Security Issues with P2P Payment Apps

Peer-to-peer (P2P) payment apps like Venmo, Cash App, Zelle, PayPal, and the new FedNow instant payment service have transformed how Americans send and receive money.

In the United States, these apps are extremely popular – surveys show that well over half of Americans (around 60–75%) use P2P payment services.

The convenience of instantly transferring money to friends or family with a few taps is undeniable, and P2P transaction volumes have skyrocketed (quadrupling from 2018 to 2022, on track to reach $1.6 trillion by 2027). However, with this convenience comes a range of security issues and risks.

From data breaches to scams and a lack of consumer protections, users of apps such as Venmo, Zelle, Cash App, PayPal – and even bank-linked services like FedNow – face new challenges in keeping their money and personal information safe.

This article explores the security issues with P2P payment apps in the USA and offers tips to stay safe while using these popular services.

What Are P2P Payment Apps and Why Are They Popular?

P2P payment apps are mobile or online services that let individuals send money directly to each other – often almost instantly – without needing cash or checks. All you usually need is the recipient’s username, email, or phone number.

Major players in the U.S. include Venmo, Cash App, Zelle, PayPal, Apple Cash, and others. These apps have become one of the most commonly used financial tools, second only to traditional banking apps.

For example, Venmo (owned by PayPal) and Cash App (by Block) let users hold a digital wallet balance and fund payments via a linked bank account, debit card, or credit card, while Zelle is a service that moves money directly between bank accounts (typically through your bank’s own app).

The Federal Reserve’s FedNow service, launched in 2023, is a new infrastructure allowing banks to offer instant transfers between accounts 24/7.

Why are these apps so popular?

In a word: convenience. Sending money to split a dinner bill, pay rent, or gift cash is as easy as texting. Many P2P transactions are free or cost only a minimal fee. The apps often integrate social features (like Venmo’s feed showing payment notes) that make payments feel more fun and engaging.

During the COVID-19 pandemic, usage surged as people sought contactless ways to pay. Trust in digital payments has grown as well – about 75% of Americans trust digital payment apps as much as cash or credit cards. All these factors have driven massive adoption.

However, “fast and easy” payments can come with trade-offs in security. Understanding how these apps work is key to understanding their vulnerabilities.

Unlike credit card transactions or traditional bank transfers, P2P payments often settle instantly and finalize with little oversight – which is great for speed, but problematic if something goes wrong. In the next sections, we’ll delve into the common security issues and risks associated with P2P payment apps.

Common Security Issues in P2P Payment Apps

While each payment app has its own features, many of the security concerns are similar across the board. Below are the major security issues and risks that users of P2P apps in the U.S. should be aware of:

Data Breaches and Cyberattacks – P2P services hold sensitive financial data and thus are prime targets for hackers.
Fraud and Social Engineering Scams – Scammers exploit the instant, cash-like nature of P2P payments to trick users into sending money.
Irreversible Transactions (Lack of Recourse) – Payments often cannot be canceled or reversed once sent, even if you made a mistake or were scammed.
Privacy Concerns – Some apps (like Venmo) have public transaction feeds or share data in ways that can compromise user privacy.
Funds Not FDIC-Insured – Money stored in many non-bank apps isn’t federally insured, meaning you could lose it if the company fails.
Regulatory Gaps – P2P apps are not always bound by the same rules as banks, resulting in varying consumer protection practices.

Let’s examine each of these issues in detail.

Data Breaches and Cyberattacks

No digital service is immune from hackers, and P2P payment apps have suffered their share of data breaches. In fact, experts warn that you cannot be certain your personal and banking information will remain safe if you use P2P payment systems. Recent incidents underscore this concern:

In January 2024, a massive data breach dubbed the “Mother of All Breaches” exposed 26 billion records from thousands of organizations – including data on millions of Venmo users.

This unprecedented leak was one of the largest on record, raising alarms about Venmo’s data security. (Notably, Venmo itself wasn’t directly hacked; the data was part of a trove circulating on hacker forums, illustrating how even big platforms can be caught up in huge breaches.)
The same year (2024), Cash App disclosed a breach affecting over 8 million users. In that case, a former employee downloaded sensitive reports containing customer names and brokerage account details.

While it wasn’t a hack by an outsider, it showed that insider threats and insufficient access controls can put user data at risk.
Even stalwart PayPal has had incidents: In late 2022, approximately 35,000 PayPal accounts were compromised via a credential-stuffing attack (hackers used lists of stolen passwords from elsewhere to break into PayPal accounts).

Exposed information included names, addresses, Social Security numbers, and more. PayPal had to notify affected users in 2023 of this breach.
P2P apps have also had design-related data exposures. Venmo, for example, for years had a public API that made all transactions public by default, allowing researchers (or malicious actors) to scrape enormous amounts of user data.

In 2018 a researcher downloaded 207 million Venmo transactions this way, revealing payment details, names, and even messages and locations users assumed were private. Venmo eventually adjusted some privacy settings, but this “public by default” design put user privacy and safety at risk for a long time.

These examples show that even if the core payment systems aren’t hacked, user data can leak through indirect breaches or poorly secured features. Stolen data like emails, phone numbers, transaction histories, and even login credentials can be exploited by cybercriminals.

If attackers obtain your P2P app password or other personal info, they could attempt to access your account or craft convincing scams (more on scams next).

