Defending Financial Innovation Against Unnecessary Regulation

A Political Attack Disguised as Consumer Protection

On July 23rd, Senate Democrats are set to continue their regulatory assault on the nation’s financial institutions, targeting P2P platforms like Zelle and others. This hearing, led by Senator Richard Blumenthal (D-CT), is more about pushing an “anti-big bank” agenda than out of concern for genuine consumer protection.

Despite claims of rampant fraud, fewer than 0.05% of Zelle transactions in 2023 were reported as fraud or scams.

Supporting the Backbone of the Economy

• P2P payment platforms are crucial for small businesses like housekeepers, landscapers, and beauticians, offering better, faster, and more convenient payment solutions.
  • New regulatory actions threaten to undermine the very innovation that has made these platforms indispensable.
• Nearly 2,200 financial institutions, mostly comprised of community banks and credit unions, utilize Zelle, demonstrating its widespread acceptance and reliability.
  • In 2023, 95% of the institutions that joined the network had assets under $10 billion, underscoring Zelle’s accessibility for smaller banks and credit unions.
• Zelle empowers small businesses by providing a secure, fast, and accessible payment method.
  • In 2023, small businesses received 217 million payments via Zelle, totaling over $100 billion.
  • Increasing use by small businesses for sending payments with employees and vendors amounted to 179 million payments totaling $113 billion in 2023.

Innovative Security Measures: Regulation Isn’t the Answer

• Zelle’s commitment to security shows that innovation can thrive without burdensome regulation.
  • In 2023, in-app alerts and multi-layered security measures have kept fraud rates below 0.05%.
  • 99.95% of transactions are completed safely, representing a nearly 50% reduction in reported fraud and scam in 2023 against a 28% increase in volume YoY,
  • Decades of experience in combating fraud through data sharing and proactive measures.

Misguided Regulatory Efforts: The Real Threat

• New regulations could force financial institutions to absorb hundreds of millions in reimbursement costs, potentially passing these costs to users through higher fees.
• This approach threatens to stifle free enterprise and limit user freedom on P2P platforms.
• Extending reimbursement obligations to over 2,000 smaller banks and credit unions would be especially detrimental to community institutions.

The True Culprits: Criminals and Insufficient Law Enforcement

• The core issue is not the banks and credit unions but the criminals who commit fraud. Enhancing penalties for fraudsters and providing more resources for law enforcement is the real solution.
• The July 23 hearing is aimed at paving the way for new regulation that punishes financial institutions rather than addressing the root cause of the problem.

Education and Empowerment: The True Role of P2P Platforms

• P2P payment platforms like Zelle are at the forefront of educating and empowering banking customers, not defrauding them.
  • Extensive educational campaigns, partnerships with the Better Business Bureau and the National Council on Aging.
  • The Scam and Fraud Elimination (S.A.F.E.) Squad campaign has been pivotal in reaching younger users, who are often more susceptible to online scams.

What You Can Do

Call Your Senators

Tell Senator Blumenthal and other senators that more regulation is not the answer. Tell them that if they truly want to prioritize consumer protection, they should empower law enforcement to pursue and effectively prosecute fraudsters and allow business to innovate to protect their users.

Chair Richard Blumenthal (D-CT) – (202) 224-2823

Sen. Tom Carper (D-DE) – (202) 224-2441