Protect your digital wallet! Scammers target peer-to-peer payment apps

Peer-to-peer payment services such as PayPal, Venmo or Zelle are becoming the norm for paying a colleague for lunch or sending money to a friend. However, crooks have found a way to use these apps by using variations of old schemes adapted to new technology.

The risks of peer-to-peer (P2P) payment

Peer-to-peer payment services allow users to send money to each other from an app on their mobile device. These services use a linked bank account or a credit or debit card. However, unlike more traditional banking systems, many payment applications will not bear the cost of fraud. This means that someone who has paid scammers using one of these services may not be able to get the company to reimburse them for losses due to fraud.

The Better Business Bureau advises consumers to beware of the following scams when using peer-to-peer payment apps:

  • Fraudulent payment methods. In a common pattern, scammers will connect a stolen credit card to a payment application. They then look for people selling expensive items (such as a computer, tablet, or car) online. Scammers will offer to pay for the product using the app. Once the seller accepts payment and sends the item, they quickly discover that the payment sent is not for a legitimate buyer and the money is withdrawn from their account. The seller then finds himself without the object or the money.
  • Canceled payments. Some digital wallet apps take several days to process a transaction. Scammers take advantage of this by setting up transactions and canceling them before they are completed. By the time the victims realize the money isn’t coming, the scammers are long gone.
  • Overpayment for an item. Fraudsters may try to convince you that you were paid more than you were owed. For example, a scam email says you were paid $3,000 for a camera you listed at $300! The shipper asks you to ship the camera in addition to the extra $2,700 you were mistakenly “paid”. In this example, the scammer wants your camera and your money. In another version of this scheme, scammers overpay for items with a stolen credit card.
  • Fake official emails. Many fraudsters send fake emails warning that an account is about to be suspended and that the account holder must enter their password on a fake web page. As a general rule, payment application providers will never ask you to enter your password unless you are on the login page.

Protect yourself when paying with a money transfer app by following these tips:

  • Use money transfer with friends: Protect yourself from scams by only using money transfer apps for their intended purpose: sending money to people you know personally.
  • Enable additional security settings: Check account settings to enable additional security measures, such as multi-factor authentication, requiring a PIN code, or using fingerprint recognition like Touch ID.
  • Link the money transfer app to a credit card. As with many other purchases, using a credit card provides additional security if you do not receive the goods or services paid for. Linking to a debit card or directly to a bank account does not provide additional protection.
  • Use a strong password or 2FA on your phone. In the unfortunate event that your cell phone is lost or stolen, make sure criminals can’t access your payment apps. Secure your phone by choosing a strong password, biometric security devices or two-factor authentication security available on many smartphones.
  • Check the account after a transaction to make sure the money was transferred. If you’re using a peer-to-peer payment app to sell something, be aware that some payments take a few days to transfer. Confirm the money transfer before sending the sold item. If you’re worried that a payer didn’t actually send the money, be sure to check your account directly.
  • Have the right phone number for customer service: Avoid searching online for a customer service phone number. Instead, go directly to the company’s website. Some tech companies don’t have public numbers and don’t accept phone calls.

Finally, determine if the payment method chosen is suitable for the risks that may be associated with each transaction. When you do not personally know the person and/or have not confirmed that it is the person you think you are, or have not yet received a delivery or other purchase, select a payment method that offers protection. When a payment service advertises itself as ‘safe’, read all the details to find out what that really means – it’s not always what you think.

It’s especially important to know that if your payment method is tied to a bank account or credit card, unauthorized access can empty that account, or with overdraft protections, even empty multiple accounts.

For more information

Go to BBB Scam Tracker to report a scam. Learn more about how to protect yourself using Venmo on their website. Check out this article on the Federal Trade Commission website for more tips and tricks.


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