Have you ever been out to dinner with friends and when the bill arrives realize you accidentally left your wallet at home? Or stop at a coffee shop that only accepts cash and you don’t have any on you? We’ve all been there! Luckily, there are payment systems or money transfer apps like Venmo and PayPal that make splitting bills or making payments easy and painless. Peer to peer payments, or P2P payments, are transactions that can be used for anything from splitting a dinner bill between friends to paying the landlord rent. These payments allow the transfer of funds between two parties using their individual banking accounts or credit cards through an online or mobile app. They are becoming more popular among people of all ages as more and more of these types of platforms continue to emerge.
How Peer to Peer Payments Work
- Peer to peer payment accounts are typically simple to set up. For whichever platform you choose, you sign up for an account and then link your bank account or credit or debit card to it. Some apps may require further verification information and passwords to increase security, but once your account is set up you can find other users by their username, email or phone number.
- Sending money is usually just a couple of clicks away after you get set up. You choose who you are sending money to, the amount of the transaction, add a reason for the payment if you desire, then submit the payment. Depending on which P2P payment service you use, the time it takes for money to transfer varies. It can range anywhere from a few seconds to three business days. Many platforms keep the money stored in the app until you manually release the money into your personal banking account.
Common Peer-to-Peer Payment Apps
a. Venmo – a mobile payment service owned by PayPal. Venmo account holders can transfer funds to others via a mobile phone app; both the sender and receiver have to live in the U.S.
2. Facebook Pay – the process is simple, whether you send money to a friend on the apps you already use including Facebook, Messenger, Instagram or Portal.
3. Square, Inc. – a financial services and digital payments company that allows users to transfer money to one another using the Cash App for mobile phones.
4. Zelle® – a digital payments network that uses an email address or mobile phone number to quickly, safely and easily send and receive money with people, regardless of where they bank.
5. Apple Pay® – a mobile payment and digital wallet service by Apple Inc. that allows users to make payments in person, in iOS apps, and on the web using Safari. Apple Pay works with select iPhone®, iPad® and Apple Watch® products.
7. Popmoney® – a quick and convenient solution for sending, receiving and requesting money from your friends and family. Lakeland offers Popmoney as well as Digital Wallet to make contactless purchases with your smartphone or smartwatch.
The Potential Security Risks of P2P Payments
For the most part, P2P services are secure, but there are always risks involved when you send or receive money online. One of the concerns for users is that it can be difficult to get refunded after a fraudulent or mistaken transaction, especially if you use the funds from the app and not from your bank. Many P2P payment providers use precautions to lower these security risks, from passwords and PINS to transaction notifications that help confirm whether users did indeed send money. Here are the top P2P frauds followed by tips to avoid becoming a victim.
- What are P2P app frauds?
- The victim purchases a product or service with a P2P payment app, the money is taken out of the account, but the service or product is never received.
- Fraudsters call victims and impersonate fraud departments while asking for their personal information including credit and debit card numbers to create P2P app accounts with the stolen information.
- Scammers may ask to use a victim’s phone, stating it’s an emergency. While pretending to send a text, they go to a P2P app and transfer funds.
- Highly skilled fraudsters can hack into a victim’s phone and gain access to apps where the username and password are stored.
- How to Prevent Becoming a Victim of P2P Payment Fraud
- Never send money to someone you’ve never met in person.
- Confirm the username or phone number of the person you are sending money to.
- Always opt in for multi-factor authentication like a PIN or facial recognition.
- Before using a P2P app, search for the customer service information you’ll need if you have a dispute.
- Make sure your P2P apps are up to date, so they always contain the latest protection and security features. Hackers exploit security vulnerabilities sometimes faster than the security pros can plug them. Pro tip: Make sure auto-updates is turned on for all your devices.
- Set up transaction alerts so you are notified immediately anytime your account is used. Consider linking your credit card to the P2P app instead of your debit card.
- Do not let strangers borrow your phone.
- If you suspect fraud, freeze your card immediately and submit a complaint at fraud.org.
How to Get Help
- If you believe you were scammed, you should contact your P2P company. Depending on the situation and the company's policy, they may be able to help.
- If your P2P service isn’t able to help you, there are other recourses:
- Report it to the Better Business Bureau (BBB). Companies accredited by the BBB including Facebook, Square, Venmo, and Zelle's operator, Early Warning Services are required to respond to consumer complaints.
- Submit a complaint with the Consumer Financial Protection Bureau's Consumer Complaint Database. The bureau's policy is to report issues to the companies for them to resolve.
- If your payment was funded by a credit card, you may be able to get your card issuer to refund it. By law, cardholders who have made payments in error are liable for no more than $50.
If you believe you have fallen victim to fraud or your personal information may be compromised, contact local law enforcement, your financial institution or credit card company and The Federal Trade Commission (FTC). Visit the Lakeland Bank Identity Theft Center for tips and tricks to keep your personal information protected, read our educational blogs on the topic of Privacy & Cybersecurity or contact us at 866-224-1379. We’re here to help!