All You Need To Know About P2P Payment Systems

Young woman hands waiter her chip enabled card to pay for her and her friends lunch at an outdoor cafe.Cash is so overrated. Why fumble through wads of crumpled bills and piles of change when you can easily pay back the $6.75 you borrowed from your friend simply by using your phone?

Peer-to-peer (P2P) payment systems are changing the way we handle our money and our social finances forever. Eating out and splitting the tab is super-easy. Collecting money for a shared gift is no longer a hassle. Paying back borrowed money can be done anywhere, and at any time.

First popularized by PayPal, the world of P2P systems has exploded. Many financial institutions Advantage One, offer the option of P2P payments between members, and lots of social media platforms let you transfer money between friends as well. However, the most popular way to pay a friend back is through money transfer apps like PayPal’s Venmo, Square’s Cash App and Zelle. In fact, according to eMarketer, the total value of mobile P2P transactions in the U.S. could increase from $156.49 billion to $244.03 billion from 2018 to 2021.

Are P2P payments really the wave of the future, or just the latest hype? Read on for all your questions on P2P payment systems, answered.

How do P2P payments work?
Say you’re eating out with a bunch of friends and your pal, Meghan, offers to cover the tab and have everyone pay her back. She hands her card to the server while you and your friends pull out your phones. You’ll open up the cash-transfer app of your choice and find Meghan in your contact list. Just key in the amount you owe and send. You may have to input your PIN or prove your identity in another way before the transaction is finalized. Within seconds, Meghan will get a notification that the money’s been sent. Once the funds actually transfer, Meghan can choose to leave them in the P2P account until it’s her turn to pay, or she may move the money to a checking account at the financial institution of her choice.

Will it cost me to transfer money?
Depending on the service provider you use, there may be a fee for transferring money through your phone.

Most P2P systems will allow you to make a payment from a linked financial account or directly into the P2P account at no cost. However, several providers will take 2-3 percent of any payment made with a debit or credit card. Also, if you want your transfer to happen immediately, you’ll usually have to pay: Square Cash will charge a 1.5 percent fee while Venmo takes a flat $0.25 for every instant transfer.

How long will it take for the money transfer to clear?
Your friend will receive notification of your payment soon after you hit the send button. However, the actual money transfer usually takes one to three business days to clear. As mentioned, if you really need that transfer to clear your account immediately, most providers allow you to pay a small fee to make that happen.

Are P2P payments safe?
All P2P systems are careful to encrypt your financial information and to use security measures for protecting your funds. However, these measures aren’t foolproof. Many P2P systems have been targeted by hackers and scammers.

Protect yourself from P2P scams by taking the following steps:

  • Use two-factor identification and a PIN before completing a transaction.
  • Asked to be notified about every transaction.
  • Never use a P2P service for business purposes or for a money transfer with someone you don’t personally know.
  • Triple-check your recipient’s information before you send a payment; a misspelled email address could send your money to the wrong person.

If something goes wrong with a P2P payment, who is responsible for covering the loss?
Unfortunately, if you’ve been scammed or have had another issue with a P2P payment, you’re on your own. Most services will offer their assistance to law enforcement agencies and notify users if they’ve been scammed, but that’s usually the extent of their fraud protection.

If you choose to use your P2P payment service for a business-related transfer, fraud protection is limited even further. P2P services were created to be a means of transferring funds from friend to friend; most services clearly state in their policies that their platforms should not be used in business transactions. Many consumers, though, choose to ignore these warnings and use Venmo and Square Cash to pay for goods they’ve bought on Craigslist, to sell a used item or even to accept funds for a service they’ve provided.

If you disregard these rules, the service will likely offer no fraud protection or assistance in reclaiming lost funds. Many of them will not even honor a business transaction at all. It’s best to only use P2P payment services among friends and people you know and trust.

Lots of users mistakenly think their financial institution will back them up if a P2P payment goes sideways. However, financial institutions like Advantage One are never responsible for a P2P payment transfer. While we never want to see you lose money for a simple mistake or because you’ve been victimized by a scam, there’s not much we can do about it after the fact. For this very reason, we strongly advocate practicing caution when transferring money online or by app.

In short, if something goes wrong with a P2P payment, you’ll be the one who is responsible for the fallout.

When used responsibly, P2P payment transfers can be a super-convenient way for friends to share expenses or pay back borrowed funds.

