Money transfer apps including Venmo, Cash App and PayPal have surged in popularity during the pandemic as people seek safe, contactless ways to send and receive money. Unfortunately, many people don't understand the limitations of these payment platforms or how they can put someone's finances at risk.
Like over-the-counter medicines, payment apps can be safe when used as directed – but people often don't read the directions, says James Lee, chief operating officer for the Identity Theft Resource Center, a nonprofit that provides victim assistance and public education about identity theft.
“You've got to make sure that you're doing the right things,” Lee says. “Because if there is a weak point in these kinds of services, it is that your behavior may make it less secure.”
Mobile payment apps let people transfer money to others quickly, often for free. Some payment systems are available via social media, email accounts or other apps.
Apps such as Venmo and Cash App are known as “peer-to-peer” platforms because they're designed to facilitate transfers among friends and family. People can search for each other using email addresses, phone numbers or user names, and money is usually transferred within one to three days. Some let users choose an instant transfer for a small fee.
Other systems, including Samsung Pay, are meant for business transactions, such as paying a merchant online or at a register. A few options, including Apple Pay, Google Pay and PayPal, can be used for both.
Many people assume their payment apps offer protections similar to those of credit or debit cards, but that may not be the case, says Kathy Stokes, director of fraud prevention programs for AARP.
For example, about half of U.S. adults incorrectly believe that they could reverse a payment made through a peer-to-peer platform, according to an AARP survey conducted in November. If you change your mind, have a problem or make a mistake – input the wrong email address or phone number, for instance – you're usually at the mercy of the recipient.
“The only thing I can do is plead for that person to be ethical and send the money back to me,” Stokes says.
Payment apps usually protect you against unauthorized transactions, but not necessarily against other fraud – and that can be true even if you link to a debit or credit card that otherwise would offer such protections. Many peer-to-peer systems specifically warn people not to pay individuals or businesses they don't know, Stokes says.
“If you use (a peer-to-peer app) to buy those great-priced tickets off of Craigslist, and you never get those tickets, you're out the money,” Stokes says.