Online payment apps: Here’s what to know the next time you tap to pay

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FILE0-A person uses an online payment app on their phone. (Photo by Monika Skolimowska/picture alliance via Getty Images)

Online payment apps offer a convenience for consumers to make transactions from their phones or electronic devices.

And while most peer-to-peer payment apps like Zelle and Venmo have policies in place to protect consumers who use their apps for transactions, Consumer Reports argues in a recent report that these companies should do more.

Consumer Reports published a report in September 2024 calling on payment app providers and the Consumer Finance Protection Bureau (CFPB), which oversees and enforces existing regulations around the online payment methods, to bolster protections for consumers.

The nonprofit consumer organization argued in its 2024 report that payment app companies should update their products and policies to protect consumers from fraud and scams, and should do the following:

Implement a mandatory 24-hour holding period for transactions of $500-750 or more, with an option for consumers to override by providing additional verification.
Institute a universal 12-to-24-hour window during which consumers can easily reverse all payments, like the cancelation policies of other financial institutions.
Commit to improving the transparency and thoroughness of internal investigation procedures and more fully reimbursing consumers who are the victims of sophisticated induced fraud scams.
Implement purchase protections for payment disputes for Zelle payments made for commercial purposes, mirroring the protections that exist for credit cards under the Fair Credit Billing Act.

Last month’s report was follow-up to a 2022 examination by Consumer Reports of four peer-to-peer (P2P) payments apps – Apple Cash, Cash App, Venmo, and Zelle – assessing their safety, privacy, and transparency policies and practices and discovered that policies for resolving fraud and errors can leave consumers at risk of losing money.

Consumer Reports told USA Today recently it was also monitoring pending legislation, named Protecting Consumers Against Payment Scams, which has been introduced in both the Senate and House, to increase protections on P2P payment apps.

In 2023, consumers reported losing $210 million in scams on these payment apps, 62% more than in 2021, according to federal data. USA Today reported that digital payment apps are less regulated compared to debit and credit cards, particularly for payments disputed by consumers as fraudulent.

What are payment apps saying about consumer protection?

Several major payment app companies shared statements and online resources with FOX Television Stations explaining the protection their companies offer to consumers who use their services.

Zelle

Denise Leonhard, Zelle’s general manager, addressed steps the company is taking to protect consumers from fraudulent activity on it's platform in a brief video post. "On the technology front we monitor tens of millions transactions daily and then we share it with our network of over 2,200 banks and credit unions. On the education front, we provide in-app messaging to make sure people are sending transactions to folks that they know, and trust and we also provide education on our website," Leonhard said. More information is also available on zellepay.com.

Separately, Early Warning, the network owner and operator of Zelle, sent a letter in response to the September report published by Consumer Reports, in which Early Warning’s chief fraud risk management officer wrote:

"The blog fails to acknowledge that Zelle goes well beyond existing legal and regulatory requirements and requires all financial institutions on the Zelle Network to fully reimburse all confirmed unauthorized claims and, additionally, for all confirmed claims qualifying under our industry-leading qualifying imposter scam reimbursement benefit. This benefit exceeds the requirements of the Electronic Fund Transfer Act (EFTA) and Regulation E, under which reimbursement for scams is not required."

Cash App

A Cash App spokesperson provided a statement to FOX Television regarding protecting consumer safety on their platform.

"Cash App remains committed to building a safe and secure platform to protect our customers. We strive to mitigate risk on the platform through a combination of preventative controls, dynamic detection, and consumer education. As part of these efforts, we're constantly developing new features and upgrading our tooling, including upleveling reporting flows and enhancing payment warnings."

Cash App also encourages customers to stay safe and educate themselves on common scams, how to avoid them, and how to secure their account through their help pages:

Apple Cash

Apple Cash has a variety of helpful resources and information on its website to help users identify and avoid scams when using the app.

Consumers using Apple Cash should send and receive money only from people that they know. Warnings are presented when consumers attempt to send money via Apple Cash to someone outside their contacts or if Apple considers a transaction risky.

Apple on its website also explains to consumers that they can avoid scams on the app by not sending money for things they haven’t received, don’t send money in exchange for a check, don't send money to a scammer posing as an employee of a business or government agency, and don't send money or share information with a scammer posing as Apple or tech support.

Venmo and PayPal

A Venmo and PayPal spokesperson tells FOX Television Stations in a statement:

"PayPal and Venmo have always had a zero-tolerance policy for attempted fraudulent activity, and we continuously evolve our fraud prevention capabilities and invest heavily in products, features, and solutions that prevent fraud from occurring in the first place, including 24/7 fraud monitoring, advanced encryption, and machine learning scam avoidance modeling to proactively take action by limiting scam accounts and declining risky transactions."

Venmo and PayPal said on its website that it uses encryption to help protect consumer account information, and they monitor user account activity to help identify unauthorized transactions. If you suspect that your account has unauthorized activity, please contact their Support team with details about what happened.

And if a consumer lost their phone and believes its being used without their consent, Venmo has steps you can take to prevent your phone from accessing your account:

Sign in to your account at Venmo.com.
Select Settings from the sidebar, then Security
Remove the session associated with your phone (when you remove the session, you will be signed out of the app on your phone)

Venmo has a page on its website for consumers who believe they may have been the victim of a scam on its platform. Users can contact the company’s Support team for help.

Venmo and PayPal also offer resources to consumers through their help pages with helpful tips to avoid scams:

How can I protect myself when using P2P payment apps?

There are several ways consumers using payment apps can protect themselves as Lisa Gill of Consumer Reports outlines on the organization’s website. Here are some of the helpful tips to remember:

Consumers should confirm the recipient’s identity before sending money.
It’s best practice to send a $1 test payment and confirm it was received by the right person.
Users should move money from their P2P account to your bank account as soon as possible.
It’s important to turn on all identity verification options available in the P2P app.
Customers should routinely monitor their P2P accounts.