Most of you have likely heard of Zelle; they are a payment processing company on par with CashApp or Venmo, making payments between individuals or small businesses extremely easy and generally at no cost. It boasted over 140 million users as of this year. It’s a giant.
You probably didn’t know that it’s powered by a Scottsdale company however, and that company is now in the crosshairs of the federal government.
Early Warning Systems is the local company that operates Zelle and makes it work. The Consumer Financial Protection Bureau is now suing early warning systems with the charge of an inability to stop fraud and criminal use of the platform.
As for the specifics of the charge, the CFPB states that Zelle has limited identity verification methods, essentially making for a breeding ground for frauds and scammers, where they can make accounts with little oversight and no mechanism for weeding them out. The suit states that they were slow and ineffective in their attempts to root out malicious usage, allowing them to use the platform for multiple fraudulent schemes.
Zelle is taking the lead in responding to these charges, and of course, Zelle is denying them. It charges that they are politically motivated, and that fraud has actually been decreasing precipitously. Despite playing an operational leadership role in such a prominent company, Early Warning Systems doesn’t seem to have the resources to fight this on its own. As a private company it is difficult to glean much information about it, but it seems to have somewhere between 1,000 and 5,000 employees. That said, if it were to crumble under this lawsuit, that would be a significant hit to the city.
The one major saving grace? A new administration with a new head at the CFPB. The timing of this during a lame duck administration seems odd, and there is a reasonable chance that the federal government will not follow through on it with new, more lassez-faire leadership. At least that’s what Zelle and Early Warning Systems are undoubtedly hoping for.