Fraud on P2P Networks Hits 12% of Bank Customers in the U.S., J.D. Power Finds

Some 12% of U.S. customers have lost money to fraud on a peer-to-peer payment network, while 11% have seen it happen to a family member, according to survey results released earlier this month by J.D. Power. The networks cited by the respondents were Zelle, Venmo, and PayPal.

For the survey, the company canvassed 4,000 bank customers across the country in September and October and asked also about the respondents’ sentiments regarding their general financial health and economic pressures such as the likelihood of a recession.

The fraud data take on increased relevance given headlines in recent months focusing on so-called scams, or transfers that users authorize on P2P payments apps but that turn out to have been induced by a fraudster. Zelle in particular has become the focus of criticism from lawmakers for these transactions because of a policy by which the network does not reimburse users in such instances. As the J.D. Power survey illustrates, this and other frauds also afflict competing networks.

Still, old-fashioned methods remain the most often-used by criminals. “Fraudulent use of a credit card” is the top method, cited by 40% of bank customers in the survey. Phone calls to trick consumers into sending money were cited by 35% of the respondents, followed closely by the use of email for the same purpose, at 34%. Some 21% indicated they had been defrauded because their identity had been stolen.

Overall, some 58% of respondents said they had been victimized by fraud, with 23% saying they had personally lost money and nearly 36% indicating a family member had. “Beyond general economic worries, one issue that most banking customers can commiserate about is fraudulent activity and the overall security of their accounts,” notes the J.D. Power report.

Peer-to-peer networks typically reimburse users for unauthorized transfers, but do not take responsibility for transactions users authorize, even if they are induced by a scammer. That problem has drawn the attention of U.S. Senators, who have investigated scams on Zelle and pressured the network to reimburse scam victims. The issue has also reportedly caught the attention of the Consumer Financial Protection Bureau, which has grown more active in the past year under new director Rohit Chopra.

Of the 18 biggest U.S. financial institutions, half are reviewing their reimbursement policies regarding P2P scams, while the other half are investigating new scam-detection and -defense technologies, according to David Mattei, a senior analyst at Aite-Novarica Group, who referred to a survey Aite conducted earlier this year. Mattei spoke to Digital Transactions News late last month.

The Wall Street Journal reported last month that at least three of the seven national banks that own Early Warning Services LLC, the company that operates Zelle, are working on a plan to reimburse victims of Zelle scams.