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  • Frank Tian

Payment Fraud - We Are in This Together

Updated: Sep 28, 2022

A recent NY Times article on the Zelle fraud issue highlights the challenge of fast payment and evolving scam tactics. However, the challenge is not unique to traditional banks and their customers.

Last December, another widely distributed article from Forbes focused on the fraud issue with fintechs. Besides merchants, even some fintechs blocked transactions from neobanks.

I am not a big fan of the narrative fintechs vs. banks, especially when it comes to fraud - although I do understand that VCs need to tell exciting stories to ensure successful exits.

While FIs meet customers’ demands with fast payments, they are also facing increasing payment fraud that comes along. As money moves faster and 24x7x365, fraud detection and control need to be enhanced and automated accordingly.

The customer identification and verification methods need to be solid. As more payments are flowing in the digital world, you want to ensure they are initiated by trustworthy customers.

For authorized push payments fraud, which is often associated with scams, is more difficult to detect as the real customer initiates the payment under the manipulation of scammers.

In this case, customers need to be engaged as an important part of the defense. Education of customers against various types of scams, in combination with behavior analysis and alert systems, would help reduce such fraud risk.

Facing payment fraud,

Banks, credit unions, fintechs, and consumers - we are all in this together.

Picture: Captial One's customer education email after the NY Times's Zelle article.

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