- Peer-to-peer (P2P) payment apps allow users to make quick, simple mobile payments to friends and other trusted parties.
- Scammers often target users via the P2P method for transferring funds, but they do not offer consumer protection or guaranteed recourse for getting your funds back.
- P2P payment scams can involve phony romantic prospects, fraudulent investment schemes and more.
At a glance, peer-to-peer (P2P) payment applications appear to be the perfect solution for effortless money exchange between friends and family, whether you’re splitting the bill at a restaurant or paying half for a hotel stay. These apps — including PayPal, Venmo, Cash App and Zelle® — allow users to send money to others within seconds, usually by connecting either a bank account or a payment card.
P2P payment technology, while convenient, comes with several inherent risks. Scammers prefer using tools that are easy to use, and this makes P2P technology an attractive exploitation method for fraud attempts. Keep reading to learn more about how these features cause significant threats to everyday users, and gain critical strategies to help you avoid becoming a fraud victim.
How do P2P payment apps work?
A P2P payment is essentially a digitized cash exchange. Users connect payment cards or bank accounts to their P2P payment platform of choice, after which they can send money to other users within seconds. Money received can usually be stored in a digital wallet provided by the app or transferred directly to a bank account, which may take a few days.
P2P payments are typically made via mobile apps, but most platforms can be accessed through a computer, too.
Learn how to recognize various P2P payment scams
P2P payment scammers leverage the convenience and sparse consumer protections associated with P2P payment apps to dupe users into parting with their cash. These scams generally involve a bad actor who manipulates P2P app users into sending money to a fraudulent recipient for a deceitful reason. Examples include:
Imposter scams: A bad actor poses as someone trustworthy — from an IT specialist to a family member and more — to convince a payer to send them money. This is a wide-ranging scam category that encompasses several other specific tactics. Some of these are covered next.
Romance scams: A bad actor poses as a prospective dating partner and requests cash from the user for reasons that often play off the user’s desires — for example, the scammer may ask for cash to book a flight to visit the user.
Overpayment scams: A bad actor “overpays” for something the user is selling, usually with a bad check. The scammer then asks the seller to refund the difference via 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 high returns on the intended victim's investment to entice the victim to part with their funds.
While these scam types vary in approach, they all share the same goal: the use of fraud to deceive an unsuspecting victim and take their money.
Scammers may also take a more roundabout approach by scamming the user out of their P2P payment app login details (likely via phishing or another social engineering strategy) rather than requesting money outright.
Risks of P2P payment technology
Many real-time P2P payment methods do not offer protection for client-authorized payments. To best protect yourself, think of P2P transactions as you would physical cash payments: Once you send money via a P2P app, consider it irretrievable.
Tips for avoiding P2P scams
While P2P technology is convenient, use it with caution. Remember the following tips every time.
1. Send money to parties you know and trust.
Only send money to people and organizations you know and have previously verified. Remember, money sent to the wrong recipient is not likely to be recovered.
2. 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 and ask you to send them money. If the request is odd and you don't recognize the number, this is a red flag: Do not send the payment. Verify with your friend through previously established connections first.
3. 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 suspicious or out of the ordinary, you are likely dealing with a fraudster.
4. Avoid offers that seem too good to be true.
Along with investment scams, fraudsters frequently offer prizes, such as lavish vacations or lottery wins, and request a P2P payment to claim the prize.
Don't fall victim. If you receive an offer that seems too good to be true, alert the P2P platform support team, and do not send your funds.
5. Implement security settings.
Take advantage of app security settings. Features like multifactor authentication can help protect your information, while fraud alerts may come in handy if you think your P2P login information has been obtained by a fraudster.
6. Avoid making payments through unsecure networks.
It’s best to avoid unsecured Wi-Fi networks — especially in public — while sending payments. Unsecured internet opens the door for tech-savvy bad actors to access sensitive information with which they may be able to access your payment accounts.
7. Report suspected fraud.
If you believe you’ve fallen victim to or been targeted by a P2P payment scam, report the incident on the P2P app (if applicable), to your financial institution and to the appropriate authorities.