Always use strong, unique passwords for your payment apps and enable multi-factor authentication (such as one-time codes) to reduce the risk of account takeover in the event of a breach.

Fraud and Social Engineering Scams

Scams are arguably the biggest security risk on P2P payment platforms. The FBI, FTC, and consumer advocates have issued numerous warnings about fraud on apps like Zelle, Cash App, and Venmo.

Unlike traditional financial fraud (where a thief might steal your credit card number), P2P scams often involve tricking you into sending money willingly. Because these apps are as fast as handing over cash, scammers have developed schemes to exploit that immediacy and the trust users place in these apps.

How common are P2P scams? Unfortunately, very common and growing more sophisticated. About 17% of P2P users have reported being targeted by scams, and of those victims, one in five lost over $5,000 to fraud. Here are some prevalent scam methods to watch out for:

Impersonation Scams (Phony “Bank” or “Friend” Messages): You might get a text that looks like a fraud alert from your bank or a message from a friend in need.

For example, a scammer may send a text pretending to be your bank asking, “Did you authorize a $500 Zelle payment? Reply YES or NO.”

If you respond, the scammer (posing as a bank rep) then calls you and urgently instructs you to transfer money to “secure” your account – often directing you to send money to yourself via Zelle or another app, when in reality it’s going to the fraudster.

Similarly, scammers impersonate family members (“Mom, I lost my phone and need money”) or pretend to be utility companies, law enforcement, etc. to panic you into sending money.

Always independently verify such requests by contacting the real person or institution at a known number – don’t trust incoming messages/calls asking for money.
“Accidental” Money Transfer (Overpayment Scam): In this scheme, a stranger seemingly sends you money out of the blue, then quickly messages asking for it back: “Oops, I sent $200 to the wrong person, can you please send it back?”

The initial payment may even appear in your app. What’s happening behind the scenes is often fraud: the first payment was made with a stolen credit card or bank info.

That transaction will eventually be reversed by the cardholder’s bank when reported as unauthorized. If you refund the scammer (who is using a stolen account), that money comes out of your own funds – and you lose it once the original payment is canceled.

Cash App and others explicitly warn about this scam. If you receive an unexpected payment from someone you don’t know, report it to the app support and do not send money back to an unknown person (the app may be able to reverse the fraudulent payment safely).
Fake Sales, Purchases or Fees: Beware of anyone you don’t personally know asking you to pay via P2P app for goods or services.

Examples include online classified scams (you pay for concert tickets or a puppy, but never receive anything), fake invoices or “business” accounts sending you payment requests, or scammers on Facebook/Craigslist who insist on a P2P payment.

Since P2P apps typically do not offer buyer protection for non-business transactions, you’re unlikely to get a refund if you get scammed this way.

Scammers often create a false sense of legitimacy and urgency (“Limited-time deal, send the money right now to hold the item!”) to make you act quickly without thinking.
Phony Customer Support and Phishing: If you run into an issue with your payment app, be very careful how you seek help. Scammers often set up fake customer support lines or social media profiles for Cash App, PayPal, etc.

For instance, Cash App historically had no live phone support, and fraudsters took advantage by creating bogus support phone numbers online – unwitting users who called for help were asked for their login info, PIN, or told to “reverse” a fake pending payment, resulting in theft.

Always get support contact info from the official app or website. Likewise, be wary of emails or texts claiming to be from PayPal, Venmo, etc. – phishing messages may say “Your account is suspended, click here to verify” and then steal your login credentials.

These are just a few examples – in general, any unsolicited request for money or personal information via a P2P app is a red flag. Scammers exploit the fact that P2P payments happen in seconds.

Once you send money to a scammer, it’s usually gone for good. Law enforcement can be notified, but the speed and often anonymous nature of these transfers make recovery difficult.

Worryingly, most victims never get reimbursed by the apps or banks. Unlike fraudulent credit card charges which you’re not liable for by law, P2P payments that you initiate are treated as authorized.

Banks and app providers often refuse to cover these losses. A U.S. A Senate investigation in 2023 found that among Zelle users who reported being scammed, only about 12% ever got their money back. Multiple big banks were even sued for allegedly refusing to help Zelle fraud victims.

This is beginning to change under public pressure (Zelle’s network, for example, rolled out a limited reimbursement policy for certain scams in late 2023), but the odds of recovery are still very low if you fall for a scam.

Irreversible Transactions and Lack of Buyer Protection

One fundamental security drawback of most P2P payment apps is that payments are typically irrevocable once sent.

In other words, if you send money to the wrong person or get tricked into a fraudulent payment, you can’t just call the app and cancel the transaction the way you might stop a check or dispute a credit card charge.

The speed of transfer – often completing in seconds – means there is no window to claw the funds back. Scammers know this and rely on that instant, final nature of P2P payments.

Even if no scam is involved, simple user mistakes can lead to loss. For example, mistyping a recipient’s handle by one letter or selecting the wrong John Smith in your contacts could send your money to a stranger’s account.

If that stranger doesn’t voluntarily return it, you’re out of luck. Reports have surfaced of people losing thousands by accidentally paying the wrong person – and the apps generally do not compensate for these errors.

As a rule, you can’t count on getting your money back in cases of error on services like Venmo, PayPal, or Zelle.

Always double-check the recipient’s username, phone or email before hitting send; some apps offer confirmation prompts (like Venmo showing the recipient’s last 4 digits of phone number – use this feature to ensure it’s the right person).

