Could we borrow $4.5 billion? No? Why not – that’s what consumers are giving peer-to-peer (P2P) payment app scammers!
Reports indicate a significant rise in fraud involving P2P apps like Venmo, Zelle, and PayPal: up 31% from last year, making it the #1 “scam to be aware of” according to Security.org.
It’s a perfect storm. PYMNTS claims that consumers are increasingly expecting their primary financial institutions to offer P2P capabilities and if a bank fails to offer that service, the customer moves on to one of its competitors. What creates the lightning in this storm is the use of generative voice and video AI – a method which makes scams harder to detect.
Vulnerability to these scams runs across demographics: Younger generations, such as Gen Z and Millennials, are particularly vulnerable, with 28% of P2P payment users having been scammed. Seniors are also targeted, with over 101,000 complaints of scams against individuals aged 60 and older in 2023, resulting in losses exceeding $3.4 billion.
For now, sadly, most of the consumers who lose money via a cash app scam are left to pound sand. The Feds are reportedly considering requiring banks to cover Zelle scam losses, but with the speed that Capitol Hill moves, don’t hold your breath.
The setups
When Security.org’s fraud analysts started sorting through the setups of these scams, they found ten that consumers said they were taken in by:
When it comes to what platform – PayPal, Zelle, or Venmo – is used most, P2P app users most often experience attempted scams on PayPal. However, this could be due to the sheer volume of PayPal's 400 million users.
Preventing peer-to-peer payment app scams
It is safe to use peer-to-peer payment apps as long as you know the warning signs of scams. Here’s what Security.org says are the ones most used these days:
Before sending money, verify a recipient's identity using phone numbers, email addresses, or QR codes.
Activate all identity verification options available in an app. The recipient of any money transfers must undergo various steps to pass security.
When paying a new recipient for the first time, send a $1 test payment and confirm the correct person received it. This step is even more critical when transferring large amounts of money.
Move the money you receive in your P2P app to your bank quickly so that Federal Deposit Insurance Corporation (FDIC) insurance kicks in.
Monitor your P2P accounts routinely. If fraud occurs, you may catch it early enough that the impact on you is minimal.
Close accounts and delete all P2P apps you do not use.
“While P2P apps are beneficial, you shouldn’t use them for all types of transactions since fewer protections are in place in case of fraud,” the analysts told ConsumerAffairs. “Instead, use credit or debit cards with built-in purchase protections whenever possible.”