[isanengineer]

It's not just fraud you need to worry about. Here's a horror story for you. A few years back I was moving to a city for graduate school and needed to rent an apartment. A friend of mine toured the place and when we decided to rent the landlord asked if we could send him the security deposit using Zelle. I sent the deposit using his contact information, but he never received it.

I spent three weeks being passed back and forth by one bank being told I needed to speak with they other bank. They confirmed the money had been debited from my account, and confirmed it was not deposited in his, but nobody could tell me where the money went. I called Zelle multiple times, but all they would tell me is I needed to talk to the banks. Eventually after three weeks the money was quietly returned to my account with no explanation. After a bit more digging it appears my transaction triggered some fraud alert, but neither myself, the depositor, or either bank was notified of this.

To add insult to injury, during this process the people in charge of Zelle at my bank (which rhymes with Space) told me I was out of luck, because using the Zelle for any type of commercial transaction, including sending rent or security deposits, is against the terms of service. Looking back over the terms of service I found they were 100% correct.

I also found that Zelle is basically just a front-end for the existing ACH Direct Deposit system. It was created by a consortium of banks to compete with services like Venmo, but it at it's core a very different service. Venmo actually provides value by acting as a middle man: Venmo pays the recipient and collects the money from me. Zelle is just a way to send money directly to someone's checking account, but by using their email address or phone number instead of the account and routing number. This is why there is absolutely no recourse if anything goes wrong.

tl;dr do not ever use Zelle.

[CalChris]

I use Zelle all the time but with people I know. In fact, I can't remember where my check book is. I use Apple Pay all the time and I use an actual credit card about once a month. I use cash at one place, my taco truck of choice. And for the record, I've never touched bitcoin.

I've used PayPal and Venmo but I don't see their utility now and prefer Apple Pay.

All of these modern tools have their benefits and risks. I got burned for $40 on Zelle for a bike part. It was a $40 lesson.

[isanengineer]

Agreed. I'm being hyperbolic when I say "do not ever use Zelle". I'm sure it's fine for passing money between friends. It's just that my version of the $40 lesson had a few more zeros on the end, and so stings a bit more.

For me I only use Venmo because that's what most people in social circles use. If they used Cash App or Apple Pay, I'd use those instead.

[yieldcrv]

lol checkbook, never had one

an employer’s direct deposit system, at a third party payroll company asked me for a voided check

I photoshopped my bank account and routing number on a stock image of a voided check

I get paid no problem. dumb process.

[ianburrell]

BTW, the solution for problems like this is complain to CFPB. Banks are afraid of CFPB and complaint will help solve problems.

Zelle has their own instant transfer system, and banks settle up overnight. My understanding is that there isn't ACH transaction for each transfer. Banks have less visibility into Zelle.

I hope FedNow kills Zelle. That should be better integrated. I think Venmo and other payment apps will stick around cause offer useful app.

[crazygringo]

You should write that up as an Op-Ed or contact some journalists to use it as part of a story.

You've got a lot of details in there that are definitely not common knowledge and would be of wide interest.

[isanengineer]

Thanks, but I don't think I know enough about this to speak about it on the pubic record. My experience is based on remembering what random customer service reps said a few years ago and a bunch of reddit and forum posts. For example, I don't know if Zelle is literally just direct deposit--if it was how did they freeze my transaction for 3 weeks?

But I do get the sense that of all the payment platforms, Zelle is uniquely risky because of the way it's set up. I do with a journalist would look at it from that angle rather just from the "wow there's a lot of fraud here". It seems to be that the banks are incentivized just to get have this product out here to undercut the competition from digital payment platforms, but have absolutely no incentive to make it a functional or safe platform.

[ben0x539]

> I also found that Zelle is basically just a front-end for the existing ACH Direct Deposit system. [...] > > tl;dr do not ever use Zelle.

I can't figure out how to do ACH transfers to friends with my credit union, and I've been told Zelle is the solution for that. I guess I should stick to Venmo?

[ISO-morphism]

In the US, Zelle vs. Venmo is comparable to debit card vs. credit card. With Zelle/debit, you're basically mailing cash - it might get lost in transit, your money is gone right away. With Venmo/credit, there's a middleman with a big pile of cash that assumes the risk of money being in-flight, and usually eats fraud/errors as a cost of doing business in exchange for selling data about your spending to advertisers.

[salawat]

It's not a front end for ACH. If it were ultimately ACH based, reversals would be no big deal. It'd be business as usual.

[ljlolel]

Yes