Furthermore, unlike a credit card or certain online payment platforms, most P2P payments offer no built-in buyer protection if you’re purchasing goods or services from an unknown party.

For instance, if you send $500 via Zelle or Cash App to someone selling event tickets and they disappear, neither the bank nor the app will typically reimburse you – since the transaction was authorized.

PayPal is a notable exception in that it does offer purchase protection for transactions designated as “Goods and Services” (we’ll discuss this more under PayPal’s section), but if you use PayPal’s “Friends and Family” option (to avoid fees) or other P2P apps for a purchase, you usually forfeit any protections.

It’s also worth noting that even truly unauthorized P2P transactions can be handled poorly by providers. Legally, under the U.S. Electronic Fund Transfer Act (Reg E), if someone hacks into your account and sends money without your permission, the platform (or your bank) should investigate and reimburse you for unauthorized transfers.

In practice, some P2P companies have shirked this responsibility. Cash App (Block, Inc.) was recently cited by the Consumer Financial Protection Bureau for failing to adequately investigate and resolve reports of unauthorized transactions, effectively pushing victims back to their banks and closing fraud cases without proper review.

The CFPB noted that Cash App’s user agreement tried to mislead customers into thinking the bank was responsible, and as a result fraud proliferated on the platform with insufficient intervention.

This example shows that consumer protections in the P2P sphere are still catching up – some providers have historically put the onus on users for fraud losses, though regulators are starting to crack down.

Privacy Concerns and Data Handling

Beyond outright theft and fraud, privacy is another concern when using P2P payment apps. Users are often unaware how much of their personal data may be exposed or collected through these services. Some privacy-related issues include:

Public Transaction Feeds: Venmo famously made transaction details public by default. Unless you change settings, anyone on the internet could see who you paid and for what (or at least the emoji/note you included).

This led to creepy situations like strangers compiling datasets of people’s habits – the aforementioned 207 million transactions scraped in 2018 revealed everything from people’s drug deals to intimate messages.

It even became a national security story in 2021 when journalists discovered President Biden’s Venmo account and contacts within minutes, due to the friend list and payments being visible by default.

Privacy settings on Venmo (and similar apps) should be reviewed so that your transactions are at least friends-only or fully private. Otherwise, you might be unintentionally broadcasting your payment history.
Data Collection and Sharing: P2P app companies may collect a trove of information – your contacts, transaction history, location, banking info, etc. Some companies have been known to monetize this data.

For example, Early Warning Services (the bank-owned company that operates Zelle) not only processes payments but also aggregates fraud and transaction data to sell risk detection tools to other financial institutions.

In a Senate inquiry, EWS admitted that Zelle is run at a loss but the user data is its “profit driver.”. While this may help fund anti-fraud innovations, it raises questions about how your financial behaviors might be used beyond just transferring money.

Always read the privacy policies – some apps might share data with third parties or for marketing.
Social Engineering via Shared Info: If your profile or contacts are public, scammers can glean info to target you.

On Venmo, for instance, someone could see you frequently pay a certain person and then impersonate that person in a scam (“Hey, it’s [friend’s name], can you Venmo me? I changed my number.”).

Limiting the visibility of your P2P profiles and being cautious about unknown friend/contact requests on these platforms is important.
Device and App Security: Privacy overlaps with security in that if the app or your device isn’t well-protected, your private data can leak. Make sure to secure your phone with a PIN/fingerprint and use the app’s security locks.

Some apps let you set an in-app PIN or use biometrics every time you open or send money – enable that so even if someone gains access to your phone, they can’t easily use your payment app. Also, beware of malware or fake apps.

Only install official P2P apps from trusted app stores, and keep them updated for the latest security patches.

In summary, P2P apps might share more about you than you realize, unless you take control of the settings. Adjust your privacy options, and treat any personal data visible in these apps as information that could potentially be leveraged by bad actors.

Funds Are Not FDIC-Insured (Financial Security Risks)

When you deposit money in a U.S. bank or credit union, your funds are typically FDIC or NCUA insured, meaning even if the bank fails, the government protects your money (up to $250,000). This is not automatically true for money stored in most P2P app accounts.

Many non-bank payment apps hold customer balances in their own accounts that are not covered by federal deposit insurance. The Consumer Financial Protection Bureau cautions that while these apps are convenient, they lack the safeguards of traditional banks – including deposit insurance.

If the company operating the app were to go bankrupt or there’s some financial crisis, your stored balance could be at risk of loss.

Consider a scenario: you leave $1,000 sitting in your PayPal, Venmo, or Cash App account. The company experiences a severe failure or a run on funds – because they aren’t required to hold your money in a protected reserve, you might not recover your $1,000.

(It’s worth noting these companies do typically invest user balances in various instruments to earn interest, since they’re not paying you interest – this is part of their business model.)

Some apps advertise that funds are “FDIC-insured” via partner banks, but this can be misleading – usually that insurance only kicks in if the partner bank fails, not if the app company itself fails.

For example, PayPal and Venmo have arrangements where if you have a branded debit card or direct deposit, your balance may be swept into a real bank account that would be insured. But if you’re simply holding money in the app’s default balance, it may not have such protection unless you opt in to those features. Zelle is a bit different: it does not hold funds at all (it just instantly moves them between your actual bank accounts), so there’s no “Zelle wallet” that could fail – your risk with Zelle is more about scams than company failure.

