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/

 

Cash-Transfer Apps

Met up with some friends for coffee and then realize you’ve left your wallet at home? Relax; you can still pay your way! Let your buddy pay for you and then grab your phone. Choose an app, thumb out the amount you owe and send it over to a friend. Payback, done!

The app market is full of cash-transfer apps that help you pay up on borrowed funds or collect money that’s owed to you. While each of these apps serves the same function, there are differences when it comes to their accessibility, speed, transfer limits and more. Also, while every service is compliant with the Payment Card Industry Data Security Standard Level 1, some have vulnerabilities you may not be aware of.

Let’s take a look at some of the most popular peer-to-peer (P2P) payment apps on the market.

Google Pay logoGoogle Pay

Formerly Google Wallet, Google Pay offers wide accessibility, generous limits on transfers and the ability to store money in the app.

Accessibility: Download the Google Pay app, link a debit card or a checking account and you’re ready to send money to any email address. And some merchants allow you to use Near-Field Communication (NFC) features to pay for purchases with the funds in your Google account. But take note: There’s no way to use Google Pay with a credit card.

Fees: Sending money with your Google Pay balance or a linked checking account is completely free. If you’re paying with a debit card, though, you’ll cough up a 2.9 percent fee to transfer money.

Limits: $10,000 for each individual transaction, and a $10,000 cap per 7-day period.

Security: Google Pay uses the latest technology to keep its service safe, including PINs, passwords, fingerprint recognition and even retina-scanning screen locks.

Speed: Google Pay transfers take 2-3 business days to clear; transfers from linked accounts can take up to 10 days.

PayPal logoPayPal

PayPal stands above the pack as the pioneering cash-transfer service, and it’s the one with the widest reach.

Accessibility: With more than 26 currencies and 200 countries supported in its system, your money goes furthest with PayPal. Lots of vendors accept PayPal as well. You can send money to anyone by entering their email address or mobile phone number, but the recipient won’t be able to access the funds unless they sign up for PayPal.

Fees: PayPal won’t charge you to move money from your PayPal account or with funds in a linked checking account. Otherwise, you’ll pay 2.9 percent for every transaction, plus a $.030 fee for using a debit or credit card. There are more fees for out-of-country transfers, which vary by location.

Limits: $10,000 for each individual transaction; no limits on the total sent per verified account.

Security: PayPal’s popularity has spawned dozens of hacks. Beware of suspicious emails appearing to be from PayPal.

Speed: PayPal transfers from linked accounts or cards usually take 3-4 business days to clear. If you send money from one PayPal account to another, the transfer will happen instantly.

Square cash logo, bright green round corner square with a dollar sign in the middleSquare Cash

Square Cash prides itself on being super-accessible. There’s no need for both users to have a Square Cash account— and all you need is an email address and a debit card number.

Accessibility: This app makes cash transfers almost effortless. You can set up your own URL, or a “$Cashtag” for accepting payments and sending money with an email address or Snapchat account.

Fees: If you use a debit card or a linked account for your money transfer, Square Cash is free. For business purposes, or to use a credit card, you’ll pay 3% per transaction.

Limits: $250 weekly for unverified accounts; $2,500 weekly for verified accounts. $1,000 receiving limit for unverified accounts; no cap on funds received for verified accounts.

Security: Square Cash allows you to discover nearby users using Bluetooth technology so you’re sure your money is going to the right recipient. A big vulnerability with Square Cash, though, is that anyone with access to your email also has access to your debit card.

Speed: Your initial Square Cash transfers can take up to 2 business days to clear. Once your card is on file, the money can move within 24 hours. For instant transfers,there’s a 1.5% fee.

Venmo logo, white "v" on medium blue circle backgroundVenmo

Venmo offers a social networking platform and cash-transfer app rolled into one. Look up where your friends are shopping, “like” their purchases and comment on the stuff they’ve bought.

Accessibility: You can sync your Facebook account and phone contacts to see who among them is a Venmo user. “Venmo” money with an email address or phone number—but only to friends who also have the app.

Fees: Sending funds from your Venmo account, a linked financial account or with a major debit card is free. For credit cards and non-major debit cards, there’s a 3% fee.

Limits: $299.99 for unverified accounts, $2,999.99 for verified accounts.

Security: Every transaction you make on Venmo becomes public information. You’ll need to adjust your privacy settings to make that information private.

Speed: Venmo transfers take 1-3 business days to clear. For instant transfers of any size, Venmo charges a flat $0.25 fee.

Your Turn: What’s your favorite cash-transfer app? Tell us all about it in the comments!

SOURCES:
https://www.thesimpledollar.com/best-apps-to-send-money/

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

https://www.lifehacker.com/money-transfer-showdown-square-cash-vs-venmo-vs-payp-1752058723/amp

https://www.google.com/amp/s/www.thepennyhoarder.com/smart-money/free-money-transfer-apps/amp/