The growth of peer-to-peer payment services including Venmo, Zelle, and Cash App has triggered a wave of scams in which victims may have little chance of recovering their money. More than ever, fraudsters are finding ways to exploit their targets’ payment apps, sometimes by tricking victims into lending them their smartphones. When scammers gain control of a phone, they can click on the apps to withdraw money and make online purchases – without getting caught or penalized.

In a January 22 letter to Cash App, Manhattan District Attorney Alvin L. Bragg Jr. expressed concern over the growing number of payment frauds in the New York area and urged the industry to strengthen consumer protections. Online payment services burgeoned during the pandemic and now represent nearly a trillion-dollar industry. Such claims of fraud tripled between 2020 and 2022, according to Bragg, costing consumers “hundreds of millions of dollars” a year.

Victims may have little recourse. “While cash apps, like PayPal and Venmo, offer consumers an easy and fast method to transfer funds, they also have made these platforms a favorite of fraudsters because consumers have no option to cancel transactions, even moments after authorizing them,” Bragg wrote in the letter.

Scammers may deceive their victims by pretending they need to borrow a phone for a legitimate call. Criminals have been known to assault or drug people to give up passwords or other authentication required to use a financial platform, Bragg said. In Los Angeles, criminals robbed several individuals of thousands of dollars at knife point to get into their Venmo accounts. Robberies also have been reported in West Virginia, Louisiana, Illinois, Kansas, Tennessee, and Virginia.

In the letter Bragg urged the payment apps to consider a range of steps to protect consumers including:

• Use “multi-factor authentication,” which requires additional proof of identity to open the app along with a password to access the app (as a default option).
• Reduce the amount of cash that can be moved out of the payment app in the course of a day.
• Require wait times in cases of unusually large transactions.