Peer-to-peer payment apps such as Venmo, Zelle, and CashApp are popular for a reason. They eliminate the need to visit an ATM to give money to people you know. Whether you’re splitting a dinner bill or reimbursing a family member for a purchase they made on your behalf, you can send them what you owe with just a few taps on your phone. But is it safe to use a cash app? How do peer-to-peer payment scams happen?
Here at Leaders Credit Union, we want our credit union members to be confident when they send money to a peer and that means making sure they’re aware of the ways they can protect themselves from P2P fraud when using P2P services. That includes recognizing peer-to-peer payment fraud when they see it. Here are the Dos and Don’ts of using P2P services to avoid fraud and protect your money.
Is It Safe to Use Peer-to-Peer Payment Apps?
If you’re like most people, you’ve probably used a cash app such as Venmo or Zelle to send money to someone you know. You may not have given it much thought, but it’s worthwhile to explore whether using a P2P platform is safe.
The short answer is that it can be safe to use P2P apps if you use them properly. The most important thing to recognize is that sending funds using these apps is the same as sending cash. Once you click SEND, the money's gone and getting it back may be difficult.
What Are Common Signs of Fraudulent Activity Related to P2P Apps?
Before we get into some best practices and things to avoid when using P2P apps, here are some of the signs of fraudulent activity with fraud prevention tips. If you see any of these signs of a peer-to-peer payment scam, be skeptical and proceed with caution:
- Unexpected payments. P2P apps allow for the easy transfer of money, but an unexpected payment–particularly someone you don’t know–should be seen as a red flag. Don’t transfer the money to your bank or spend it until you have more information.
- Unsolicited messages. You can get notifications from P2P apps when you receive money or get a request for money. Either way, an unsolicited text or email asking for money or to verify your account information is a potential sign of fraud and should be treated with caution.
- Overpayments. Another common fraud is to overpay somebody and then ask them to return the overpayment using the same app. An overpayment may be intentional. Once you send money back to the person, the initial transaction is flagged as fraudulent, and you’ll be out the money you sent.
- Embedded links. In some cases, scammers may send texts or emails with embedded links. If you click the link, you’ll be prompted to enter your account ID and password, after which the scammer will be able to take your money.
- Impersonal greetings and spelling/grammar errors. A lot of phishing scams, including P2P payment scams, use impersonal greetings (where messages from your financial institution and legitimate messages from P2P services may be personalized) and are riddled with errors. Be suspicious of any communication that includes these things.
If you receive any communication that includes the warning signs we’ve listed here, it’s important not to be reactive. Take screenshots, don’t click on any links, and double-check everything by visiting the app instead of relying on outside information.
The Dos and Don’t of Using P2P Services
Now, let’s review the Dos and Don’ts of using peer-to-peer payment services.
Following these best practices will help you avoid scam attempts and protect your money.
Do: Enable two-factor authentication
All P2P apps have an option for users to opt in to two-factor authentication. Using 2FA means that you’ll need to scan your fingerprint, use facial recognition, or enter a single-use texted code to access your account. Both options will prevent someone who isn’t you from accessing the app and your money.
Do: Double check before sending money
One of the trickiest things about using P2P payment apps is that usernames may be similar to one another and difficult to differentiate. You should always double check that you have the right username since it may not be possible to get funds back once they’ve been sent. The best option is to scan a friend’s QR code to avoid mistakes.
Do: Avoid clicking on embedded links
There are a lot of P2P payment scams where the scammer sends an embedded link hoping the recipient will click it and enter their username and password. No matter how authentic a message seems, never click on a link. Instead, open the app directly, log in, and review your account from there.
Do: Report overpayments or unexpected payments immediately
As we mentioned earlier, any unexpected payment or overpayment should be viewed with suspicion. Since scammers will sometimes send fraudulent payments, it’s essential not to spend that money or do anything with it other than report it to the P2P payment app immediately.
Do: Set up alerts to be notified of transactions on your account
All P2P payment apps have the option to sign up for push notifications, so you’ll be given a heads-up when there’s a transaction on your account. We strongly recommend enabling push notifications and paying attention to them, so you’ll be on top of any unusual activity or payments on your account.
Do: Keep your P2P payment apps updated
All mobile apps require occasional updates to address security concerns and gaps. Whenever you receive an update notice for your P2P payment apps, be sure to install the update right away to minimize the risks that someone unauthorized will be able to access your money.
Now, here are the most important Don’ts of using P2P payment apps to protect yourself and your money.
Don’t: Send money for a product or service you haven’t received
There are some scammers who use P2P payment apps to carry out mobile and online scams. One way they steal money is by asking shoppers to use P2P apps to pay them before a product has been received or a service has been rendered. You can protect yourself by not paying for anything until you have actually received it.
Don’t: Lend your phone to anybody you don’t trust
P2P apps live on your phone, so it should come as no surprise that it’s a best practice not to give your phone to anybody you don’t trust. Once your phone is in somebody else’s hands, there’s a risk that they could access a P2P payment app and use it to send money to themselves or an accomplice. (Requiring a fingerprint to send money will add an extra layer of protection.)
Don’t: Send money back to someone who overpays you
If someone overpays you for a product or service, they may ask you to send the overpayment back to them. The issue with doing so is that if the initial payment was fraudulent, you could be on the hook for the entire amount. Instead, report the overpayment to your P2P payment app and let them handle the situation.
Don’t: Cash checks that someone sends you
One type of P2P payment scam to keep an eye out for is when someone sends you a check, typically for more than they owe you, and asks you to send the overpayment back to them using a P2P payment app. The check is usually forged and if you cash it, you could be on the hook for the entire amount of the check.
Don’t: Log into or initiate payments on a P2P app using a public or unsecured network
There’s a risk associated with making any financial transaction using an unsecured or public wi-fi network. If you must use a P2P app when you’re away from home, do so using mobile data to protect yourself.
Can You Get Money Back After a P2P Payment Scam?
One of the reasons that we’re so determined to protect our members from P2P payment scams is that it can be difficult to get money back if you send it to a scammer (or even if you make a mistake and send it to the wrong party.) Most P2P apps don’t offer payment protection, but Venmo and PayPal do, and you may want to take advantage of that protection.
If you are the target of a P2P scam and you lose money, you should report it to the P2P app, your financial institution, and the local police. You may also want to file a report with the Federal Trade Commission, especially if you’ve been a victim of identity theft.
Get Secure Online Banking with Leaders Credit Union
Using peer-to-peer payment apps can be safe provided you take the necessary precautions and avoid unsafe behavior. The Dos and Don’ts we’ve listed here will help you avoid P2P payment frauds and scams and keep your money safe.
Do you need secure online banking with a financial institution that cares as much about your money as you do? Leaders Credit Union is here to help! You can access our free “Ultimate Fraud Prevention Help Kit” and learn how to protect your finances from fraudsters.
Report Scams to the FTC
If you were scammed or think you saw a scam, report it to the Federal Trade Commission.