Illustration by Philip Smith for Forbes
The holiday season is busy one for fraudsters. This round-up story will pull out five common scams people pull on cash apps like Venmo, CashApp or Zelle. One example are accidental payment scams, where users are told money was sent by mistake using stolen credit card information. If they send the funds back, they risk being stuck with the loss.
Payment apps like Venmo, Cash App, PayPal and Zelle have revolutionized the way people send money for everything from check splitting among friends to monthly rent payments. Unfortunately, scammers are evolving with the payments landscape and have come up with a raft of tricks to siphon customer funds from these payment methods into their own pockets.
Consumers are used to being protected from certain fraud losses – most notably, bogus charges on their credit cards. But with payment apps, customers’ digital funds are treated as cash, making it difficult for victims to recover fraud losses if they have been tricked into approving a payment. In fact, under current federal regulations for electronic fund transfers in the United States, if a customer makes the mistake of authorizing a scam payment, he’s not entitled to any reimbursement from the bank.
Industry pros refer to cases where folks are tricked into sending money to the crooks’ accounts as authorized push payment (APP) scams and say they’re growing quickly. In the United States, APP scams could cost consumers $3.1 billion by 2026, up from $1.6 billion in 2021, payments software company ACI WorldwideACIW
predicted in its November Scamscope report.
The first phase of many scams is phishing—con artists start by sending out text messages, emails, fake advertisements and other forms of communication to identify vulnerable individuals. These messages are also used to gather information to better target potential victims by figuring out products they are interested in, people they know or other personal pieces of information to make a scam feel more believable. That allows a scammer to create a sense of urgency when he later tries to get a target to send money. (That urgency is in itself a red flag to watch for before sending money to new accounts.)
“A lot of instances where people get scammed, it’s actually rapid fire and they just never thought about the fact for one second that they might be being scammed,” Tommy Nicholas, CEO of identity verification platform Alloy, says. “Take a beat and give yourself time because there are almost no situations in which you are put in a position where through some unusual channel somebody is asking you for money and it’s time sensitive. It’s almost always a scam.”
The good news is that under pressure from lawmakers, the seven banks behind the Zelle network are reportedly developing a standardized system for refunding money to customers who were tricked into sending cash to criminals. While the future may bring a path for such refunds, the best way to keep your money safe now is to avoid scams altogether. Here are five to watch out for.