Consumers are increasingly using digital payment apps for convenience. The peer-to-peer (P2P) apps were originally marketed as a way for friends to split expenses. But, perhaps due to a concern for contactless payments during a pandemic, consumers are using them for more and more transactions, opening their bank accounts to scammers.
Consumers don’t realize that the instantaneous transactions are not reversible, nor that they have fewer consumer protections when they use a payment app or service. So, complaints are way up. The three most commonly complained-about issues involving digital wallets are problems managing, opening or closing accounts; problems with fraud or scams; and problems with transactions (including unauthorized transactions).
Complaints are on the rise
Digital wallet complaints have increased sharply in 2021. In April 2021, complaints nearly doubled from the previous record month, July 2020.
Three companies accounted for two-thirds of complaints
Paypal (which also owns Venmo), Square (which owns Cash App) and Coinbase — accounted for more than two-thirds of all digital wallet complaints through April 2021.
Ten companies accounted for 90 percent of complaints
Ninety percent of all complaints in the report were against the ten most complained-about companies.
Scammers have an open door to apps
App websites have pages of warnings to watch out for fraud, yet some encourage more use of the apps through sweepstakes and other gimmicks, which opens a door to scammers.
TIPS FOR CONSUMERS
TELL VENMO: PROTECT OUR PRIVACY
Consumers are increasingly reliant on payment apps like Venmo for living our financial lives, and we deserve apps that are safe and trustworthy.
Senior Director, Federal Consumer Program, U.S. PIRG Education Fund
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.