The Gulf Today - Business - - SPECIAL REPORT -

When Michael O’neil tried to pay the com­pany that in­spected the condo he bought last sum­mer, he had no idea there was a com­pany on the East Coast with a nearly iden­ti­cal name and an email ad­dress that dif­fered by just four let­ters — un­til he sent $360 to the wrong busi­ness.

O’neil, 37, sent the mo­bile payment us­ing Zelle and has spent the last year try­ing to get the money back.

“It was my mis­take, but one that I thought was im­me­di­ately pro­tected,” he said. “Four let­ters shouldn’t cost you ($360).”

Con­sumers want to be able to send and re­ceive money as in­stantly as they can an email, whether they’re split­ting the bill at a restau­rant or send­ing al­lowance to their kids. Tech com­pa­nies and banks met that de­sire with prod­ucts such as Venmo and Zelle. But lost in the ex­cite­ment over the new tech­nol­ogy was the un­der­stand­ing that in­stant pay­ments don’t have the same pro­tec­tion as credit card trans­ac­tions. If a user sends money to the wrong per­son, it’s the sender’s re­spon­si­bil­ity — not the com­pany’s.

While the cus­tomer may ex­pect banks to re­trieve their money, Zelle pay­ments are treated the same as cash. There’s only so much fi­nan­cial in­sti­tu­tions can do to get the money back. In its user agree­ment, Zelle rec­om­mends that users not send money to peo­ple they don’t know.

Venmo says it does not take re­spon­si­bil­ity for ac­tions of re­cip­i­ents and doesn’t guar­an­tee the iden­ti­ties of users.

Still, the mo­bile payment op­er­a­tors are adding some warn­ings af­ter learn­ing that cus­tomers are more prone to mis­takes than they had an­tic­i­pated.

Last year, Venmo gave users the abil­ity to add pro­file pic­tures to their ac­counts, in­tro­duced flags that pop up if the sender doesn’t know the re­cip­i­ent, and added other mea­sures to try to slow down users be­fore they hit send. Early Warn­ing Ser­vices, the bankowned con­sor­tium be­hind Zelle, ex­pects its part­ner banks to in­tro­duce pop-ups or alerts that ask users to con­firm they’re send­ing money to the right per­son.


Although users of­ten send each other $5 or $10 for pizza or beer, the trans­ac­tions add up. Zelle pro­cessed $32 bil­lion in pay­ments be­tween July and Septem­ber, up 67 per­cent from the com­pa­ra­ble pe­riod last year, ac­cord­ing to Early Warn­ing, which is based in Ari­zona. More than 75 mil­lion email ad­dress and phone num­bers are en­rolled in Zelle, which has its own app and can be of­fered through banks’ apps or sys­tems. Zelle also pro­cesses cor­po­rate dis­burse­ments, such as in­sur­ance pay­outs, which are in­cluded in its num­bers.

Venmo pro­cessed about $17 bil­lion in pay­ments dur­ing the same pe­riod this year, up 78 per­cent from last year. The com­pany, which Paypal ac­quired in 2013 when it bought Chicago-based Brain­tree for $800 mil­lion, does not re­lease user num­bers.

Some users have al­ready learned their les­son about mis­di­rected pay­ments.

When she was fresh out of col­lege, Melissa Rohman was at a happy hour with new work ac­quain­tances. Some­one with “a very generic name” picked up the tab, she said. Rohman found a Venmo ac­count with that name, typed in some emoji and sent off about $10.

“I keep tabs on my bank ac­count pretty reg­u­larly, and I was notic­ing that it hadn’t gone through,” Rohman said.

She sent the money to the wrong per­son. The per­son on the re­ceiv­ing end of Rohman’s $10 never ac­cepted it, and the money was later re­funded.

But the tem­po­rary loss of that $10 was enough to slow down the Elmhurst res­i­dent when she sends money. Now, Rohman makes sure she’s trans­fer­ring money to the right per­son via Venmo. She checks the other user’s pro­file pic­ture, puts the per­son’s num­ber in her phone, and asks for di­rect con­fir­ma­tion that the pro­file she chose is the right one.

“If I know that it’s not for cer­tain them, I just wait and ask them,” she said. “I don’t want to be giv­ing out money to peo­ple I don’t know.”

Amy Bax­ter, 27, also has re­sorted to her own ana­log se­cu­rity mea­sures af­ter send­ing $5 to the wrong per­son to cover her share of a with co-work­ers.

“I hold up my phone and I’m like, ‘Is this you?’ ” she said.

When Early Warn­ing launched Zelle last year, it thought con­sumers would use the prod­uct to send money to friends and fam­ily — peo­ple al­ready in their con­tact lists, said Lou Anne Alexan­der, the com­pany’s group pres­i­dent of payment so­lu­tions.

“We thought it would be mom, sis­ter,” she said. “I don’t think we re­al­ized how many folks would ac­tu­ally type in a cell­phone num­ber, for in­stance, as op­posed to pulling it from some­one (they) al­ready know.”

Users as­sume that banks can get their money back if it’s sent to the wrong per­son, just as unau­tho­rized credit card charges are of­ten re­funded. But that sort of pro­tec­tion is paid for through an­nual fees or other charges and Zelle is free, Alexan­der said.

She de­clined to pro­vide data on the num­ber of mis­fires Zelle users have ex­pe­ri­enced or the amount of money they’ve sent to the wrong peo­ple.

“It wasn’t a lot of them, but when they hap­pen, they’re painful, and con­sumers like to talk about it,” Alexan­der said. “They get re­ally mad if their money goes some­where and they don’t see it.”

For Zelle users, that anger is am­pli­fied be­cause it’s a bankbacked en­tity han­dling the money, said Sarit Markovich, a clin­i­cal as­so­ci­ate pro­fes­sor in the strat­egy depart­ment at North­west­ern Univer­sity’s Kel­logg School of Man­age­ment. Venmo users, on the other hand, might not ex­pect the Paypal-owned com­pany to get their money back, Markovich said.

“Con­sumers just ex­pect from banks more than they would ex­pect from a (smaller) com­pany, specif­i­cally when you’re think­ing about pro­tect­ing your money,” she said. And it doesn’t mat­ter to con­sumers that Zelle is free, Markovich said. They as­sume they’re get­ting cer­tain pro­tec­tions since they’re al­ready pay­ing other bank fees.


Zelle users are cov­ered if they’re vic­tims of fraud. Banks have a good-faith obli­ga­tion to help the con­sumers get their money back, but some­times it’s out of their con­trol, Alexan­der said. For ex­am­ple, peo­ple who re­ceive money sent in er­ror might not agree to have it taken out of their ac­counts.

O’neil still con­tacts Jpmor­gan Chase ev­ery few months in hopes of find­ing an as­so­ci­ate that can help him get his $360 back from the East Coast home in­spec­tion com­pany. His at­tempts to get his money back from the com­pany di­rectly also have been un­suc­cess­ful.

“Ev­ery­one seems a bit dumb­founded,” he said. “If peo­ple are mak­ing large pur­chases … and there’s this kind of room for er­ror, you would think more mech­a­nisms are in place to pro­tect con­sumers in this day and age.”

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