NEW YORK–A growing number of everyday Americans are being scammed on payments apps. During the pandemic people have flocked to instant payments apps such as Cash App, Venmo and Zelle as consumers have seen their financial institution branches close and they’ve turned increasingly to online commerce.
“But many people are unaware of how vulnerable they can be to losses when they use these services in place of banks,” reported the New York Times. “Payment apps have long had fraud rates that are three to four times higher than traditional payment methods such as credit and debit cards, according to data from the security firms Sift and Chargeback Gurus.”
The Times noted the fraud appears to have surged in recent months as more people use the apps. At Venmo, daily users have grown by 26% since last year, while the number of customer reviews mentioning the words fraud or scam has risen nearly four times as fast, according to a New York Times analysis of data from Apptopia, a firm that tracks mobile services.
“Driving the surge is the apps’ ease of use,” the Times stated. “People need just an email address to create a Cash App account and a phone number to make a Venmo account. That simplicity has made it seamless for thieves to set up accounts and to send requests for money to other users, something that was not possible with traditional bank payments.”
Less Time to Detect Fraud
The Times further reported the apps’ instantaneous transactions — compared to the two or three days needed for a standard bank transfer — have also meant that Venmo and Cash App have less time to detect whether a transaction is fraudulent.
“Fast payments equals fast fraud,” Frank McKenna, the chief fraud strategist for the security firm PointPredictive, told the Times, adding the apps are “ripe targets.”
The Times noted Square, PayPal and Zelle do not disclose the rate of fraud on their apps. “PayPal takes steps to “limit potential fraudulent activity and mitigate any customer impact,” a spokeswoman told the Times, but she did not address whether it had seen more cases of fraud.
Of all the payment apps, fraud issues have been particularly acute for Square’s Cash App, according to the Times. As the number of people using the app daily has grown 59% over the last year, the number of reviews about it that mention the words fraud or scam has risen 165%, according to Apptopia data quoted by the Times.
The Better Business Bureau also told the New York Times it had received more than twice as many complaints about Cash App as Venmo over the past year. That is significant given that Venmo has twice as many users as Cash App, according to Apptopia, the Times said.
No Phone Support
The report explained Cash App has been more vulnerable to fraud partly because of how it handles customers, security experts told the Times. Square has until recently offered only email support for the app, not a phone number for its customers to call. That led some customers to fall for fake help line numbers, the Times stated. Venmo, in contrast, has a chat line on its app that customers can use for a quick response, it added.
The Times reported that in 2017, Square began a marketing campaign called “Cash App Fridays,” which gives money to Twitter users who post their so-called $Cashtag or username. The campaign, security experts told the Times, provided fraudsters with a phone book of potential victims.
It also led to copycat campaigns, where people claim to work for Cash App and say they will give away a large sum of money if users first send in a smaller sum, the report added.