Payment apps such as PayPal, Venmo and Cash App help customers move money quickly and easily. But complaints about these peer-to-peer tools are soaring, according to the Massachusetts Public Interest Research Group Education Fund.
In April 2021, there were 970 digital wallet complaints, according to a recent MASSPIRG Education Fund analysis of the consumer complaint database maintained by the federal Consumer Financial Protection Bureau. That number is higher than it has ever been since the bureau started accepting complaints about digital wallets in 2017 — and it’s nearly double the number of complaints from the previous monthly high, reached in July 2020.
The MASSPIRG Education Fund report found that the three most common complaints about digital wallets have to do with problems:
- Managing, opening or closing accounts
- With fraud or scams
- With transactions, including unauthorized transactions
When poring over more than 9,200 digital wallet complaints that the Consumer Financial Protection Bureau received from 2017 through April 2021, the MASSPIRG Education Fund found that 10 companies accounted for about 90% of the grievances. The three companies that garnered the most complaints are:
- PayPal (which also owns Venmo) — 4,431 complaints
- Square (which owns Cash App) — 1,202 complaints
- Coinbase, a cryptocurrency trading platform — 755 complaints
Consumers also groused about many big banks, including PNC Bank (594 complaints), JPMorgan Chase (324 complaints) and Bank of America (262 complaints) — which ranked No. 4, No. 5 and no. 6, respectively, for the number of digital wallet complaints they have received.
The MASSPIRG Education Fund notes that these banks are among the co-owners of Early Warning, which operates Zelle, which is a leading peer-to-peer payment app.
In a press release, Deirdre Cummings, consumer program director for the MASSPIRG Education Fund, says:
“People use peer-to-peer apps for convenience but there’s nothing more inconvenient than having your money inaccessible — or even worse, going to the wrong person. We’re seeing as more people turn to payment apps, more people are getting burned by related problems, including scams and fraud.”
How to stay safe when using payment apps
The MASSPIRG Education Fund notes that when using peer-to-peer payment apps, you have “fewer rights by law and more threats from scammers.” Therefore, the organization urges you to:
- Only use these apps with friends and others you both know and trust
- Keep a separate bank account solely for the purpose of linking to peer-to-peer accounts
- Change every security settings to “most private.” (The default is often “most public.”)
In addition, the MASSPIRG Education Fund says the first time you send money to someone, it is wise to send a small amount — such as $1 — as a test. Or, ask the recipient to send you a request for the cash.
As Cummings notes:
“Don’t use these apps to pay people you don’t know and, even if it’s your best friend or your mom, confirm you’re set up correctly and using the right user name. Consumers don’t realize these online transfer payments are instantaneous and treated like cash, so when fraud strikes, you’re likely without recourse.”