Summary:
Mobile payment apps like Cash App, Venmo, and Zelle offer the ultimate convenience for transferring money. Unfortunately, thieves love these apps too, according to a recent warning from the Manhattan D.A.’s office. Here are some practical steps you can take to guard against theft and fraud in payment apps.
Fraud claims related to payment apps have tripled in recent years
It’s never been easier to send payment to a person or company, thanks to mobile apps like Cash App, PayPal, Venmo, and Zelle. The speed, convenience, and reliability of these apps make them a popular replacement for the old methods of cash, checks, and credit cards. A 2023 survey by NerdWallet found that 80% of Americans use mobile payment apps; half say they use these apps at least once a week.
With all this popularity and convenience, however, comes a greater likelihood of fraud and financial loss. While the major payment apps have security measures in place for fraud prevention and detection, the risk remains.
Authorities warn of an increase in thefts from payment apps
Earlier this year, the Manhattan District Attorney’s Office sent a letter to the makers of Venmo, Cash App, and Zelle, demanding stronger consumer protections in response to a surge in thefts from payment apps not only in New York but in cities across the country. The letter stated that fraud claims from the use of payment apps tripled between 2020 and 2022, resulting in financial losses of hundreds of millions of dollars.
The D.A.’s Office noted that the offenses typically involve “an unauthorized user gaining access to unlocked devices and draining bank accounts of significant sums of money, making purchases with mobile financial applications, and using financial information from the applications to open new accounts.”
These crimes can take different forms: “In some instances, the fraudster asks to use an individual’s smartphone for personal use, and then quickly sends large amounts of money to themselves through the victim’s financial application. In other instances, the offender asks for a donation for a specific cause, offers to transfer the money directly from the victim’s smartphone, and then transfers significant funds to the fraudster’s own account.” In extreme cases, the letter continued, some criminals have gained access after physically assaulting or incapacitating victims.
The D.A.’s Office recommended that the app companies implement specific solutions for preventing unauthorized access and limiting damages from theft. These include enhancing login security, imposing lower monetary limits on total daily transfers, requiring wait times for large transactions, and asking for confirmation when unusual activities occur.
For more information, see this article from Newsweek.
Not just mobile payment apps
This article is mostly aimed at mobile payment apps, but there are plenty of payment apps for your computer, either installed or web-based. For example: Apple Wallet, Google Wallet, Zell, PayPal, Payoneer, Western Union, QuickBooks, Skrill, Remitly, Xero, Wise, FreshBooks, etc.
How to protect your finances when using payment apps
While consumers might eventually get better protection through new security measures, there are steps you can take right now to minimize the risk of fraud or theft in mobile payment apps.
Use biometric authentication. Beyond entering a passcode to unlock your phone, it’s best to set up a biometric authentication step that requires the phone to confirm your identity by scanning your face or fingerprint. (On an iPhone, you can enable Touch ID and/or Face ID, while on Android devices you can enable fingerprint scanning.) This way, even if a thief or fraudster gets their hands on your phone, they can’t unlock it to get into your payment app.
- Enable additional protection for stolen devices: If you have an iPhone with iOS 17.3 or later, you can also help prevent thieves from accessing your payment apps by enabling Stolen Device Protection. This adds a security delay “designed to prevent a thief from performing critical operations so that you can mark your device as lost and make sure your Apple account is secure,” according to Apple. To use it, you’ll first need to activate Face ID or Touch ID.
- Pay closer attention to the app itself: Choose the strictest privacy and security settings within a payment app. Carefully review your account on a regular basis for suspicious activity, and add notification alerts for new transactions. Make sure you’re using the latest version of the app, as developers continually add new security upgrades. And if there’s a payment app account that you’ve set up but are no longer using, simply delete it.
- Know exactly who you’re sending money to: Your device doesn’t need to be stolen for fraud to occur. Be careful about transferring funds to any person or organization you haven’t verified. Do your research on the other party, because when an unknown vendor, new friend, or supposed charity asks you to send money, they might be running a scam.
- Hold onto your phone: This should go without saying, but be extremely cautious about willingly handing your unlocked phone to a stranger, even for a brief moment. A skilled thief can access your payment app and transfer funds to themselves in a matter of seconds.
Wi-Fi, Bluetooth, and NFC
Remember that you don’t want to do any mobile banking on an unsecured network. Don’t use the guest Wi-Fi at Starbucks, McDonald’s, or the Airport to access your banking information or check your credit card balance. Bluetooth is great for connecting devices like your earbuds, speakers, or even your glucose meters. However, keep in mind that when you have Bluetooth turned on, it is constantly scanning for devices, you can accidentally connect to the wrong device and share information. NFC or Near Field Communication can be used for mobile payments, but also can be used to steal data from a mobile device. Best practice is don’t have NFC turned on until you need it. Keep track of your saved Wi-Fi SSIDs, it is a good idea to delete ones you don’t use, like the hotel Wi-Fi you stayed in six months ago.
In Closing
Know that theft or unauthorized payments can affect all aspects of your life, including your credit report and credit score. As I have mentioned in previous emails, keep an eye on your credit reports. Also, there are services out there that can help keep you protected. Method Studio offers Allstate Identity Protection.