My Turn: Consumer protections for digital wallet payment apps

  • DREAMSTIME

Published: 7/22/2021 1:02:31 PM

My freshman year of college, I decided to attend a party at a popular fraternity on campus that required an entry fee at the door. As I reached the front of the line, the bouncer grabbed my phone and navigated to my Venmo to more easily “secure payment.” Seeing no other option, I reluctantly relinquished my iPhone. Immediately after I let go, the four people behind me — complete strangers — chimed in that I promised to pay for them as well. In all the chaos, I couldn’t convince the bouncer to leave these strangers off my tab and charge only my own entry. I awoke the next morning to a Venmo payment of nearly $50.

Almost every Venmo user I know has a frustrating story like mine. Whether they’ve paid the wrong person, added an extra zero to a payment without realizing it, or fought unauthorized transactions, peer-to-peer payment options or “digital wallets” have created new risks for consumers.

Issues with Venmo are not purely anecdotal. A new report, Virtual Wallets, Real Complaints, released last month by MASSPIRG Education Fund, found that the number of consumer complaints to the Consumer Financial Protection Bureau (CFPB) about “mobile or digital wallets” has increased each month since the CFPB began accepting complaints in that category in 2017, coinciding with more widespread use of digital payment companies such as PayPal, Venmo, Cash App, and Zelle. A recent Nerdwallet survey reported that almost four in five Americans (79 percent) use mobile payment apps. People not going out to a physical bank or ATMs during the COVID-19 pandemic exacerbated this trend.

The three most commonly cited complaints highlighted in the MASSPIRG Education Fund report are problems managing, opening or closing accounts; problems with fraud or scams; and problems with transactions (including unauthorized transactions).

Beyond these issues, peer-to-peer payment app users are also concerned by the limited privacy of friend lists and payments. At a family party, my aunt remarked that I must “go out to eat a lot” because she had recently seen my takeout transactions pop up on her feed. Venmo automatically makes all public transactions visible to your phone contacts who also use the app. Until users can opt to authorize or prevent this feature, your aunt will see your late-night egg roll runs and your friends will see your birthday money tagged with an embarrassing family nickname. Venmo only recently let users hide their friend lists (and any Venmo transactions between friends), following a Buzzfeed expose that found President Joe Biden’s network of Venmo contacts, including his grandchildren and other family members, and raised national security concerns.

A product so many consumers use should be regulated to prevent abuse and protect consumers. Policy makers should help ward off fraud and require the apps to investigate errors — even when consumers make a mistake in sending the money.

In the meantime, MASSPIRG has compiled a list of recommendations for consumers to protect their money when using payment apps.

■Using a P2P app is like spending cash. Only use it with friends and other people you both know and trust.

■If possible, keep one separate bank account to link to P2P accounts. Do not link P2P accounts to all your 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.

To avoid a repeat of my freshmen year incident, I have since set personal locks on my apps holding secure information, and removed the public setting of my payments/friends to best protect my privacy. While we all enjoy the ease of payment apps, we need to recognize the liabilities of their use and demand that the companies behind them offer us basic consumer protections. In the meantime, educate yourself and consider the consumer tips inMASSPIRG’s P2P app safety report: tps://masspirg.org/reports/map/virtual-wallets-real-complaints

Elise Donovan is a Policy Intern with MASSPIRG, a statewide consumer advocacy organization.


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