Peer-to-Peer Payment Apps

The Risks of Using Peer-to-Peer Payment Apps
September 4, 2024

What is a Peer-to-Peer or Person-to-Person (P2P) Payment App?

It’s an app that lets you send money to and receive money from another person using a mobile device that is linked to a bank account or card. The transactions are conveniently  and quickly made– from splitting the cost of lunch with a friend to lending money to a family member – right from your phone. Some of the most popular P2P apps include Apple Cash, Cash App, Venmo, Zelle, Meta (Facebook) Pay and PayPal.

Everyone loves quick and easy and these apps can move money with a few clicks. But, there are some risks to be aware of when using them.

Fraud and Scams
Fraudsters may pose as legitimate contacts to trick you into sending money – and if a hacker gains access to your account, they can make transactions with the same apps using your funds.  They also like to hang around Facebook Marketplace or use social media ads to sell goods or services that you will never receive after payment.

From an OFCU member: "I saw something on Facebook Marketplace that I wanted to purchase. The seller would only accept Facebook pay so I sent him $300.00 for the item. As soon as the funds were sent, he blocked me from messaging and I could not find any information on this person. I contacted Facebook and they were unable to help."

In this scenario, OFCU  was not able to recover the funds for this member. As the payment app, Facebook (Meta) Pay made the transfer as requested. That’s an important point to remember – it was a transfer of funds authorized by the member, not a debit card purchase. OFCU could not dispute the transaction. Unfortunately, this member lost $300.00.

 Tips:

• Only send money to people you know and trust.
• Research any companies/products in ads that look suspicious.
• If you don’t automatically receive a notification each time a transaction is made, check your settings and opt to do so.

Lack of Protection
Unlike traditional bank or credit card payments, P2P apps don’t often provide any  protection if something goes wrong. Most don’t offer a way to reverse transactions that have been made in error, and a lack of customer support can make getting your money back or resolving issues difficult.

Tips

• Before using a P2P app, review its terms of service and understand the protections it offers (or doesn’t).
• Keep records of transactions and communications.

From an OFCU employee: I spoke to a member who was renting a camp, and the only way the renters would accept payment was through Venmo or PayPal. The member wanted to know how to set this up. I informed her that this was not something I could help her with and explained that if she made this transfer, she would have no recourse if the rental wasn’t what was promised. We then discussed safer ways for her to make payment and she was thankful. She had no idea how P2P payment methods worked.

Accidental Payments
It’s easy to make mistakes when using P2P payment apps. If you accidentally send money to the wrong phone number or email or send more money than you intended, recovering those funds may be impossible.

Tips

• Double-check your recipient’s information and the amounts before submitting a payment.
• Some apps offer an additional step to review and catch errors before finalizing the transaction.
• Try sending a small amount first – like a penny or a dollar. Confirm the person you intend to send it to receives it before transferring the entire amount.

In conclusion, peer-to-peer payment apps are easy and convenient, but they do come with risks that users need to be aware of.  Know how they work before using and always be cautious – this is your money after all.  You'll find additional information about peer-to-peer payment apps here and from our partner, Banzai here.