Using cash apps like Venmo may be convenient but fraud...

Using cash apps like Venmo may be convenient but fraud in payment apps is a growing problem and remains substantially higher than fraud in credit or debit cards, an expert says. Credit: Venmo

During the pandemic, increasingly people are using cash apps. That uptick hasn’t been missed by scammers who are seizing the opportunity to line their pockets.

In a recent survey of 1,000 Americans by SimpleTexting, a Miami Beach provider of text messaging software, 81% of those polled said they’re using cash apps more since the pandemic. The big news though, is that 49% also said they have been targeted by a scam on Venmo or other cash apps.

"Fraud in payment apps is a growing problem and remains substantially higher than fraud in credit or debit cards. In many cases attacks are not technical, but based on social engineering intended to trick consumers into sending funds as partial or advanced payment for bogus goods or services," says Paul Rohmeyer, a cybersecurity expert and associate professor at Stevens Institute of Technology and Hoboken, New Jersey.

What can go wrong

He explains one typical scheme. Someone shopping for a car connects with a supposed seller via a fraudulent web listing on a site such as Craigslist. Seller tells buyer they need an immediate deposit to hold the vehicle and suggests the use of a payment app. Buyer sends a few hundred dollars and feels safe because the total sales price is much higher, perhaps in the thousands. "The problem is there’s no actual vehicle and the listing, seller, and deposit money all vanish soon after funds are sent. The fraudster then transfers the stolen funds out of the payment app and perhaps even deletes their account to impede investigation or the recapture of funds," Rohmeyer says.

Understand the risks

"Even if your bank advertises a specific app, they’re not managing your money through the app itself. Payment apps are third-party sites and as such, typically have less consumer protection and safety measures in place than traditional financial institutions," says Nishank Khanna, chief financial officer of Clarify Capital in Manhattan.

When you use payment apps, you’re increasing your risk because you simply do not have the level of support and comprehensive protection large banks offer, he says.

The bad news, "If you’re using a payment app and somebody steals from you, you’re probably not going to get that money back," Khanna says.

One of the biggest glaring problems (especially with Cash App) is the fact that it’s incredibly easy for a user to set up an account, says Nick Epson, a copywriter with Blue Label Labs, an app developer in Manhattan. "There is little in the way of authenticating an account holder as a real person so it’s easy for fraudsters to create an account — or seven — which makes it difficult to trace. Further, in-app transfers for virtually every app out there occur so quickly, that it makes it difficult for the platform to respond in a timely fashion."

How best to protect yourself?

"Only pay people or businesses you know and have verified as part of a purchase or fund transfer you initiate. Don’t respond to unsolicited emails or text messages about sending money directly through a payment app. For payment requests, log into your payment app to see if there is a direct request. If not, it is likely a scam," says Eva Velasquez, president and CEO of the Identity Theft Resource Center in San Diego.

Look for red flags like suspicious activity in your financial accounts. If you’re victimized report it to the mobile payment app. Says Velasquez, "It will help the company identify attacks. If you provide information to what turns out to be a scam, immediately change your account password and scan your device with antivirus software."

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