The takeaway here is you should not use P2P apps as a savings account. Only keep the balance you need for convenience and transfer excess out to your linked bank account.

The CFPB explicitly warns that non-bank payment apps “are not suitable substitutes for traditional bank accounts” and that funds stored on these platforms could be lost in a crisis.

By regularly moving your money to an insured institution, you ensure it’s protected by federal insurance. Thankfully, transferring from apps to your bank is usually easy (though some apps charge fees for instant transfer – you can often wait 1-3 days for a free standard transfer).

Security Features and Issues of Popular P2P Apps

Next, let’s highlight specific security issues and features of some top P2P payment services: FedNow, Venmo, Cash App, Zelle, and PayPal. Each has a unique approach and history related to security. Understanding these can help you use them more safely.

FedNow: New Instant Payments Infrastructure

FedNow is not a consumer-facing app but rather a payment network launched by the U.S. Federal Reserve in July 2023. It enables banks and credit unions to offer instant bank-to-bank transfers at any time (24/7, 365 days).

In practice, you might use FedNow through your bank’s mobile app or website when sending money to someone at another bank that also supports FedNow. Because it’s new, not all banks have adopted FedNow yet in 2024–2025, but it’s expected to expand nationwide.

From a security standpoint, FedNow benefits from the Federal Reserve’s involvement – one can expect robust encryption and bank-level security standards in the network itself. The system is designed to be highly reliable and secure for interbank transfers.

However, the main security concern with FedNow is the same as with other instant payment methods: irrevocability. Once a FedNow payment is initiated and cleared (which happens in seconds), it cannot be unwound.

This is similar to the private-sector Real Time Payments (RTP) network or a wire transfer. Fraudsters are keenly aware of this “instant and final” nature. Authorized push payment fraud – where scammers con consumers or businesses into sending them money – is a threat with FedNow just as it is with Zelle or wires.

For example, if a scammer convinces you to urgently send a FedNow payment for an “emergency,” the money may be gone before you realize it was a scam, and FedNow has no built-in buyer protection or chargeback mechanism.

Because FedNow is so new, banks and their customers are still learning the fraud schemes that come with it. Other countries that launched instant pay systems saw a spike in scams; India, a pioneer in real-time payments, saw a 23% rise in real-time payment fraud in one year once adoption grew.

U.S. financial institutions will need to update their fraud detection and educate users accordingly. The Fed has encouraged participant banks to implement safeguards, but as with any tool, there’s a learning curve. Early on, professional scammers may try to exploit any lack of familiarity or gaps in oversight.

Using FedNow safely: Treat FedNow payments like cash or wire transfers – only send to people or businesses you know and trust. Double-check recipient details (since routing mistakes could send money to wrong accounts).

It’s wise for banks and businesses to implement controls like dual-approval for large transfers, but as an individual, your best defense is vigilance. The advantage of FedNow is you’re transacting directly through your bank, so you have the security of your bank’s authentication processes (like logging into your bank app).

Still, all the usual scam precautions apply. Remember, FedNow itself will not call or email you – any unsolicited message about FedNow is likely a scam.

And because it operates behind the scenes, the average user might not even realize a payment is FedNow versus ACH; regardless, keep your guard up with any instant transfer.

Venmo: Convenience Meets Social Exposure

Venmo is one of the most popular P2P apps in the U.S., known for its emoji-filled payment feed and ease of use. Security-wise, Venmo provides standard protections like encryption and the ability to set up PIN codes or biometric locks on the app. It also allows (and encourages) enabling two-factor authentication via SMS or an authenticator app.

Venmo has added a feature where when you pay someone new, you can confirm the last four digits of their phone number – a useful way to ensure you’ve got the right person. These are all good features users should utilize.

However, Venmo has had notable security criticisms over the years, particularly regarding privacy and fraud:

Public by Default: As mentioned earlier, Venmo’s default public sharing of transactions led to major privacy breaches. Even though it wasn’t a “hack,” researchers exposed how much personal detail could be gleaned from the public feed.

This is more of a design flaw than a technical vulnerability, but it’s serious – someone stalking or profiling could misuse that data.

Tip: Change your settings to make transactions private (or at least visible only to friends), and consider not using the social features for anything you wouldn’t want others to know.
Data Breach Inclusion: Venmo was one of the companies named in the huge 2024 data leak (the MOAB breach) that exposed user data. While details are scarce on what Venmo info was leaked, it put users on alert that their account details (like email, phone, possibly transaction metadata) might be circulating with hackers.

If you had a Venmo account in early 2024, it’s wise to update your password and be extra vigilant about phishing attempts.
Fraud Cases: Venmo, like others, has scams. One common Venmo-specific scam involves someone claiming they never got your payment. Because Venmo is often used among friends, scammers exploit trust – e.g., selling concert tickets, asking a buyer to pay via Venmo, then claiming “I didn’t receive it, can you send it again?”

(Meanwhile they did receive it on a duplicate account name). Always verify the actual account and use features like QR code pay or the phone number confirmation to avoid imposter accounts. Also, note that Venmo does not offer purchase protection for personal payments.

It does have a feature where certain transactions can be tagged as “Goods and Services” with a small fee to the seller, which could provide some protection – but unless you explicitly use that, a normal Venmo payment is not protected if something goes wrong.
Regulatory Scrutiny: In the past, Venmo settled with the FTC over misleading users about privacy settings and how it handled security and disputes. Venmo has since improved transparency, but it underscores that early on, the app prioritized growth over safety in some respects.

