Zelle fraud, JPMorgan Chase's AI efforts and other tech news

Zelle fraud, JPMorgan Chase's AI race: Top tech news October 2024

October 31, 2024 1:00 PM

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In October's roundup of top tech news: The rising concerns of Zelle fraud, JPMorgan Chase battles it out with Capital One and Royal Bank of Canada in an AI arms race, increased bank data breaches and more.

Click here to read last month's roundup of top tech news.

How Zelle fraud compares to other payment apps

By some measures, Zelle is a less popular target for scammers and fraudsters than other peer-to-peer, or P2P, payment platforms in the United States, according to data sources. By others, it is a major offender — in line with its overall high usage.

Zelle has faced increasing pressure in recent months over fraud on the platform. Early Warning Services, a fintech co-owned by seven of the largest banks in the United States, operates the Zelle network, and some lawmakers say these big banks are not doing enough to protect their customers.

JPMorgan Chase, one of the owners of Early Warning, has said it would fight enforcement actions it might face over Zelle after the Consumer Financial Protection Bureau sent inquiries to the bank about fraud and scams on the platform. Early Warning has also said Zelle fraud and scams decreased from 2022 to 2023, even as transaction volume increased.

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'It's a frenzy': JPMorgan Chase, Capital One dominate AI arms race

Over the past 12 months, the largest banks have been in an artificial intelligence arms race. An industry ranking reveals how they are fighting for the prize.

JPMorgan Chase, Capital One and Royal Bank of Canada have been named the top AI leaders in banking in Evident's AI Index for 2024. Three banks — Morgan Stanley, TD Financial Group and HSBC — made it into the top 10 for the first time. Wells Fargo, Citigroup, Commonwealth Bank in Australia and UBS round out the first 10 on the list.

Evident's team of data scientists annually assesses 50 of the largest banks in North America, Europe and Asia in the categories of AI talent, innovation, leadership and transparency, using mostly publicly available information.

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Inside Capital One's quest to spread ID tech

Capital One is betting the scourge of fraud and growth of mobile payments will lay the groundwork for a network based on the financial institution's authentication system.

The credit card lender said on Oct. 9 that it would make its AirKey security product available to other financial institutions. AirKey, which Capital One developed seven years ago, enables credit and debit cards to be used for enrollment and to verify user identity at the point of sale.

AirKey is designed to address a chronic fear in the payments industry, with fraud on the rise. Push-payment fraud is expected to reach $6.8 billion in early losses by 2027, a compound annual growth rate of 11% between 2022 and 2027, according to ACI Worldwide, which reports most of that fraud is in the United States.

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Truist customers affected by February data breach of third party

Truist publicly disclosed this month that a February data breach at a third party, affecting 4.2 million consumers, included some bank customers. The data had been in the possession of debt collection agency Financial Business and Consumer Solutions.

Truist has not publicly disclosed how many of the 4.2 million victims were its own customers. Comcast also said this month that 230,000 of its customers were affected. Initial reports from FBCS indicated a smaller number of total victims, but it provided a supplemental filing in April to the Maine Attorney General, revising the total up from 3.2 million.

In its letter to victims, Truist told customers that the type of information impacted varied per person but may include the consumer's name, address, date of birth, Social Security number and account number. It emphasized that FBCS' systems had been breached, not Truist's. The bank did not immediately respond to a request for comment.

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'Enough already': Analysts question banks' $650 billion tech spend

Banks spent $650 billion on technology last year — roughly the equivalent of the gross domestic product of Belgium or Sweden — but have little to show for it, according to a report McKinsey released on Oct. 23.

"Banks have been investing in technology, but for different reasons, they haven't been able to, at least at the industry level, monetize the outcomes of all these investments," said Xavier Lhuer, McKinsey partner, in an interview.

Not everyone takes such a dire view, and of course banks have to invest in technology in order to function. But most analysts and industry observers agree that banks need to be more transparent about tech spending and show more of a return on it.

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Sutthiphong - stock.adobe.com

The promise and perils of agentic AI

Article by

Penny Crosman

A technology called agentic AI is being heralded by consultants and vendors as the next big thing. It has the potential to help banks and other companies reap efficiency and cost savings from their investments in large language models.

It also comes with many risks.

Agentic AI takes a large language model and allows it to do things, with minimal human intervention. Agentic refers to acting as an autonomous agent, capable of performing tasks on its own.

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Amber Buker, co-founder and former CEO of Totem

"I've spoken to folks who serve tribes through various prepaid card solutions and they all want desperately to reduce their costs," wrote Amber Buker, co-founder and CEO of Totem, in a LinkedIn post announcing the company's closure.

Fintech startup Totem tried to do everything right. What went wrong?

Article by

Miriam Cross

Consumer neobank Totem made every effort to cover its bases as it launched in 2022.

The startup had a niche audience — Native Americans — for whom a neobank did not seem to exist. It had a plan to monetize beyond interchange revenue by white-labeling the app for individual tribes. The founders, Amber Buker and Richard Chance, who are Native themselves, mapped out features that would be of particular value to the community, such as credit building and a powwow finder. It secured its first tribal partner in 2023.

This past summer, two years after Totem publicly announced its launch plans, it closed.

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Daniel Acker/Bloomberg

Banks fight payday lenders with cheaper small-dollar loans

Article by

Cheryl Winokur Munk

More banks are offering customers small-dollar installment loans or lines of credit at lower costs than nonbanks as alternatives such as payday lenders fall out of favor with regulators.

Financial institutions are on track to save consumers millions of dollars each year, said Gabriel Kravitz, a Pew Charitable Trusts manager who researches this market. Multiple large banks including Bank of America, Huntington Bank, Regions Bank, U.S. Bank and Wells Fargo offer these products to customers. Several mid-size and community banks — including First National Bank, WesBanco and First Financial Bank — have also entered the fray.

This more consumer-friendly effort follows joint regulatory guidance in May 2020 that encouraged financial institutions to offer small loans to account holders. "It's something banks have realized is a competitive necessity," said Christopher Leonard, chief executive of Velocity Solutions, which works with about 100 community banks and credit unions to offer small-dollar installment loans to consumers. "The alternatives are not good. Payday loans are harmful and trap people in a cycle of debt," Leonard said.

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Hackers used two Fidelity accounts to steal data from 77,000 customers

Cybercriminals recently stole personal information on 77,099 consumers using two Fidelity Investments customer accounts they created posing as legitimate customers, the investing platform said in a public disclosure on Oct. 9.

Between Aug. 17 and Aug. 19, the attackers "obtained certain information without authorization using two customer accounts that they had recently established," according to Fidelity's letter to victims, which it provided to the Maine attorney general. The company detected the intrusion on Aug. 19.

Fidelity has not publicly detailed what personal information was involved in the breach. The company was careful to point out that the breach involved access to customers' personal information, not their Fidelity accounts. In other words, the attackers did not steal any money or investments.

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JPMorgan Chase poised to take gen AI from experiment to implementation

Banks' use of generative artificial intelligence is on the cusp of shifting from an experimentation phase to implementation, according to the chief data and analytics officer at JPMorgan Chase.

Next year could mark the start of a transformation in banking, with "a little less experimentation and more rubber hitting the road," according to Teresa Heitsenrether, who spoke on Oct. 22 at American Banker's Most Powerful Women in Banking Conference in New York City.

"We're starting to see an evolution of [AI] teams that are multi-faceted," Heitsenrether said. "I think we'll see more of that, and that will drive more traction" around substantive change.

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