Avoid Peer-to-Peer Payment Scams on Paypal, Zelle, and Venmo

4 minute read | Nov 3, 2020

Cash, once considered king in paying for things, may be taking a back seat to the cashless society being ushered in because of convenience. It’s more than likely happening quickly because of coronavirus and the preference of using a touchless way for businesses to carry out transactions in person.

Peer-to-peer payment services such as PayPal, Venmo, or Zelle are becoming the norm to pay a coworker for lunch or send money to a friend. Scammers have found a way to use these apps, using variations on old schemes tailored to the new technology.

The Risks of Peer-to-Peer (P2P) Payment?

Friends exchange money in coffee shopPeer-to-peer payment services allow users to send money to each other from an app on their mobile device. These services use a linked bank account or credit or debit card. However, unlike more traditional banking systems, many payment apps will not shoulder the cost of fraud. This means that someone who paid scammers using one of these services may not be successful in getting the company to reimburse them for their losses to the fraud.

BBB advises consumers to look out for the following scams when using peer-to-peer payment apps:

Fraudulent payment methods
In one common scheme, scammers will connect a stolen credit card to a payment app. They then look for people selling big ticket items (such as a computer, tablet, or car) online. The scammers will offer to pay for the product using the app. Once the seller accepts the payment and sends the item, they’ll soon discover that the payment sent is not to a legitimate buyer, and the money is removed from his or her account. The seller is then without either the item or the money.

Canceled payments
Some digital wallet apps take several days to process a transaction. Scammers take advantage of this by setting up transactions and canceling them before they go through. By the time victims realize the money isn’t coming, the scammers are long gone.

Overpayment for an item
Fraudsters may try to convince you that you’ve been paid more than you were owed. For example, a spoofed email says that you’ve been paid $3,000 for a camera you listed at $300! The sender asks you to ship the camera in addition to the extra $2,700 you were “paid” by mistake. In this example, the scammer wants your camera AND your money. In another version of this scheme, scammers overpay for items with a stolen credit card.

Fake official emails
Many fraudsters send spoofed emails warning that an account is about to be suspended, and that the account holder must enter their password in a spoofed webpage. Generally, payment app vendors will never ask you to enter your password unless you are on the login page.

Protect yourself when paying with a money transfer app by following this advice:

Use money transfer with friends
Protect yourself from scams by only using money transfer apps for their intended purpose — sending money to people you personally know.

Enable additional security settings
Check the account settings to turn on additional security measures, such as multi-factor authentication, requiring a PIN, or using fingerprint recognition like Touch ID.

Link the money transfer app to a credit card
As with many other purchases, using a credit card provides additional security if you don’t receive the goods or services paid for. Linking to a debit card or directly to a bank account does not provide added protection.

Use a strong password or 2FA on your phone
In the unfortunate event that your cell phone is lost or stolen, be sure criminals can’t access your payment apps. Secure your phone by choosing a strong password, biometric security devices or a two-factor authentification security available on many smartphones.

Check the account after a transaction to be sure that the money transferred
If you do use a peer-to-peer payment app to sell something, be aware that it takes a few days for some payments to transfer. Confirm the money transfer before sendind the sold item. If you have any concerns that a payer didn’t really send the money, be sure to check your account directly.

Have the right phone number for customer service
Avoid searching online for a customer service phone number. Instead, go directly to the company’s website. Some tech companies do not have public numbers and don’t accept phone calls.

Finally, consider whether a chosen method of payment is right for the risks that might be associated with each transaction. When you don’t personally know the person, and/or haven’t confirmed it really is the person you think it is, or haven’t yet received a delivery or other purchase, select a payment method that offers protection. When a payment service advertises itself as “safe” read through all of the details to find out what it really means – it’s not always what you think. It is especially important to know that if your payment method is attached to a bank account or credit card unauthorized access might drain that account, or with overdraft protections, even drain multiple accounts.

For More Information

Go to BBB Scam Tracker to report a scam.

Learn more about how to protect yourself with using Venmo on their website. Check this article on the Federal Trade Commission website for more tips and advice.

Content courtesy of the BBB.

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