Zelle transactions reached $100 million an hour in fourth quarter

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The peer-to-peer network Zelle moved $806 billion last year through 2.9 billion transactions across 120 million consumer and small-business accounts, up 28% over 2022, according to operator Early Warning Services, which is owned by five of the largest U.S. banks. 

During the fourth quarter alone, Zelle drove a record $219 billion in transaction volume, hitting an average of $100 million an hour, EWS said in a Monday press release.

Among the fastest-growing users of Zelle are small businesses, which received 217 million payments through the network in 2023, up 44% over the prior year, EWS said. Small businesses sent 179 million payments during 2023, up 34% over 2022. 

Fraud and scams accounted for less than one-tenth of 1% of total transaction volume, EWS said. That translates to about 2.9 million transactions reported as fraud or scams for the year, a number that continues to drive concern from lawmakers and consumer advocates.

KGO-TV, the San Francisco affiliate of ABC, reported on March 1 the details of a Zelle scam involving a Wells Fargo customer, in which a fraudster impersonating a bank employee persuaded her to transfer $3,500 in eight separate Zelle transactions in quick succession.

"When a customer reports they've fallen victim [to a scam], we conduct a comprehensive investigation and make a decision on their claim using the same Zelle rules, laws and regulatory guidance applicable to all banks," Wells Fargo said in a statement.

EWS said Zelle's fraud declined between 2023 and the prior year, but the firm did not say by how much. Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank and Wells Fargo co-own EWS.

Through its Risk Insights for Zelle service, EWS provides real-time alerts to network participants about potentially high-risk transactions. During 2023, banks in Early Warning's network notified users more than 700 million times of potentially risky transactions, according to Monday's press release. More than 2,100 banks and credit unions participate in Zelle.

In response to ongoing reports of scams involving Zelle, Senator Sherrod Brown, D-Ohio, along with Sens. Jack Reed, D-R.I., and Elizabeth Warren, D-Mass., on Feb. 15 sent a letter asking Zelle CEO Cameron Fowler to publicly clarify Early Warning's reimbursement policy for Zelle users victimized by various types of scams. The lawmakers also want the firm to streamline the process for consumers trying to report unauthorized transactions and other types of fraud, which they said is "unnecessarily cumbersome." 

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The move comes in the wake of Zelle last year announcing plans to reimburse certain victims of fraud and scams, without disclosing which types of incidents are eligible. 

Zelle is not the only P2P service fraudsters are targeting. Brown was also lead author of a letter sent in December 2023 to PayPal and Block. The letter asked for similar details about PayPal's plans to reimburse victims of scams through its Venmo P2P unit, and asked for Block's scam-reimbursement policies for its Cash App P2P service.

Federal regulators are exploring Cash App's exposure to fraud, according to a February NBC report. Block did not respond to queries about the probe, but the firm's CEO, Jack Dorsey, told analysts last month that he's allocating more resources to battling fraud, and stepping up customer service to help users. 

In addition, Dorsey told investors in the firm's quarterly shareholder letter that Block is adding "priority phone support" for high-volume Cash App users.