Peer-to-peer payment services like PayPal, Venmo, or Zelle are becoming the norm for paying for a co-worker’s lunch or sending money to a friend. However, scammers have found a way to use these applications 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 apps will not bear the cost of fraud. This means that someone who paid scammers using one of these services may not be successful in getting the company to reimburse them for their fraud losses.
The Better Business Bureau advises consumers to be on the lookout for the following scams when using peer-to-peer payment apps:
- Fraudulent payment methods. In a common scheme, scammers will connect a stolen credit card to a payment app. 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 the payment and ships the item, you will soon discover that the payment you sent is not for a legitimate buyer and the money will be removed from your account. The seller is then without the item and the money.
- Canceled payments. Some digital wallet apps take several days to process a transaction. Fraudsters take advantage of this by setting up transactions and canceling them before they happen. By the time victims realize the money is not coming, the scammers are gone.
- Overpayment for an item. Scammers may try to convince you that they paid you more than they owed you. For example, a spoofed email says he was paid $3,000 for a camera that he listed as $300. The sender asks you to send the camera in addition to the additional $2,700 he was “paid” for in error. 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 scammers send spoofed emails warning that an account is about to be suspended and that the account holder must enter their password on a spoofed web page. In general, payment app 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 the money transfer with friends: Protect yourself from scams by using money transfer apps only for their intended purpose: sending money to people you know personally.
- Enable additional security settings– Check your account settings to enable additional security measures, such as multi-factor authentication, requiring a PIN, or using fingerprint recognition such as Touch ID.
- Link the money transfer app to a credit card. As with many other purchases, using a credit card provides added security if you don’t receive the goods or services you 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 that criminals cannot access your payment applications. Protect 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 use a peer-to-peer payment app to sell something, keep in mind that some payments take a few days to transfer. Please confirm the money transfer before shipping the sold item. If you have any concerns that a payer didn’t actually send the money, be sure to check your account directly.
- Have the correct phone number for customer service: Avoid looking online for a customer service phone number. Instead, go directly to the company’s website. Some technology companies do not have public numbers and do not accept phone calls.
Finally, consider whether the chosen payment method is adequate for the risks that could be associated with each transaction. When you don’t personally know the person and/or haven’t confirmed that they really are the person you think they are, or haven’t yet received a delivery or other purchase, select a payment method that offers protection. When a payment service advertises itself as “secure,” read all the details to find out what it really means; It’s not always what you think.
It’s especially important to know that if your payment method is linked to a bank account or credit card, unauthorized access can drain that account or, with overdraft protections, even drain multiple accounts.
For more information
To go BBB Scam Tracker to report a scam. More information on how protect yourself with the use of Venmo on your website. Check this article on the Federal Trade Commission website for more tips and advice.