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Cash App and Venmo, peer-to-peer payment services from Block Inc. and PayPal Holdings Inc., respectively, are under scrutiny from four U.S. senators over their fraud-protection efforts.
In letters dated June 15 and sent to each company, the senators requested data on the volume of fraud reports the networks have received from customers and on related matters. Their deadline is June 30. The inquiry follows a similar investigation launched last year by some of the same Senators and related to alleged scams on Zelle, a rival P2P payments network.
Both letters, signed by Sherrod Brown (D-Ohio), Jack Reed (D-R.I.), Bob Menendez (D-N.J.), and Elizabeth Warren (D-Mass.), outline that neither company has made its own data on scams and fraud publicly available, but cite a Consumer Reports article from January and a 2022 Pew Research Center survey.
Specifically, they are asking for the number of Venmo and Cash App reports of fraud for the past five years and in 2023, as well as the number of reports of customer-initiated transactions that were fraudulently induced, and the number of accounts used to receive fraudulently induced transactions, all for the same time period. They also want descriptions of each P2P payments provider’s fraud detection and elimination practices and policies.
“Americans deserve a payments system that provides them with speed and convenience, but above all, that keeps their money safe. In light of these concerns, we would like to understand the specific steps you are taking to detect and prevent fraudulent transactions, including fraudulently induced transactions, on Venmo,” the senators assert, mirroring the phrasing in the Cash App letter.
Last year’s Zelle inquiry, which carried four other Senators’ names, sought similar information. In November, some of the nation’s biggest banks, many of which own Early Warning Services LLC, which operates the Zelle network, were developing new scam defense and detection technology.
As for the timing of the queries into similar firms almost a year apart, it could be that the Zelle inquiry was driven, in part, by the nature of its ownership, says Stewart Watterson, strategic advisor at Aite-Novarica Group, a Boston-based payments advisory firm. “Zelle is something that is put forth by a consortium of regulated banks,” Watterson tells Digital Transactions News. As members of the Senate Banking Committee, they may have felt an obligation or some leverage, he suggests.
It may have taken some high-profile articles and studies for Cash App and Venmo to gain similar attention, Watterson says.
