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SALT LAKE CITY — Mobile payments are on the rise, particularly among millennials.
Apps like Venmo, Apple Pay and Zelle have transformed the way we pay people back, and online banking has revolutionized the way the world pays bills and tracks its finances.
A study from financial tech analyst Juniper Research "forecasts that by 2021, nearly 3 billion users will access retail banking services via smartphones, tablets, PCs and smartwatches" — so about half the adults in the world.
With that much money being exchanged online, there has also been an increase in scams. Parents, millennials and anyone with a smartphone should be aware of the pros and the pitfalls of mobile payments.
1. Seller beware
Venmo and Zelle, two popular P2P (peer-to-peer) payment apps, have seen a rash of sellers scammed out of their money.
A buyer will often contact a seller about an item they want to purchase, like jewelry. The seller accepts a payment for the jewelry over the app, but the buyer cancels the transaction after making the payment.
Even though it looks like the P2P transaction happened instantaneously, there's a several-day processing delay. This can allow the scammer to pay, take the jewelry and cancel the purchase. The buyer is out their jewelry and the money.
P2P payment apps do not typically have buyer and seller protection, and, unlike a credit card, you can't contact the company to dispute the transaction. Only buy and sell with people you know and trust — and check out the insurance policy of the online platform you're using.
Like any online purchases, mobile payment apps are vulnerable to hacking. One popular hack is a "man-in-the-middle" attack where the scammer intercepts the communication between the financial institution's server and the mobile device.
Most mobile payment apps require a connection to a bank account and "talk" to those banks. A scammer can "listen in" by accessing the same public Wi-Fi and sending a fake bank certificate to the app.
If the app accepts the certificate, this allows the scammer to utilize the user's personal information like bank account numbers and more.
Another common hack is phishing, or when a scammer pretends to be someone or something else — like a bank. Sometimes a scammer may create a fake and malicious app or contact people over email to deceive them into thinking there's a problem with their account and ask for bank information.
There is always a risk with making purchases online, and mobile payments are no exception. But you can help defend yourself with these tips:
- Don't purchase things on public Wi-Fi
- Have a strong password and/or two-factor authentication
- Keep your phone updated
- Monitor your financial statements
- Never send financial information through email
Mobile payment apps have worked to fill the gap that larger financial institutions don't cover, like smaller payments between peers. This can be extremely convenient if you don't have cash, and these apps are simple to use.
However, users may be paying more for that convenience than they think. Not all transactions are free, and transferring money with a debit or credit card may incur a charge.
There’s no fee to use Apple Pay Cash with a debit card, but if you send money using a credit card, there's a 3 percent credit card fee. Those small payments —$20 here, $10 there — can rack up.
There may also be fees after a certain number of transactions or a spending limit on specific apps.
Use with caution
Those adopting mobile payment options are generally part of the under-30 crowd. Statistica reports that about a third of millennials use digital wallets while about 70 percent of those over 60 said, "No, and I don't want to use it."
Mobile payment apps make it easier to buy, sell and pay, but financial literacy is key.
"We are very fortunate in Utah to have such a forward-thinking legislature and board of education committed to developing financial literacy capabilities in our K-12 students," said Travis Cook, financial literacy specialist with the Utah State Board of Education.
As long as money exists, there will be financial scams. Technology has just changed the landscape. Education and awareness is key to decreasing the risk of losing your hard-earned money.