Using Peer-to-Peer Payment Systems

Peer-to-Peer (P2P) payments systems have become a popular way to transfer money. The oldest form of a P2P system is PayPal. However, newer competitors have joined the market including Venmo, Zelle, Apple Pay, Cash App, and others. While they may be convenient, it is important to understand these transactions and only use them in the most appropriate way.

P2P systems allow users to send money to each other through mobile apps linked to a bank account or card. It is still a cash transaction and comes with similar risks. While most systems do encrypt your financial information, there is still the potential for hacks and scams. Each system has its own security procedures and fraud policies, and you should review these before signing up.

These systems were intended for payments between friends and family who know and trust one another. They are not the way to shop online and should not be used to pay for goods or services, as there is very little fraud protection. Consumers need to understand that once a payment is sent, it is gone. If something goes wrong with the payment, it will be very difficult to get it back.

In addition to the potential problems with mishandled payments, there may also be privacy and security concerns. Venmo, for example, has an automatic social media feed which anyone can see and know when you make any transfers. Consumer Reports has more information about privacy and data concerns with P2P apps.
There are steps that you can take to make using these apps more secure:

1. Always opt-in to the strongest security. Most systems offer higher levels of security through different settings. It is worth it to take the extra steps necessary to take advantage of them.
2. Sign up for multi-factor authentication if offered.
3. Only send money to people you personally know.
4. Make sure you have all of the recipient’s information correct before you send any money. Misdirected money is difficult to claw back.
5. Do not use these services for business purposes or for purchasing products or services.