Downside to Mobile Payment Apps: Faster Money Transfers May Lead to Faster Scams

Peer-to-peer (P2P) payment apps are booming, with consumers sending one another billions of dollars to split the check, pay the rent, or (sometimes against recommendations) even buy from an online marketplace. Unfortunately, it seems that scammers have also caught on to the convenience of mobile payments. The National Consumers League has reported a growing number of complaints from victims of mobile payment scams. Learn 7 ways to better protect yourself—and your cash.

The Perfect Payment Mechanism for Scammers

Whether you use Zelle, Venmo, Apple Pay, Google Pay, Facebook Payments, or Cash App, these apps have made it convenient to quickly transfer money to another person. But it’s that simplicity and speed that has consumer advocates worried.

Experts say that P2P platforms may be the perfect payment mechanism for scammers and that faster payments and apps could be leading to faster fraud and identity theft. P2P payment scams can range from the false promise of a new puppy to a romantic interest asking for a quick transfer to the fake sale of goods and services.

Phishing scams are also hitting mobile payment users hard. In one phishing attack targeting Venmo users, scammers contacted victims about so-called problems with their account to trick them into handing over their account credentials or sending money. (Venmo has since sent out a notification that it will never text or email users asking for their credentials.)

Victims of these scams can lose hundreds or even thousands of dollars.

P2P Payments May Provide Less Consumer Protections

Experts also worry that users may mistakenly think that P2P payment apps have similar protections to a debit or credit card, which isn’t accurate.

In fact, payments made through a P2P mobile app likely have less consumer protections than using a credit card, debit card, or even writing a check. And unlike money in the bank, funds stored in a P2P payment account may not be insured by the Federal Deposit Insurance Corporation (FDIC).

And there’s another wrinkle in terms of P2P payment consumer protection.

Many of the P2P payment platforms are intended for transfers between friends and family—not to make purchases from businesses or online marketplaces. If a user—knowingly or unknowingly—violates the provider’s terms of service, they could be on the hook for much more than they expect. In one complaint filed to Consumer Reports, a user who violated Venmo’s no-commercial-use terms was left both without the high-end camera he sold online and without his money, after Venmo reversed the payment and the buyer disappeared with the merchandise.

Ways to Better Protect Yourself and Your Money When Using Mobile Payment Apps

The bottom line: once money is transferred via a P2P payment app, it is nearly impossible to get back, which is why experts advise users to pay with caution. Learn these 7 ways to better protect yourself—and your cash—when using a mobile payment app.

  • Send money only to people you know - P2P payments are intended to be used between people who know each other, like family, friends, colleagues, or a trusted individual, such as a babysitter. Experts advise users to think of a P2P transfer just like handing over cash. If you wouldn’t feel comfortable giving someone a $100 bill, then don't transfer $100 to them through a mobile payment app.
  • Double-check that the recipient’s details are correct - Before sending money, make sure you have the right username, address, or phone number. If you aren’t positive that you have the right person, consider sending a smaller sum first and then confirm that the intended recipient received it.
  • Be wary of using P2P services to buy or sell products or services - Most P2P payment apps prohibit commercial use, such as buying or selling goods or services. If an online retailer requires payment via a P2P transfer, it may be a scam. (Note that some retail websites are authorized to use Venmo, which may appear as a Venmo-branded payment button or as an option if PayPal is selected as the payment method.)
  • Beware of potential phishing attacks for both sending and receiving money - If you receive an unexpected email or text message requesting money, don't click on any links. Instead, it’s recommended to log in to the app and view any pending requests there. Scammers may also spoof messages to look like an official notification that the user has received money waiting to be collected. If you get an unexpected notice that you received money, it’s best to contact the individual first to make sure it’s legitimate.
  • Watch out for customer support scams - If you receive a text message, email, or phone call regarding problems or updates to your account, the Identity Theft Resource Center (ITRC) says to ignore the message and instead go directly to the app settings or contact customer support. It’s also advised not to trust the contact information provided in the message, but rather look it up on your own and contact support directly.
  • Use the strongest security settings - Consider using the added layers of security offered by the mobile payment provider to help protect your money if your phone is lost or stolen. For example, some P2P platforms let users create a personal identification number (PIN), which is required to open the app or to transfer money. Some apps also offer two-factor authentication (2FA), which experts recommend enabling.
  • Consider adjusting social media sharing settings - Some payment apps share transactions on social media. Experts recommend adjusting account settings based on what you are comfortable sharing publicly.

If You Believe You’ve Been a Victim of a P2P Payment Scam

If you think you have been the victim of a mobile payment scam, report the scam to the mobile payment app provider and follow their procedures. Then, report the incident to the Federal Trade Commission.