Watch out for problems with peer-to-peer payment apps like Venmo and Zelle

I’ve written about it before, but it’s worth highlighting again.

A Consumer Reports evaluation of peer-to-peer or P2P payment apps found that users could lose money to fraud or scams and face privacy risks because app providers may share their personal information widely and it’s difficult for users to delete their data.

More than half of Americans, 64 percent, use a P2P payment app for payments to and from individuals, including four out of five, 81 percent, of the 18 to 29 age group, a Consumer Reports survey found. Two out of five Americans, 40 percent, say they use P2P payment services at least once a month; nearly one in five, 18 percent, use them at least once a week.  

The survey also found that for those who use P2P payment services at least once per week, 12 percent had sent money to the wrong person and 9 percent had been the victim of a scam.

In 2022, Consumer Reports looked at the safety, privacy, and protections of Apple Cash, Cash App, Venmo and Zelle by reading documents on company websites and apps. It found that all four P2P payment apps:

• Don’t fully reimburse customers when users when fraud occurs.
• Collect a large amount of personally information about their users, may share it with undisclosed companies for sometimes unknown or vague purposes, and make it difficult for users to delete their own data.
• Have to meet confusing conditions to ensure their funds held in the payments portion of the app are protected by Federal Deposit Insurance Corp. insurance. Users could lose money if they haven’t completed additional app or product registration requirements and the P2P companies suffer financial losses or declare bankruptcy. 
• Make it difficult for users to track changes to the terms of service and require users to give up some legal rights to resolve disputes. Users must resolve claims and disputes on an individual basis, mostly through binding arbitration or small claims court.

Consumer Reports has urged policymakers to strengthen consumer protections for P2P payment app users, but is also calling on providers not to wait for regulators to act and to take more aggressive steps themselves to minimize user risks, Delicia Hand, director of financial fairness for Consumer Reports said in a statement.

Consumer Reports recommends these steps consumers can take to help minimize risks:

• Confirm the recipient’s identity before sending money.
• Send a $1 test payment and confirm it was received by the right person.
• Move money from your P2P account to your bank account as soon as possible.
• Turn on all identity verification options available in the P2P app.
• Frequently monitor your P2P accounts.
• Delete any P2P app you don’t use. 
• Opt out of binding arbitration if possible.

So protect yourself today by following Consumer Reports’ guidance. You don’t want to lose money needlessly when money is so tight these days for a variety of reasons.