If you’re like more than half of American these days, you’re likely using a peer-to-peer payment platform like Venmo, Zelle, Cash App, to name a few, to send someone cash with the tap of an app. I’ve used them to split the bill at dinner, pay my mom back for an impromptu clothes shopping spree, and divvy-up class project costs for kids. It saves the hassle of stopping off at an ATM every time you go out, the risk of walking around with a wad of cash in your wallet, or eyerolls of telling someone, “the check’s in the mail.”
The use of these apps is growing. Nearly 60% of people in the U.S. use them, and that number rises close to 80% for young adults ages 18-34, according to a survey by the Mercator Advisory Group. Analysts predict we’ll make some $700 billion in peer-to-peer payments in the U.S. by the end of 2018 alone.
They way most P2P apps work is similar: Download the free app onto your smartphone, sign-up, and connect to your bank account or credit card number. To send cash, type in someone’s email or phone number—or pull it right from your contacts list—add the dollar amount, push submit and you’re done. Most are free to use, work with iOS and Android devices, and take less than five minutes to set up.
EASY MONEY? EASY TARGET.
They are so quick, easy, and insanely convenient, it likely comes as no surprise that scammers have honed right in on ways to exploit the system. Thieves have stolen cash from users via both Venmo and Zelle in similar scams in the past few years.
At the core of the issue? You’re not supposed to use these apps with anyone you don’t know personally. “Zelle is intended as a replacement for cash and checks, and for sending money to individuals you know. It is not a payment platform for the purchase of goods and services…” says Lou Anne Alexander, Group President Payments at Early Warning, the network behind Zelle.
WHAT YOU NEED TO KNOW ABOUT VENMO
According to the FTC report, one of the biggest complaints revolved around Venmo showing deposits made to accounts, which were later reversed. The Verge detailed one of the most notorious examples of a scam last November, when an LA area man listed a set of limited-edition Yeezy Zebra sneakers, a collaboration between Adidas and Kanye West, on Craigslist for $13,550. The seller apparently waited to hand the precious kicks over until he saw the money transferred to his Venmo account. But shortly after, the buyer had Venmo reverse the charges, leaving the seller with no item, no payment, and no recourse.
In some cases, buyers used stolen credit cards or hacked accounts—which the payments company then reverse—leaving sellers with neither their precious possession or any money for them. In other cases, sellers handed over just-released iPhone X’s or prized Hermès handbags. Many victims filed police reports, to no avail.
Venmo, which is now owned by PayPal, says “we’ve taken steps to significantly strengthen our privacy and data security practices.”
WHAT YOU NEED TO KNOW ABOUT ZELLE
With Zelle, with partners with 60 financial institutions including major banks like Wells Fargo and Bank of America, the scam went the opposite direction—it was mainly buyers who were duped. What’s tricky with Zelle is that it’s backed by dozens of banks, and even included in some banks mobile apps themselves. With money going straight from one bank to another, some people assumed their transactions were both fraud and purchase protected, as is often the case when using a credit card. But that’s not how it works.
As TechCrunch reported last month, several Zelle users have complained that they lost hundreds, even thousands of dollars, when they used Zelle to buy concert tickets, or other goods online (again, mainly via Craigslist).
In one account, a Zelle user transferred money for concert tickets to a seller who had given him a name, email address, and phone number. As soon as the transfer went through, the seller assured the Zelle user the tickets would show up in a matter of minutes. By the time the Zelle user realized he’d been duped, the scammer had disappeared, along with the money.
“Sending money through Zelle is equivalent to sending cash,” Alexander added. “If consumers wish to exchange money for goods and services with people they are not familiar with, we recommend using credit cards, which have built-in buyer protections.”
Both Venmo and Zelle are now trying to do a better job telling people how to — and how not to — use their services. The FTC also published a list of tips, warning people who use P2P payment platforms, repeating the warning to only use them with people you know. Other suggestions include:
- Check your account settings to see if you can enable additional security like multi-factor authentication, requiring a PIN, or using fingerprint recognition like Touch ID.
- Check social media permissions or settings—to make sure they’re not sharing information you don’t want out there.
- Read the terms of service if you’re which kinds of transactions are permitted on the service you use.
*An edited version of this story ran in USA Today.