Overall, Venmo is as safe as the precautions you take. Use a strong unique password, enable 2FA, and lock the app on your phone. Double-check who you’re paying (especially if they have similar names). Keep your app updated.

By managing privacy settings and staying alert to scams, Venmo can be used securely for low-risk, everyday payments. Just remember it’s tied to real money – the playful interface shouldn’t lull you into overlooking security.

Cash App: Fast Growing, But Fraud Concerns

Cash App (by Block, Inc.) has grown rapidly, boasting over 50+ million active accounts and offering features beyond P2P (like Bitcoin and stock trading, and a Cash Card for spending).

It’s extremely convenient – you can even use it to direct-deposit paychecks – but this flexibility comes with some security pitfalls to be aware of.

On the plus side, Cash App offers strong security options to users. It uses encryption on data transfers and is PCI-DSS compliant for handling payments. It allows you to enable Security Lock, which requires additional verification (PIN or biometric) for every payment.

This feature is highly recommended – it can prevent both accidental sends and unauthorized use if someone gets access to your phone. Cash App also provides email/text alerts for transactions and login attempts.

In recent years, Cash App introduced an AI-driven scam warning system that detects when you might be about to send money to a known scam account or for a suspicious reason – and it will warn or even prevent you from proceeding.

According to the company, this has helped stop over $2 billion in potential P2P scams before they occurred. While these measures are great, Cash App users must actively use them (set up the security lock, heed the warnings, etc.).

Despite these features, Cash App has faced heavy criticism for fraud and customer support issues. In January 2025, the CFPB took action against Block (Cash App’s parent) for allowing fraud to proliferate and for poor handling of unauthorized transaction disputes.

The CFPB found that Cash App employed weak security protocols and failed to fully investigate reports of fraud, instead often telling victims to go to their bank and then denying their claims.

They also noted Cash App’s customer service was hard to reach – the official support number simply directed people back to the app for years – which in turn led frustrated users to fall into fake support scams (scammers set up phony Cash App support lines that duped people into giving up passwords).

Block was ordered to refund $100+ million to harmed users and pay penalties, and is now required to improve its fraud handling.

Some specific security incidents for Cash App include a 2022 breach where a former employee accessed and downloaded customer data of around 8.2 million users (mostly those with investing accounts linked).

No passwords were taken, but names and brokerage account numbers were. Additionally, Cash App users often report phishing messages and fake payment notifications (someone “accidentally” sends you money then asks for refund) – these are scams as described earlier.

To use Cash App safely: enable all security settings (PIN, 2FA, notifications), and never give your sign-in code or PIN to anyone. Treat any Cash App support issue only through in-app help or official email – never trust random phone numbers online for support.

Be cautious of any strangers sending you money or requesting money. And as always, double-check Cash Tag usernames when sending funds (scammers sometimes impersonate others’ Cash Tags by changing one letter). With prudent use, Cash App can be secure, but you need to be on your toes given the platform’s fraud history.

Zelle: Bank-Backed but Still Vulnerable

Zelle is a bit different from the other apps in that it’s not a standalone company but a service integrated with banks. Launched by a consortium of major banks via Early Warning Services, Zelle allows instant transfers directly between bank accounts.

If your bank offers Zelle (and most large U.S. banks do), you can send money to another person via your banking app using their email or phone number – no separate wallet or balance is held at Zelle. Because of this model, Zelle transactions occur within minutes bank-to-bank, and there’s no escrow or protection once the money moves.

From a security perspective, Zelle benefits from bank-grade authentication – you typically access it through your bank’s online banking login, which might have robust security (password, security questions, 2FA, etc.).

There’s no additional Zelle password to manage (convenient, but that also means if a fraudster has access to your online banking, they have Zelle access too).

One advantage of Zelle’s design is that there’s no intermediate storage of funds – the money goes from your bank to the recipient’s bank, so you’re not worrying about a third-party holding your balance (and no worry about FDIC insurance since your money stays in insured bank accounts until transfer).

However, the speed and finality of Zelle payments pose the same issues we’ve discussed: scams and mistakes can drain your bank account in seconds.

Zelle has gained a reputation (perhaps unfairly to the technology itself) as a tool often used in scams. The fraud rates on Zelle surged in recent years, leading to government scrutiny.

A 2022 report found the dollar amount of fraudulent transactions on Zelle at the seven owner banks was around half a billion dollars in 2021–2022, and banks were inconsistent in reimbursing victims.

As noted, a congressional report revealed only ~12% of scam victims on Zelle got their money back, which is alarming. This has prompted pressure on the banks to do more.

In response, in mid-2023 Zelle introduced a limited reimbursement policy for certain scams (specifically, clear-cut cases of someone being tricked into paying an imposter pretending to be their bank or a known business).

But this policy still only covered a small fraction of total fraud cases – roughly 15–20% of scam disputes were reimbursed in the first six months of the policy. So, while it’s a step in the right direction, the vast majority of Zelle scam victims remain uncompensated.

Using Zelle safely requires the same vigilance: Only send to people you personally know or have verified. Double-check you have the correct email/phone for the recipient (if you typo and send to a stranger, there’s no built-in reclaim – you’d have to rely on the kindness of that stranger or get your bank to reach out on your behalf).