Your Turn:
Do you use a P2P payment system? Tell us all about it in the comments, below.

SOURCES:
https://www.wired.com/story/venmo-alternatives/

https://paymentweek.com/2018-3-30-problems-p2p-mobile-payments/

https://www.nerdwallet.com/blog/banking/p2p-payment-systems/

https://www.google.com/amp/s/amp.usatoday.com/amp/36726065:

Are P2P Payment Systems Safe?

Close-up of the hands of four people holding smart phonesP2P payment services, like Venmo, Zelle and Square’s Cash App, are aiming to make cash obsolete – and some would contend they’re succeeding! Just a few quick swipes, and you can transfer funds to a friend, pay for an item you bought online or collect money that’s owed to you.

Convenient as they are, P2P payment systems have unfortunately become a breeding ground for scams and hacks. From compromised accounts to fraudulent transactions, using a P2P service opens you to some risk of losing your money to a scammer.

Read on to learn how to better protect yourself from a P2P payment scam.

How do P2P payment scams happen?
There are lots of ways using a P2P payment system can put you at risk, but the following two vulnerabilities are most common:

1.) The bogus buyer
In most cash-transfer apps, when you receive a payment, the money goes into your P2P system balance and stays there until you transfer it to an external account or use it to pay for another transaction. This transfer usually takes one to three business days to clear. Crooked scammers are taking advantage of that “float” in the transfer process to con you out of your money.

Here’s how it works:
A scammer will contact you about an item you’ve put up for sale or tickets to an event. Together, you’ll arrange for an exchange of funds and goods. You may even take precautions against a possible scam by insisting on an in-person meeting for the exchange or refusing to send out the item until you see the money in your P2P account. Things proceed according to plan. You’re notified that the money has been sent to your account and you hand over your item. Sadly, you won’t realize you’ve been ripped off until a few days later when the money transfer does not clear and the contact has disappeared with your goods. Unfortunately, there’s no way you can get your money back, because most P2P providers will not offer compensation for a fraudulent sale. Similarly, your linked financial institution bears no responsibility for the scam and can’t help you recoup the loss.

2.) Publicized payments
PayPal’s Venmo is the only P2P app with a built-in social networking component. This feature has led to a host of privacy issues that have been brought to the attention of the Federal Trade Commission (FTC).

In short, every Venmo transaction you make is up for public scrutiny. No one can access the payment amounts, but anyone who is interested can track the restaurants where you like to eat, the clothing stores you most frequent and check out when you last filled your gas tank. Creepiness factor aside, all that information going public makes Venmo users super-vulnerable to scammers and identity thieves.

Venmo allows you to tweak your privacy settings to keep your information from going public, but most people are unaware of the issue and/or neglect to take this measure. Recently, the FTC ruled that Venmo must make this detail clearer to users. Venmo has since created a popup tutorial for all new users demonstrating how to adjust your privacy settings to keep your transactions from going public. If you choose to use Venmo, check your settings to be sure your money habits aren’t being broadcast for the world to see.

Protecting yourself
You can keep your money safe and still enjoy the convenience of cash-transfer apps with these simple steps:

  • Only send money to people you know and trust.
  • Never use a P2P service for business-related transactions.
  • When using Venmo, adjust your privacy settings and opt-out of public tracking.
  • Carefully read the terms and conditions of a P2P service before using.
  • Always choose two-factor identification and use a PIN when possible. If your app and phone allows, choose fingerprint recognition and/or touch ID for added protection.
  • Accept any security updates offered by the P2P app you use.
  • Check your recipient’s information carefully before completing a money transfer.
  • Choose to be notified about every transaction.
  • Link an external account instead of keeping your funds in the P2P account.

Your Turn:
Do you think P2P systems are safe? Why, or why not? Share your take with us in the comments.

SOURCES:
https://triblive.com/business/technology/13358843-74/peer-to-peer-apps-come-with-risks-ftc-warns

https://www.consumer.ftc.gov/blog/2018/02/tips-using-peer-peer-payment-systems-and-apps

https://paymentweek.com/2018-3-30-problems-p2p-mobile-payments/

https://www.ftc.gov/news-events/events-calendar/2016/10/fintech-series-crowdfunding-peer-peer-payments

https://www.lexology.com/library/detail.aspx?g=9efa141a-40d2-4773-b930-bb395111d226

https://www.consumerreports.org/scams-fraud/how-to-protect-yourself-from-p2p-payment-scams/