Are Cash Transfer Apps Safe to Use? Here’s What Your Family Needs to Know

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cash appsI can’t recall the last time I gave my teenage daughter cash for anything. If she needs money for gas, I Venmo it. A Taco Bell study break with the roommates? No problem. With one click, I transfer money from my Venmo account to hers. She uses a Venmo credit card to make her purchase. To this mom, cash apps may be the best thing to happen to parenting since location tracking became possible. But as convenient as these apps may be, are they safe for your family to use?

How do they work?

The research company, eMarketer, estimates that 96.0 million people used Peer-to-Peer (P2P) payment services this year (that’s 40.4% of all mobile phone users), up from an estimated 82.5 million last year.

P2P technology allows you to create a profile on a transfer app and link your bank account or credit card to it. Once your banking information is set up, you can locate another person’s account on the app (or invite someone to the app) and transfer funds instantly into their P2P account (without the hassle of getting a bank account number, email, or phone number). That person can leave the money in their app account, move it into his or her bank account, or use a debit card issued by the P2P app to use the funds immediately. If the app offers a credit card (like Venmo does), the recipient can use the Venmo card like a credit card at retailers most anywhere. 

Some of the more popular P2P apps include Venmo, Cash App, Zelle, Apple Pay, Google Wallet, PayPal.me, Facebook Messenger, and Snapcash, among others. Because of the P2P platform’s rapid growth, more and more investors are entering the market each day to introduce new cash apps, which is causing many analysts to speculate on need for paper check transactions in the future.

Are they safe?

While sending your hard-earned money back and forth through cyberspace on an app doesn’t sound safe, in general, it is. Are there some exceptions? Always. 

Online scam trends often follow consumer purchasing trends and, right now, the hot transaction spot is P2P platforms. Because P2P money is transferred instantly (and irreversibly), scammers exploit this and are figuring out how to take people’s money. After getting a P2P payment, scammers then delete their accounts and disappear — instantly

In 2018 Consumer Reports (CR) compared the potential financial and privacy risks of five mobile P2P services with a focus on payment authentication and data privacy. CR found all the apps had acceptable encryption but some were dinged for not clearly explaining how they protected user data. The consumer advocacy group ranked app safety strength in this order: Apple Pay, Venmo, Cash App, Facebook Messenger, and Zelle. CR also noted they “found nothing to suggest that using these products would threaten the security of your financial and personal data.”

While any app’s architecture may be deemed safe, no app user is immune from scams, which is where app safety can make every difference. If your family uses P2P apps regularly, confirm each user understands the potential risks. Here are just a few of the schemes that have been connected to P2P apps.

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Potential scams

Fraudulent sellers. This scam targets an unassuming buyer who sends money through a P2P app to purchase an item from someone they met online. The friendly seller casually suggests the buyer “just Venmo or Cash App me.” The buyer sends the money, but the item is never received, and the seller vanishes. This scam has been known to happen in online marketplaces and other trading sites and apps.

Malicious emails. Another scam is sending people an email telling them that someone has deposited money in their P2P account. They are prompted to click a link to go directly to the app, but instead, the malicious link downloads malware onto the person’s phone or computer. The scammer can then glean personal information from the person’s devices. To avoid a malware attack, consider installing comprehensive security software on your family’s computers and devices.

Ticket scams. Beware of anyone selling concert or sporting event tickets online. Buyers can get caught up in the excitement of scoring tickets for their favorite events, send the money via a P2P app, but the seller leaves them empty-handed.

Puppy and romance scams. In this cruel scam, a pet lover falls in love with a photo of a puppy online, uses a P2P app to pay for it, and the seller deletes his or her account and disappears. Likewise, catfish scammers gain someone’s trust. As the romantic relationship grows, the fraudulent person eventually asks to borrow money. The victim sends money using a P2P app only to have their love interest end all communication and vanish.  

P2P safety: Talking points for families

Only connect with family and friends. When using cash apps, only exchange money with people you know. Unlike an insured bank, P2P apps do not refund the money you’ve paid out accidentally or in a scam scenario. P2P apps hold users 100% responsible for transfers. 

Verify details of each transfer. The sender is responsible for funds, even in the case of an accidental transfer. So, if you are paying Joe Smith your half of the rent, be sure you select the correct Joe Smith, (not Joe Smith_1, or Joe Smithe) before you hit send. There could be dozens of name variations to choose from in an app’s directory. Also, verify with your bank that each P2P transaction registers.

Avoid public Wi-Fi transfers. Public Wi-Fi is susceptible to hackers trying to access valuable financial and personal information. For this reason, only use a secure, private Wi-Fi network when using a P2P payment app. If you must use public Wi-Fi, consider using a Virtual Private Network (VPN).

cash apps

Don’t use P2P apps for business. P2P apps are designed to be used between friends and include no-commercial-use clauses in their policies. For larger business transactions such as buying and selling goods or services use apps like PayPal. 

Lock your app. When you have a P2P app on your phone, it’s like carrying cash. If someone steals your phone, they can go into an unlocked P2P app and send themselves money from your bank account. Set up extra security on your app. Most apps offer PINs, fingerprint IDs, and two-factor authentication. Also, always lock your device home screen.

Adjust privacy settings. Venmo includes a feed that auto shares when users exchange funds, much like a social media feed. To avoid a stranger seeing that you paid a friend for Ed Sheeran tickets (and won’t be home that night), be sure to adjust your privacy settings. 

Read disclosures. One way to assess an app’s safety is to read its disclosures. How does the app protect your privacy and security? How does the app use your data? What is the app’s error-resolution policy? Feel secure with the app you choose.

We’ve learned that the most significant factor in determining an app’s safety comes back to the person using it. If your family loves using P2P apps, be sure to take the time to discuss the responsibility that comes with exchanging cash through apps. 

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