100% free money transfer service - the paper cheque.
Don't banks in your country have the ability to transfer money electronically?
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Paper checks are too dangerous now.
They have your account information, and can be intercepted, washed, and resubmitted with a new payee and anount.
They need to be phased out.
Someone has to pay for everything (Score:2)
If the currently free services will be required to follow certain customer protection rules that will increase their costs, they will need to recover those costs somewhere. Banks/card issuers recover their costs from merchant fees. Venmo/Zelle etc do not have merchant fees (and not all of their payments are for goods/services anyhow). So, they will need to charge for *something*.
If the rules will apply to all payment services, than no new payment service will be free either, because these mandatory costs wi
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Venmo does have merchant fees. If you send payment for services or goods they deduct a few %.
Scams Vs hacking (Score:2)
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Verizon, AT&T, T-Mobile, Apple, and Google (Score:2)
Basically, users without a mobile authenticator active have a 15 day trade hold or 1 day with contacts they've had for a year or longer. It takes 7 days with the mobile authenticator active to get instant trades.
The problem with piggybacking on mobile for verification is that it makes Verizon Wireless, AT&T, T-Mobile, Apple Inc., and Google LLC the arbiters of who may and may not trade on Steam. If someone uses a tablet without a cellular radio or a phone without a SIM as their primary iOS or Android device, they're not eligible. If someone uses a flip phone, KaiOS phone, Librem phone, PinePhone, or phone running Android Open Source Project (AOSP, as opposed to Android with GMS) as their primary communication d
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their mobile authentication has nothing to do with carriers.
If you don't have a relationship with a carrier, either one of the big three or a smaller MVNO that resells their service, you won't receive the text message needed to configure Steam's dedicated 2FA app. And if you share a phone with someone else in your household who also uses Steam, it won't let you send the text message because said someone else already has Steam's dedicated 2FA app set up with that number.
Steam mobile authenticator is what they call their dedicated 2FA app
If your phone doesn't come with one of the big two app stores, you won't be able to download Steam
no fee banking needs at least $30K in your account (Score:2)
no fee banking needs at least $30K in your account
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Incorrect. There are lots of banks credit unions offering no fee banking in the form of free checking accounts.
Something for nothing (Score:1)
I don't understand why people expect something for nothing.
Anyone who wants to offer the planet free bank transfers is welcome to set up shop and do just that. Capture all that lucrative business from customers who don't pay you anything.
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Can't they book a big number under Goodwill?
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A big number of what? Why are they going to a thrift store?
Not all the benefits of cash (Score:2)
Zelle transfers enjoy all the benefits of cash
Not true, Zelle does not enjoy the benefits of privacy
FedNow (Score:2)
I think this solution will be the best option in the future.
https://www.frbservices.org/financial-services/fednow
The problem is getting the banks on board. They are somewhat reluctant to allow funds to be sent via FedNow at the moment.
In the USA, the profit motive gets in the way of having a low cost service. Private companies want this business, but it really should be something run by the Federal Reserve or other federal entity.
this is propaganda to tenderize people (Score:1)
unintended consequences (Score:2)