Kansas City Fed
Fast payments are characterized by around-the-clock services and payment recipients’ instant (or near-instant) funds availability, enabling consumers to make and receive payments in a timelier fashion than traditional payment methods. But these characteristics, as well as the irrevocability of interbank settlement for (most) fast payments—meaning that once funds from a fast payment transaction are deposited into a recipient’s account, the transaction cannot be reversed—are also attractive to fraudsters.
One prominent type of payment fraud in fast payment systems is authorized push payment (APP) scams, where fraudsters manipulate or deceive individuals into authorizing their financial institutions to push funds from their accounts to accounts controlled by the fraudsters. APP scams can generate substantial losses for fast payment system participants, particularly for consumers who fall victim to them. For example, in 2023, customers at the three largest banks that participate in Zelle—a U.S. person-to-person fast payment network—disputed more than $206 million worth of Zelle transactions as scams, with the scam victims bearing more than 80 percent of losses (U.S. Senate 2024). As fraudsters increasingly leverage technology to expand their operations and create more convincing scams, consumers face a growing risk when using fast payments. Efforts to combat APP scams are thus critical to ensuring the safety of fast payments and building and maintaining consumer confidence in fast payment systems. This Payments System Research Briefing provides an overview of APP scams in fast payment systems and discusses measures that fast payment system (FPS) operators and participating financial institutions can adopt to mitigate APP scams.
Read More – Source