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10 Ways To Stop P2P Payment Fraud In Its Tracks

Here’s info credit unions can share with members to protect both from P2P scammers.

Use of P2P (person-to-person) payments is accelerating in this country, largely due to the popularity of two of the top P2P apps on the market, Venmo and Zelle. As P2P payments have become mainstream, many large financial institutions like Bank of America, Chase, and Wells Fargo are partnering together to offer a P2P service. And if you think P2P apps are only a preferred payment option for younger generations, think again: a recent Aite report shows that P2P payment use has doubled in just four years, from 22% in 2014 to 50% in 2018.

While cash or checks have historically been the easiest way to pay a friend or acquaintance, P2P payment technologies have introduced a new way of sending money that is fast and convenient. P2P apps are an easy way to transfer money without having to carry cash or checks. Members commonly use them to transfer money to people they know for example, sending gifts, splitting a restaurant bill or vacation, or paying a neighbor at a yard sale.

The downside of this new method of payment is that it is also becoming increasingly popular with scammers, primarily because fraudsters are able to prey on consumers’ trust. The best way credit unions can help prevent their members from falling victim to P2P payment fraud is through education and proactive detection. Credit unions should share the following tips with members through every possible touchpoint and channel:

  1. Never send money to someone you have not met in person. When making purchases, use a service with buyer protection.
  2. Double-check the username or phone number of the person you are trying to send money to, and try sending a small amount first to confirm that your intended recipient received it.
  3. Opt in for stronger security. Almost every popular P2P platform offers the ability to create a personal identification number (PIN) or use facial recognition.
  4. Before using any P2P service, search the app for customer service contacts and procedures so that you know where to go and what kind of help to expect in the event you have a dispute.
  5. Make sure you have auto-updates turned on for your device to ensure your app has the latest updates and protections.
  6. Set up transaction or account alerts and controls so that you can be notified of payments or any account changes from your financial institution.
  7. Do not let strangers borrow your phone. They could pretend to be using it for an emergency but really be using it to transfer money from your app to their account.
  8. Consider linking your credit card in the app instead of a debit card, so you have more built-in fraud protection.
  9. If you suspect fraud, freeze or lock your card immediately, contact the P2P app’s customer service to initiate a dispute, then separately contact your credit union for further instructions.
  10. You also can lodge a complaint with the Consumer Financial Protection Bureau’s Consumer Complaint Database or file a complaint at Fraud.org via a secure online form.

With consumers embracing P2P payment technologies more rapidly, credit unions will likely want to allow for P2P transactions to remain competitive. At the same time, it is key for both the credit union and members to be aware of the risks to thwart this emerging threat.

PSCU’s recently released white paper,Peer-to-Peer (P2P) Payment App Fraud: Navigating the New Payment Landscape, provides a comprehensive review of P2P payment app fraud and guidelines for credit unions to help members detect and thwart this emerging threat. It can be downloaded here.

David Ver Eecke is a Senior Fraud Product Manager at PSCU. David knows that the cooperative nature of credit unions provides a unique advantage when it comes to stopping fraud. When he isn’t working on products to increase payment security for credit unions and wage war against fraudsters, he finds time to write about topics on risk and fraud. David has worked in the financial services industry focusing on fraud and risk for over seven years.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
July 6, 2020

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