Avoid Scams with Peer-to-Peer Payments

Highlights:

• Peer-to-peer payment (P2P) apps allow users to send and receive money directly to each other.
• Because the money being sent is available to the recipient almost immediately, P2P platforms are popular options for scammers, and many of these apps lack the fraud protections of traditional banks and credit cards.
• When making payments with a P2P app, be sure you recognize and trust the person who is sending or receiving money.

You’re probably familiar with peer-to-peer (P2P) payment apps such as PayPal^®, Cash App^® and Venmo^®. These platforms allow users to quickly and conveniently send money directly to each other. You might use a P2P payment app to split the check for a group dinner with friends or receive money from a roommate for rent and utilities.

P2P payments aim to make life easier for users. However, they don’t typically offer the same protections against scams and other types of fraud that are common with traditional banks and credit cards. By learning the warning signs of potential scams, you can enjoy the convenience of P2P payments while still feeling confident that your financial and personal information is secure.

Avoid scams and fraud on P2P payment apps

Scams involving P2P payment apps occur when a stranger tricks you into sending money or personal information. For example, they might ask for a charitable donation to an organization that doesn’t exist or request funds for a family emergency that never really happened. Alternatively, scammers might pose as tech support and ask for access to personal information that would allow them to log into your private accounts.

Because the money being sent is available to the recipient almost immediately and there’s usually no way to get your money back once it has been sent, P2P apps are popular options for scammers.

Even if you’re not a victim of fraud, transactions can still go wrong with P2P payment methods from the simplest mistakes, such as misspelling a user’s name or incorrectly inputting one digit in a phone number.

How does the scamming & fraud happen?

Scammers use a variety of methods to access your private information. Here are common scams to watch out for when it comes to popular P2P apps.

• Phishing Scams: Phishing occurs when scammers pose as a P2P app employee and send you an email or text message claiming your account has been suspended or locked. These messages typically ask you to click on a link, which can install malware or trick you into entering your account information. The email or text is designed to look like it came from a legitimate source. You can often identify the scam from misspellings, a link that directs you to a fake URL or a request for sensitive information such as your credit card or login credentials. Legitimate emails from a P2P app will address you by your full name, whereas phishing emails tend to address the recipient generically, such as “Dear user.”
• Unauthorized money transfers: If money has left your P2P account without your approval, you may have been the victim of an unauthorized transfer. These transfers occur when someone accesses your account through hacking, phishing or other means, and moves money out of your account without your knowledge. In these cases, the convenience and speed of P2P apps works against you. Money can be transferred quickly into a thief’s own pocket. However, reversing the process isn’t as easy. It may take significant effort to identify and dispute fraudulent transfers.
• “Accidental” transfers: In this scam, you receive a payment from a stranger who claims the transfer was a mistake and asks you to return the money. What they don’t tell you is that the funds were stolen to begin with. Down the road, if the P2P app identifies the money as stolen, you could become responsible for having it in your account. You may find yourself on the hook for paying back the amount you transferred, or face an account ban. If you receive funds from someone by mistake, reach out to the P2P app’s customer service for assistance. Avoid transferring money to users you don’t know.

5 steps you can take to ensure secure online payments

Luckily, despite the prevalence of fraud, there are steps you can take to help keep your funds and personal information secure.

• Never send or accept P2P payments from someone you don’t know. Make sure you recognize and trust the party who is accepting or sending money. It can be helpful to think of P2P platforms like cash — once the money leaves your hands, it’s gone and inaccessible.
• Double-check the information of the person you are sending money to. To avoid any mistakes, make sure the recipient’s username or phone number is correct.
• Make sure your bank or P2P payment app is up to date. Most payment platforms have data encryption and other security features installed. Updating your apps regularly and adding extra security methods, such as multi-factor authentication, can help protect your personal information.
• If you are a victim of fraud, notify your P2P platform and bank immediately. Blocking the responsible party and reporting the incident to the P2P platform can improve your chances of getting your funds back. Although there is no guarantee you will recover the money you lost, this process will alert the app’s staff to the scammer and give them the opportunity to better protect other users.
• When calling a P2P app’s customer service line, never provide sensitive information over the phone. A legitimate customer service representative from a P2P app will not ask for your bank account information.

When used correctly and cautiously, P2P payment platforms can be a convenient way to manage transactions between friends and loved ones. Just be sure to use the services with caution and stay on the lookout for potential scams.