Be extremely skeptical of any situation where someone you don’t know in person asks for a Zelle payment. Many scams (like fake apartment rentals, Facebook Marketplace scams, romance scams) will push you to pay with Zelle because it’s fast and typically irreversible.

Some banks have started adding warning pop-ups when you initiate a Zelle transfer, reminding you not to send to unknown people because it’s like cash. Heed those warnings. Also note: You cannot normally opt out of having Zelle if your bank offers it – accounts are often “Zelle-ready” by default.

So even if you don’t use it, be aware that someone could try to misuse your bank account via Zelle if they got your login – which means protecting your bank credentials is vital.

In summary, Zelle is very safe for what it’s designed for: quick payments to people you trust, like family or splitting lunch with a friend (it’s directly in your banking system, after all). But it provides no safety net if used outside that trust circle.

PayPal: The Original P2P Platform’s Approach to Security

PayPal has been around since the 1990s as one of the first digital payment platforms. It’s a bit of a hybrid – it serves as a P2P app (you can send money to friends/family) but also as a payment processor for merchants and online shopping.

Over decades, PayPal has built out quite a strong security infrastructure and buyer protection policies, but there are still caveats when using it for peer payments.

Security features: PayPal employs high-level encryption and advanced fraud monitoring. It was one of the first to offer two-factor authentication (we recommend turning this on in your PayPal settings, so you need a code to log in from a new device).

PayPal accounts are username/password based, so using a unique, strong password (and a password manager) is key.

One advantage of PayPal is you can transact without sharing bank details with the other party – all they see is your email or phone. This keeps sensitive info like your bank account or card number more insulated.

Buyer/Seller Protection: Where PayPal stands out from other P2P services is in its Purchase Protection program. If you buy eligible goods or services and pay as a commercial transaction (not using the Friends and Family option), PayPal’s policy may reimburse you if the item never arrives or isn’t as described.

This makes PayPal a preferred method for platforms like eBay and many online shops. However, note: Scammers often try to get buyers to send money via Friends and Family on PayPal, precisely because that has no protection and no fees.

If you’re buying something from an unknown seller and they ask for a Friends & Family payment, that’s a red flag – you’ll have no recourse through PayPal if it’s a scam. Always use the proper goods/services payment for commerce, even if you have to pay a small fee, because that keeps your rights intact.

For purely personal payments (like paying a friend back for dinner), PayPal functions similarly to others – no protections needed if you trust the person. Just be sure you send the correct email/number to avoid mistakes.

Fraud and breaches: PayPal’s long history means it’s seen various attacks. Phishing targeting PayPal users is extremely common – emails or texts that look like PayPal saying “Click here to resolve an issue” are often traps to steal your login.

Always access PayPal by manually navigating to its site or app, not via unsolicited links. As mentioned, a notable incident occurred in December 2022 when tens of thousands of PayPal accounts were accessed via credential stuffing.

PayPal itself wasn’t directly hacked, but since many people reuse passwords, hackers could get into PayPal accounts using login info leaked from other sites. PayPal responded well and there was no indication of further damage, but it underlines the importance of unique passwords and 2FA.

Another concern is that because PayPal is widely used, scammers leverage its brand in creative ways.

For example, fake PayPal invoices or payment requests might appear in your email – scammers can send a PayPal request to your account that looks like a bill (e.g., “You owe $600 for Tech Support – call this number if incorrect”).

Those who call the number reach the scammer, who then tries to gain access to their computer or accounts. Remember that you can cancel or ignore any request; receiving a request doesn’t charge you money. When in doubt, log in to PayPal directly and decline suspicious invoices.

Overall, PayPal can be considered one of the safer P2P options, especially for purchases, due to its protections and the company’s experience with security. But it is not immune to user error or fraud.

You should secure your account with all available measures and use the appropriate payment type for the situation. And like others, once you send a Friends/Fam payment on PayPal, you can’t retract it – so triple-check recipients.

Use PayPal’s trusted contacts feature (you can mark certain people as trusted to avoid imposters), and regularly review account activity. With prudent use, PayPal is a powerful tool for digital payments with a robust security track record.

How to Protect Yourself When Using P2P Payment Apps

While the risks are real, you don’t need to swear off P2P payment apps entirely. By taking some smart precautions, you can greatly enhance your security when using Venmo, Cash App, Zelle, PayPal, or any other platform. Here are some practical tips to protect yourself:

Enable Two-Factor Authentication and App Security Locks: Turn on 2FA for every payment app that offers it. This usually means you’ll enter a one-time code (from SMS or an authenticator app) when logging in on a new device. It adds an extra barrier for hackers.

Similarly, use features like Venmo’s PIN code, Cash App’s Security Lock, or device biometric locks for the app. This ensures even if someone gains access to your phone or password, it’s much harder for them to send money out of your account.
Use Strong, Unique Passwords: Do not reuse passwords between your payment apps and other services. As the PayPal incident showed, credential stuffing works when people recycle logins.

Use a password manager to generate and store complex passwords. This reduces the chance a breach at some unrelated site will compromise your P2P app account.
Verify Recipient Details (Double-Check Everything): Before hitting “send,” take a moment to confirm you have the right person. Scammers often create usernames that look like someone you know (e.g., john.smith vs johnsmith1).

