Mobile payment apps, such as Venmo and PayPal have gained in popularity, but is the cost of convenience the security of your money? As financial planners, we want you to understand the risks and benefits. If you’re wondering, are payment apps safe? Here are useful facts you need to know.
How Payment Apps Work
If you don’t already use a mobile payment app, here’s how they work: First, you download the app and create an account. You’ll then choose the payment method to connect to the account, such as a bank account or credit card. Then you can send and receive money. When you receive money, it won’t go immediately to your bank account, but will instead be added to your balance in the app. You have the ability to leave the money in the app and use it to fund future transactions or you can transfer it to your bank account.
The bank account information you enter and the transactions themselves are a safe way to transfer money. In fact, mobile payments are more secure than traditional payment methods, such as a credit card or check, since your financial information is not exposed during the transaction. That doesn’t mean payment apps don’t come with risks, one of the biggest of which is scammers.
How to Avoid a Scam
Scammers attempt to get people to send them money through a mobile payment app, since getting the money back once it’s sent is incredibly difficult, if not impossible. One common scam involves the scammer pretending to be a loved one in some sort of financial trouble. The scenario may be vague and improbable or might include many accurate details.
For example, let’s say a scammer sends out a mass email looking for automatic out of office (OOO) responses and they get one from your brother who is at a conference in Las Vegas. The scammer could then pretend to be your brother and send you a message asking you to send him money because he lost his wallet at the airport. If you ever receive an unexpected request for money, whether it’s from someone you know or not, call the person and make sure the request is legitimate.
How to Avoid Sending Money to the Wrong Person
You could also send money to the wrong person by accident, in which case you’re completely reliant on the good nature of the other person to return your money. This is more likely to occur if you’re paying someone for the first time. A simple way to avoid sending money to the wrong person is to have the person send you a payment request. This ensures you’re sending the money to the correct person. If the app doesn’t have a request option, you could also send a smaller amount as a test payment. A smaller test payment is an especially good idea if you’re sending a large amount of money.
How to Keep Your Smartphone Safe
If you use a mobile payment app or mobile wallet another potential concern is someone gaining access to your phone. Best practices, whether you use a mobile payment app or not, include never leaving your phone unattended in public, remaining aware of your surroundings while using your smartphone, and making sure your smartphone requires a password to log in (or fingerprint/facial recognition). You should also use a unique password for all of your mobile apps, including any mobile payment apps.
Additionally, you should never use mobile payment services on an unsecured Wi-Fi network. If you’re on public Wi-Fi, for example at a coffee shop or hotel, you should avoid entering passwords for financial accounts or making any financial transactions, since public Wi-Fi networks can provide access points for hackers. That doesn’t mean you can’t ever use a mobile payment app in public (that would defeat the purpose of their convenience). You just need to make sure to disconnect from public Wi-Fi, (in your phone’s settings). You’ll then be using data and you can securely send or receive funds. Once you’re finished you can reconnect to the public Wi-Fi network.
What to Do if You Lose Your Smartphone
If you lose your smartphone, the first thing you’ll want to do is figure out if it was stolen or simply misplaced. Depending on the type of phone you have, you may be able to find it using the GPS locator. If you have an iPhone, you can use the Find My app to locate your phone. If you have security software installed on your phone you can use it to lock your phone and wipe personal information. You’ll want to report the loss to your wireless carrier and if you believe the phone stolen, you’ll also want to report the theft to the police. Finally, if you can’t lock and wipe your phone, you’ll want to change all passwords for your mobile payment apps (you can do this through logging in on any computer). You’ll also want to change any passwords for accounts of any financial accounts you accessed from your phone, whether or not you have the apps on your phone.
So, Are Payment Apps Safe?
Every payment option, be it cash, credit card or check, has its risks, and mobile payment apps are no different. If you choose to use mobile payment apps, a few simple precautions can go a long way in helping to maintain your financial security.
If you’d like even more security in your future through financial planning, contact us to talk to an advisor.
Additional Resources:
Nerdwallet.com, "Can You Really Trust Your Payment App?"
Consumer.ftc.gov, "Mobile Payment Apps: How To Avoid a Scam When You Use One"
Consumerfinance.gov, "Helpful tips for using mobile payment services and avoiding risky mistakes"
FCC.gov, "Mobile Wallet Services Protection"
FCC.gov, "Wireless Connections and Bluetooth Security Tips"
Support.apple.com, "Use the Find My App to Locate a Missing Device or Item"
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