The odds are high that you or someone you know have turned to using digital payment apps, such as Venmo, Cash App or Zelle. Originally marketed as a way for friends to split expenses, a 2020 Nerdwallet survey found that approximately 4 in 5 Americans now use mobile payment apps.

Whether out of convenience or concern for contactless payments during the pandemic, consumers are using apps for more and more financial transactions, but if not careful, Arizonans could be opening their bank accounts to fraud and scammers.

In the Arizona PIRG Education Fund’s recent report, Virtual Wallets, Real Complaints, we analyzed the Consumer Financial Protection Bureau’s (CFPB’s) Consumer Complaint Database and found that payment apps surged during the pandemic year with 970 digital wallet complaints in April – almost double the previous monthly high from July 2020.

Virtual Wallets, Real Complaints found that the top 10 most-complained-about companies across the country accounted for 90 percent of all 9,277 digital wallet complaints, led by PayPal (which also owns the Venmo app), Square (which owns Cash App) and Coinbase, a cryptocurrency trading platform. Americans also complained a lot about several big banks, including Bank of America, Chase, and PNC Bank.

The three most commonly complained-about digital wallet issues identified in the Arizona PIRG Education Fund report: problems managing, opening, or closing accounts; problems with fraud or scams; and problems with transactions (including unauthorized transactions). And when a peer-to-peer payment (P2P) app is used, the instantaneous transactions are not reversible, and consumers have fewer rights by law.

Here are tips for consumers using payment apps:

  • Remember that using a P2P app is like spending cash. Only use it with friends and other people you both know and trust.
  • Beware of phishing or unexpected requests.
  • If possible, keep one separate bank account to link to P2P accounts. Do not link P2P apps to accounts containing significant funds.
  • Make sure all your security settings are set to “most private”; the default is often “most public.”
  • If you are going to send money to a new recipient through a P2P payment app, even to a person you know, you should either initially send $1 as a test or ask the person to send a request for the money. There are many similar accounts like BobSmith01 and BobSmith02. The accounts can have photos, but the photos are often so small, it's difficult to tell whether it's the correct person.

While consumers should adhere to the recommended tips, policymakers should also strengthen consumer protections on payment apps to ensure that consumers are protected if they are defrauded into sending money, and app providers should be required to investigate errors and fraud.

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Ed Mierzwinski is consumer program director for PIRG Education Fund, an organization that conducts research and education on issues in the public interest. 

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