Protecting Your Finances When Using Peer-to-Peer Payment Apps

Published on May 9, 2024 | Webster Bank

Popular money transfer apps like Zelle, Venmo, CashApp, and PayPal have been making headlines—and not just for their ease of use. While these apps come in handy for splitting the bill at a restaurant or paying back a friend, they can open up app users to the risk of their accounts—and money—being compromised. Take steps to protect yourself when using peer-to-peer payment apps.

 What are peer-to-peer apps?

“Peer-to-peer” payment apps, sometimes called P2P apps, enable you to send money to another person easily. On most of these apps, users create an account on their platform of choice, connect it to a bank account, and connect with a trusted friend to send or receive money.

As more people embrace going “cashless,” these payment apps make paying the babysitter or paying a friend for coffee from your smartphone easy. But do these payment apps open you up to financial risk?

Reports from across the country highlight theft and fraud tied to these apps when criminals steal unlocked phones and send money to themselves. Unlocked smartphones can give criminals open access to a user’s financial information—and money.

Know Your P2P Apps

Whether you’re a daily user or brand new to payment apps for purchases or transactions, learn about the differences between each app:

• Zelle partners with more than 2,000 credit unions and banks across the U.S.—including Webster Bank. Unlike some other payment apps, Zelle is commonly accessed through a user’s banking app and allows users to quickly and conveniently send and receive funds.
• Venmo, owned by parent company PayPal, has a social feed for transactions. This app allows users to spend a Venmo balance and offers a free debit card. For a fee, you can instantly transfer money.
• CashApp is similar to Venmo and offers a free debit card to spend balances. Each user has a unique “$cashtag.”
• PayPal is often used for online sales or transactions with businesses. This platform enables users to transfer more significant amounts of money to users around the globe

Six Steps to Protect Yourself

While these apps introduce potential financial vulnerabilities, they’re still handy when sending money to people you know and trust. With a few guidelines, you can protect yourself from fraud and theft on peer-to-peer payment apps.

1. Know Who You’re Sending Money To

The best way to protect yourself from fraud on a payment app is to only exchange money with people you know and have met in person. These apps are designed for sending and receiving money only with people you trust.

When using an app like Zelle, which sends money directly between bank accounts, users only need an email address or phone number to send or receive money. Venmo and CashApp rely on usernames or email addresses to send or receive money.

2. Use a Credit Card for Riskier Transactions

When buying goods or services from a business or exchanging money with an individual you don’t know and trust, use a form of payment that comes with purchase protection. Using payment apps is much like using cash—once the transaction is completed, it usually can’t be easily reversed.

While most major credit cards come with fraud protection built-in as part of your cardholder agreement, most payment apps unfortunately do not offer such protections to their users. Some do, such as Venmo for payments made for goods or services from certain verified business accounts, but generally these protections are not available for most transactions.

3. Use Strong Passwords and Multi-Factor Authentication

Protect accounts accessible on your phone or online with multi-factor authentication.

Multi-factor authentication relies on more than one step to log in—for example, using biometrics such as face or fingerprint identification or receiving a one-time code by text—to confirm your identity in addition to using your password to access your account.

Furthermore, making sure to use strong and unique passwords—and changing them frequently—can also help to prevent your app account from being compromised by cyber criminals.

For more security, add a PIN to not just your phone but also to log in and use a payment app.

This isn’t typically on by default on some websites or apps; you can enter the app’s account settings and enable multi-factor authentication for logging in or sending a payment.

4. Check Your Privacy Settings

Some payment apps like Venmo publicly show users’ transactions as a feed in the app. Check your privacy settings and make transactions private and only visible to you.

5. Be Aware of Scammers—and Report Suspicious Activity

You’re not alone if you’ve received a request from a distant family member or business that looks fishy or fake. According to the Federal Trade Commission, imposter scams were the top fraud category in 2023.

Scammers can use fake emergencies or act like a bank or business to attempt a phishing attack or attempt to get you to send them money or provide personal information. If you receive a request to send money from someone you know through a payment app, contact the party directly via a trusted phone number or communications channel (do not respond to the inbound email or phone number) to confirm the request is legitimate. Once a payment is sent, you can’t cancel or reverse a transaction.

Also, be sure to remain vigilant and never share your login details or one-time access codes with anyone else, as cyber criminals have been known to trick users into providing this information to gain access to accounts. Remember, payment app companies and/or your financial institution will never contact you requesting this information. If you think you may have paid a scammer through a payment app, immediately contact the company and report it to the FTC.

6. Double-check the recipient and the amount before sending.

If you send money to someone for the first time, have them request it through the app to avoid sending it to the wrong person or account. Always verify the account name with the phone

number or email address. Double-check the recipient’s username or contact information and the amount before making a transaction. Remember: once your money is sent, you may not be able to get it back.

Learn more about how to safely use Zelle through Webster Bank and about Webster’s commitment to your privacy and security.

ADDITIONAL SOURCES:

• Do you use payment apps like Venmo, CashApp, or Zelle? Read this
• Zelle – How it Works
• Peer-to-Peer Payment Services
• Peer-to-Peer Payment Services: Findings from CR’s nationally representative American Experiences Survey in 2022
• How to Safely Use Payment Apps
• Helpful tips for using mobile payment services and avoiding risky mistakes
• Zelle Money Transfer: What It Is, How to Use It
• Payments app Zelle begins refunds for imposter scams after Washington pressure