Protect Your Money: How to Help Avoid Peer-to-Peer (P2P) Payment Fraud

Quick insights

• Peer-to-peer (P2P) payment apps allow users to make quick, simple mobile payments to friends and other trusted parties.
• Scammers might leverage the speed and convenience of P2P platforms to defraud unsuspecting victims.
• P2P payment scams can involve phony romantic prospects, fraudulent investment schemes and more.

At a glance, peer-to-peer (P2P) payment apps like Zelle^{®Golden Source: zelle-z022024} may seem ideal for simple financial exchanges. The technology isn’t without its risks. Its speed and convenience have made this type of platform an attractive tool for scams. Read on to learn how they happen to help protect yourself from this type of fraud.

How do P2P payment apps work?

Users on a P2P payment app typically connect bank accounts or payment cards to their accounts. This allows users to exchange money on the P2P platform, seemingly in seconds. Money received can often be stored in a balance and transferred to a connected bank account within several days. Otherwise, the balance can be used to send money later.

It’s common to use the mobile app version of a P2P platform, but most can be accessed through a web browser on a computer too.

Types of P2P payment scams

A P2P payment is like a digital version of cash exchange. The convenience of exchanging money on P2P payment platforms can be used maliciously to dupe users into parting with their cash. In general, bad actors manipulate and deceive unsuspecting users into sending money.

Examples include:

• Imposter scams: A bad actor poses as someone trustworthy—an IT specialist, friend or romantic interest, for example—to persuade someone to send money on a P2P platform. This is a common P2P scam because there are many ways to play on a victim’s emotions.
• Overpayment scams: In these cases, a bad actor might “overpay” for something the user is selling, usually with a bad check. The scammer then asks the seller to refund the difference with a P2P payment.
• Investment scams: A bad actor tricks the user into sending money for an investment scheme that doesn’t exist. The scammer may promise unrealistic returns on the intended victim’s investment that entice a victim to part with their money.

While any P2P payment scam can vary in approach, they all share the same goal: to deceive someone and take their money.

Risks of P2P payment technology

P2P platforms may not offer protection for payments that users authorize. This is a fundamental risk of this type of technology. If you’re the victim of a scam, the P2P service might not give you any solutions that return money you’ve sent.

Tips for avoiding P2P scams

While P2P technology is convenient, using it safely requires certain precautions. Above all, it may help to equate P2P transactions with paying someone in cash: Once you send money on a P2P app, you can’t retrieve it.

Here are several tips to prepare yourself to identify P2P payment scams:

Send money to parties you know and trust

Only send money to people and organizations you know and have verified before. When you’re in person, verifying that you’re sending money to the right user can be easier. The person can confirm their profile information on a P2P mobile app before you authorize the payment.

Stick to trusted phone numbers

Scammers often attempt to impersonate someone you know. For example, a scammer may message you on social media under a recognized name of a friend, asking for money. If the request is odd, and you don't recognize the profile, then wait a minute. Verify that your friend sent the message through another established connection, like a phone call.

Scrutinize unusual or urgent requests

Scammers often attempt to create a sense of urgency for their intended victim by inventing fraudulent tales of emergency situations. If a story seems unnecessarily urgent, be suspicious that you are dealing with a fraudster.

Avoid offers that seem too good to be true

Claims of enticing prizes, such as lavish vacations or lottery wins, can actually be predatory scams. A P2P payment may be requested to claim the prize. But if you receive an offer that seems too good to be true, alert the P2P platform support team and don’t send any money.

Implement security settings

Take advantage of any P2P app security settings that are available. Features like multifactor authentication and biometric screenings can help protect your information. Fraud alerts may also come in handy if you think your P2P login information has been obtained by a fraudster.

Avoid making payments through unsecure networks

Unsecured Wi-Fi networks—especially in public—are just that: unsecure. Try not to be on one of these when sending a P2P payment. Unsecured internet can be an open door for tech-savvy bad actors to access personal and account information transmitted across the network.

In conclusion

Whether you’re splitting the bill at a restaurant or paying half of a hotel reservation, P2P apps help users to send and receive money. Remember, money sent to the wrong recipient is rarely, if ever, recovered. Scammers can use a variety of tactics to deceive you into sending money on P2P payment platforms. It’s fast and convenient, which can make fraud difficult to recognize before it’s too late.

If you believe you’ve fallen victim to or been targeted by a P2P payment scam, report the incident on the P2P app if possible, to your financial institution and to the appropriate authorities.