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How to stay safe while using digital payment services like Zelle and Venmo

AYESHA RASCOE, HOST:

Making payments online has never been easier, but it's not without risk. Last week, some Bank of America customers who used the app Zelle said money had disappeared from their accounts. Bank of America said affected customers may have experienced delays but that the issue had been resolved. Payment platforms like Zelle allow users to move funds directly from one bank account to another. Customers love the convenience. So do scammers trying to trick people into sending money. To find out more about these digital payment services, we reached out to Kate Fitzgerald. She's a senior editor at American Banker, a trade publication covering the financial industry. She began by giving us an overview of these apps.

KATE FITZGERALD: Venmo has been around for years, very popular originally with younger consumers. Cash App has really taken off. It's extremely popular. And Zelle started kind of slow, but with a few - handful of big banks, but it picked up momentum very quickly. In the last couple of years, they claim to be processing a million dollars a minute at least, and people are using it for - to exchange money with friends and family and to pay bills, to pay rent. Businesses use it to send money directly to people's bank account. It's great because it's free, and it's literally instant, and it's quite secure. The other thing is a lot of people really are living paycheck-to-paycheck, and many of these people, through research we've learned, operate at the - they have a split-second timing on paying their bills. They have in their head exactly which bills are due when. They can't afford to wait a day. It has to go through today, or they'll get a late fee.

RASCOE: Absolutely. I mean, I do have to ask you, though, is fraud a bigger concern with these digital payment services than, you know, traditional banking?

FITZGERALD: Fraud continues to be a problem across the financial sphere, although I'd say our expectations for having no fraud are also rising because as things get quicker and more efficient, we expect things to be perfect. Now, there are two kinds of fraud that we're concerned about. What is called unauthorized fraud - that's been around forever. That's where the criminals intercept your personal information, and they somehow do an unauthorized credit card or debit card transaction. You're not liable for that, but when you're the one who's actually directing the transaction, like with Zelle, you could accidentally send the money to the wrong person.

Now, these payments through Zelle are instant, but they're also final, and it comes right out of your bank account. So people are mad about the fact that they're being tricked. The scams are very complicated and even very intelligent. Expert people are falling for them. So there's been a real pushback from lawmakers and from consumer advocates to make banks take more responsibility for allowing these scams to happen.

RASCOE: So what's the best way to stay safe because you have those type of scams - I've even heard of people maybe asking to borrow your phone to make a call and then Cash Apping themselves or something like that 'cause it's - or just, you know, because it's so easy. Should we think of our phones now as our credit cards and never, like, hand them over to anyone?

FITZGERALD: Well, actually, yeah, that's one way of looking at it, but in many ways, these transactions have never been safer. In most cases, your phone is protected with biometrics. Technology is constantly improving to try to stay one step ahead of these - what we call the fraudsters, but the fraudsters are also using the same technology to invent new tricks. So yeah, you have to safeguard your phone, and you have to safeguard your identity and use common sense.

And also, there's quite a bit of information about the red flags that you might encounter when you're using Zelle. Red flags are someone you don't know is asking you to send money. You should never do that, and the banks have made that very clear. You should never respond to anything that's, like, urgent because there's no need for urgency. That's a big red flag for a scam. And of course, routine transactions. Don't use Zelle to pay for something that you don't already have in hand because you may - you're just sending money to someone you don't know. You have no idea whether you'll get that merchandise.

RASCOE: That's Kate Fitzgerald, a senior editor at American Banker. Thank you so much for speaking with us.

FITZGERALD: Thank you. Transcript provided by NPR, Copyright NPR.

Ayesha Rascoe is a White House correspondent for NPR. She is currently covering her third presidential administration. Rascoe's White House coverage has included a number of high profile foreign trips, including President Trump's 2019 summit with North Korean leader Kim Jong Un in Hanoi, Vietnam, and President Obama's final NATO summit in Warsaw, Poland in 2016. As a part of the White House team, she's also a regular on the NPR Politics Podcast.