If your app lets you, use QR codes or pick the person from your contacts list to avoid typos. Venmo’s prompt to confirm phone digits or PayPal’s profile pictures can help verify identity. If you’re paying a new contact, you might even send a small test amount first and confirm they got it.
Be Wary of Any Unsolicited or Urgent Payment Requests: This is worth repeating – if you receive a surprise message about paying someone (even if it appears to be from a company or a friend), treat it with skepticism.

Scammers prey on urgency. Don’t let anyone rush you. Take a breath and independently verify. If “your utility company” says you’re overdue and must pay via Zelle immediately, call the utility using the number on your bill – 99% of the time it’s a scam.

If a “friend” asks for money out of the blue on a P2P app, call or text them separately to confirm it’s really them. Legitimate friends won’t mind you double-checking on another channel.
Never Share Login Codes, PINs, or Personal Info: No real bank or payment app support will ever ask you for your password or verification code over the phone or text. Never give these out.

Likewise, do not follow instructions from someone to install apps or software on your phone/computer related to “resolving a payment issue” – that’s a tech support scam tactic. Keep your personal and financial info closely guarded.
Limit Your Exposure (Don’t Store Large Balances): As discussed, money sitting in Venmo/Cash App/PayPal is often not insured and is also easier for a fraudster to access than your actual bank (since P2P apps are designed to be convenient).

The safest approach is to withdraw funds to your bank regularly. For example, if you’re paid $500 on a Cash App, transfer it to your checking account rather than leaving it in the app. This way, even if someone did compromise your app, there’s less to steal at any given time.
Keep Apps Updated and Device Secure: Always install the latest updates for your payment apps – updates often patch security vulnerabilities. Also update your phone’s OS regularly. Use reputable security software if possible.

And avoid using P2P apps on public Wi-Fi networks; if you must, use a VPN. Essentially, maintain good cyber hygiene, as your device’s security is the app’s security too.
Take Advantage of App Settings & Alerts: Most apps let you turn on notifications for every transaction – do that. It’s an early warning if an unauthorized payment happens; you’ll see an alert pop up.

Some apps allow setting lower sending limits or requiring additional steps for large payments – explore the security settings and use what’s available. On PayPal, consider only linking a credit card for payments (not your bank/debit) when possible – that way you have an extra layer of credit card protection in case of a dispute.

On Zelle through your bank, you might be able to set daily send limits that are low by default and increase them only when needed.
Educate Family (especially less tech-savvy members): Many scams target older adults or new users of P2P apps. If your relatives or friends are using these services, share these safety tips with them.

For instance, let them know that no, the police or IRS will never demand Venmo or Cash App payments – any such request is a scam. Helping others recognize common fraud scenarios can prevent a costly mistake.

If despite precautions you do fall victim to a P2P scam or error, act quickly: contact your bank or the app’s support immediately. File a fraud report. In some cases, if you report within 1–2 days, the bank might be able to work with the recipient’s bank to recover funds (especially if the recipient hasn’t withdrawn them yet).

Also report the incident to the FTC and the FBI’s IC3 website – while this might not get your money back, it helps authorities track scam patterns and could support any investigation. Finally, if a significant loss occurred, you may want to freeze your credit and monitor financial accounts in case the scam involved identity theft.

Frequently Asked Questions (FAQs)

Q1. Are peer-to-peer payment apps safe to use?

A: P2P payment apps can be safe if used carefully – they employ strong encryption and generally have fraud monitoring in place. Technologically, services like Venmo, Zelle, and PayPal are as secure as banks in terms of data protection.

The real security concerns come from how they are used. The convenience of P2P apps makes it easy to send money with little friction – which also makes it easier to send money to the wrong person or to a scammer.

Unlike credit cards, P2P payments lack guaranteed fraud protection, so user caution is paramount.

In essence, the apps themselves are secure against hacking in most cases, but you must be vigilant against social engineering, double-check recipients, enable 2FA, and use the apps in the manner they were intended (i.e. sending to people you trust).

When used among family and friends with proper security settings, P2P apps are very safe. Problems arise when people use them for things like buying from strangers or responding to unsolicited requests.

Think of a P2P app like a digital cash wallet – secure in your own hands, but if you hand cash to the wrong person, the app can’t protect you. By following best practices (see the tips above), you can enjoy the speed and ease of P2P payments with minimal risk.

Q2. What is FedNow and is it secure compared to apps like Venmo?

A: FedNow is a new instant payment service launched by the Federal Reserve in 2023. It’s not an app you download; rather, it’s a payment network that banks use to clear transactions 24/7 in seconds.

When you initiate a transfer through your bank that uses FedNow, the money moves almost instantly to the recipient’s bank.

In terms of security, FedNow benefits from being operated by the central bank – it uses bank-level security protocols and isn’t directly exposed to consumers the way a mobile app is (so things like app-specific breaches or account hacks are less of an issue on FedNow itself).

However, from a user perspective, FedNow carries similar risks to other P2P methods because of its immediacy. The primary risk is that FedNow payments are irrevocable – once a payment is sent, it cannot be undone.

This is exactly like Zelle or a wire transfer. So if you mistakenly send money via a FedNow transfer or get duped into sending one, you likely won’t get that money back. FedNow by itself doesn’t provide features like escrow, purchase protection, or dispute resolution for consumers – those would be handled by your bank.

Q3. Which is the safest P2P payment app to use?

A: It’s hard to declare one app as the safest – all major P2P payment platforms have similar security measures like encryption and optional two-factor authentication. The “safety” often depends more on how you use the app.

