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Instant payment apps have become a popular fixture for peer-to-peer payments. Before using instant payment apps such as Venmo, Cash App, or Zelle, you should do your research so you understand exactly what you are signing up for.

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Peer-to-peer payments are instant, cashless, payments made online. They allow people who do not carry cash to split bills or reimburse their friends without having to wait for a check or transfer to process. Users can connect a debit card or bank account to an app and initiate or collect payments their unique user-ID.

It’s important to know what happens to the money in your balance however. In February, the Federal Trade Commission (FTC) announced a settlement with PayPal over privacy concerns with popular payment app, Venmo. The FTC alleged that Venmo misled consumers using their product about their ability to transfer “money credited to their Venmo balances… to external bank accounts” as well as the extent that they could keep transactions private. Reading the terms and conditions might help to know how long a transfer may take and why and how a transfer is flagged for additional review.

Some users of these apps also have reported getting scammed by a stranger when making a payment or selling an item. Both Venmo and Zelle’s websites warn against making payments to strangers through the app. In some scams, the seller can take your money and not actually have anything to sell you. In others, the buyer can meet you, receive the goods, send payment and then cancel the transaction before it is fully processed. They’ll have the item they bought but you won’t have the money for it.

Consumers should be sure to review the user agreement to understand if the app is permitted for use with a stranger for the sale of goods (for instance, buying concert tickets from someone reselling them). There is often no resource from this type of risky transaction.

If you have a mobile payment app and your phone get stolen, notify your bank in case someone gains access into it. Check if the app offers optional security features that consumers may utilize, such as adding a PIN code to enter the app or a multi-factor authentication.  Regardless of what security measures are or are not in place, you should always be careful before making transactions using payment apps. It’s best to only use these apps with people you know and trust.

For more information on buying and selling online, you can review our Online Smarts blog series: Tips for safe online shopping.

If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation along with its five agencies work together to achieve two goals: to protect and empower consumers through advocacy and education, and to ensure a fair playing field for Massachusetts businesses. The Office also oversees the state’s Lemon Laws and Arbitration Program, Data Breach reporting, Home Improvement Contractor Programs and the MA Do Not Call Registry.

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