That said, there are some differences: PayPal is often considered one of the safest for transactions with strangers, because if you use a business transaction (Goods and Services) you have buyer protection that others lack.

So for buying items, PayPal (with the proper payment setting) offers recourse that Venmo, Cash App, or Zelle do not. Zelle could be deemed “safe” in that it’s bank-operated and there’s no third-party holding your money – but Zelle also has among the highest scam rates, so if you use it outside of known contacts, it can be risky.

Venmo and Cash App are very safe for sending to friends/family, and they have solid security features, but if used for things like marketplace purchases or if you neglect privacy settings, you might encounter issues.

FedNow isn’t an app but will likely be used in many banking apps; it’s as safe as your bank’s controls, which are generally excellent, but again – scams can happen on any instant payment rail.

Q4. Can I get my money back if I sent it to the wrong person or got scammed on a payment app?

A: In most cases, unfortunately no. P2P payments are designed to be fast and final. If you send money to the wrong person, you usually cannot force a reversal.

Your best option is to quickly contact the app’s support and (if it’s through a bank like Zelle) your bank, explain the mistake, and hope they can coordinate a return.

Sometimes if the recipient hasn’t withdrawn the funds and is cooperative, the app can facilitate a return – but if the recipient refuses or has already spent the money, you’re out of luck. For scams, the outlook is similarly grim.

As discussed, the majority of users do not get refunded for voluntary transfers that turn out fraudulent. Some platforms may investigate if you claim unauthorized access (someone hacked your account), and then you might get a refund through their fraud policies or Reg E protection.

But if you willingly sent money to a scammer (thinking you were paying someone legitimate), it’s typically considered an “authorized” transaction even under the law.

One exception: if you bought something using PayPal’s Goods/Services payment, you can open a dispute – if you can prove you never got what you paid for, PayPal might reimburse you under their buyer protection.

Also, in limited cases Zelle’s new policy might reimburse certain impersonation scams, but those are very narrow criteria and handled case-by-case by the banks. Overall, you should operate under the assumption that P2P payments are non-refundable.

It’s like handing over cash – once it’s gone, it’s gone. That’s why it’s crucial to double-check details and only send money in situations where you’re sure.

If you did send money wrongfully, report it immediately; while chances are low, a quick report is your best bet to possibly freeze the funds. And always report scams to authorities – even if you can’t get a refund, it might help prevent others from being victimized.

Q5. Is the money in my Venmo/Cash App/PayPal account FDIC insured?

A: Generally, no – funds stored in most P2P app accounts are not FDIC insured in your name. This is an important distinction. If you have $500 sitting in Venmo or Cash App, that is not the same as $500 in your bank checking account.

If the company behind the app were to fail or lose funds, there’s no government guarantee you’d get your money back. The Consumer Financial Protection Bureau warned in 2023 that funds held in non-bank payment apps could be at risk in a company failure or crisis.

Some apps have taken steps to mitigate this: for example, PayPal and Venmo have introduced a feature where user balances are deposited into pooled accounts at partner banks which could provide pass-through FDIC insurance.

However, this only applies under certain conditions (like you have to verify your identity and agree to have a “Cash Account” or use direct deposit features). Even then, the insurance covers the bank holding the funds, not the payment company itself.

Cash App similarly holds balances in partner banks for those with the Cash Card, which can make those funds insured. The details can be confusing, so the safest assumption is: if your money hasn’t been moved into a real bank account, it’s not insured.

To protect yourself, it’s best not to leave large sums in the app. Transfer your balance to your linked bank account, which is FDIC/NCUA insured, especially for any long-term holding. Using the app as a pass-through (rather than a piggybank) is wise.

One exception is Apple Cash, which actually does store funds in an FDIC-insured account (Apple Cash balances are held by Green Dot Bank). But for the major apps mentioned: Venmo, Cash App, PayPal – assume it’s uninsured by default unless you’ve specifically enrolled in a feature that states otherwise.

Always check the app’s terms or FAQs on “insuring balances” if you plan to keep money there. And remember, even insured or not, it’s safer in your actual bank where you have full regulatory protections.

Conclusion

Peer-to-peer payment apps have undeniably made everyday financial interactions more convenient. Splitting bills, paying friends, or sending money in a pinch is easier than ever in the USA thanks to services like Venmo, Cash App, Zelle, PayPal, and the FedNow instant transfer system.

But with great convenience comes new responsibilities for users. Security issues with P2P payment apps range from technical data breaches to the very human problem of fraud and mistakes.

The fast, real-time nature of these payments means both users and the apps themselves have less time to react when something goes wrong.

The good news is that by staying informed and adopting safe habits, you can significantly reduce the risks. Treat P2P payments with the same caution you would physical cash. Verify recipients, enable security features, and don’t hesitate to slow down or refuse a payment if something feels off.

Remember that your financial safety is ultimately in your hands – no app can 100% guarantee it for you. U.S. regulators and the apps are continuing to improve security (for instance, introducing refund policies for scams or enhancing fraud detection), but those measures are catching up to a problem that’s already well-entrenched.

In summary, P2P apps are powerful tools that can be used securely with a bit of care. Enjoy the convenience – just be sure to keep your guard up.

By following the guidelines and best practices outlined in this article, you can confidently take advantage of instant payments while keeping your money and information safe from the most common pitfalls. Happy (and safe) transacting!