PSA: Don't use P2P money transfer services like Venmo with people you don't know

Posted:
in iPhone edited November 2015
While smartphone-based person-to-person payment services are convenient, they aren't necessarily a secure or guaranteed way to receive money. If you're doing business with an unknown person, such as selling an item on Craigslist, you should just stick to cash. Here's why.




tl;dr: Don't use Venmo with people you don't personally know.

Scammers have found ways to exploit P2P payment services by transferring money that isn't actually in their account. I experienced this con firsthand this week selling iPhones on Craigslist.

The crime was perpetrated through Venmo, one of the most popular P2P payments services, through its official app for iPhone.

Because the fraudulent "transaction" is accomplished through the official app, it might appear to some users that the money has been verified and is in the process of being transferred to the recipient's bank account. This isn't a spoofed PayPal email or a Nigerian prince seeking a money transfer --?the fact that the notices come through an official app may give some users a false feeling that the money is there instantly. It's not.

As detailed in an explanation of the system published by Slate, scammers can ensure victims never receive the money they are promised. Essentially, con artists commit to sending money that isn't actually available in the connected bank account.

The catch is, the transaction isn't protected or guaranteed. As a result, a victim can end up losing out.

Venmo's terms of service state that "business, commercial, or merchant transactions may not be conducted using personal accounts." In addition, the service offers zero guaranteed buyer protections in the event of fraud.




AppleInsider reached out to Venmo after I fell for the scam, and the company provided the following statement:

"Venmo is designed for payments between friends and people who trust each other. We encourage our users to avoid payments to people they don't know, especially if it involves a sale for goods and services (like event tickets and Craigslist items), as these payments are risky and can result in people losing their money without getting what they paid for. Because of this, we discourage people from using Venmo to purchase or sell goods and services to or from people they don't know. More information on how our users can protect themselves can be found here https://venmo.com/about/security/."

Though I was duped and clearly should have been more careful, Venmo thankfully recovered the money I was owed. A considerable sum, too --?$950.

It's unclear how often and in what circumstances Venmo might offer refunds to victims. The company's terms of service (if you read them) make it clear that transactions are not guaranteed or protected, and in other cases Venmo has told customers that they don't resolve disputes.

One victim profiled by Slate was contacted by Venmo about a month after they were supposed to have received $2,400 for NBA tickets. The P2P transfer service explained that the sender had insufficient funds in their account for the transaction. Venmo's solution in that instance: Contact the buyer yourself.

In my case, Venmo resolved my dispute in about 17 hours. The money was refunded Tuesday about an hour after I asked the company for a comment for this story.




AppleInsider recently featured Venmo in our roundup of the best ways to send money with your iPhone. Having grown on American college campuses, it has become the default option for many people sending money, though the lack of protections associated with the service may be unknown to some users.

Issues with existing services only serve to highlight the kinds of hurdles Apple faces, and could potentially resolve, with its own P2P payment system. Earlier this month, it was said that the company is looking to build P2P transaction capabilities into Apple Pay, its mobile wallet service.

With a P2P Apple Pay system, users would presumably be able to directly transfer money to another person directly, putting Apple in a position to compete with current options like Venmo, Square Cash, Google Wallet, and even banks themselves.

Regardless, the lesson here is to only use services like Venmo or Square Cash with people that you know and trust. It's simply not a safe option for receiving money from an unknown person.
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Comments

  • Reply 1 of 39

    I guess we all can't be writing articles about a service while asking it for a refund. You do realize that you only got your money due to the position you are in right?

     

    "In my case, Venmo resolved my dispute in about 17 hours. The money was refunded Tuesday about an hour after I asked the company for a comment for this story."

     

    So your case would in no way represent the real world for all the other users of this service. Saying that, your advice to avoid services like this is valid.

  • Reply 2 of 39
    mike1mike1 Posts: 1,898member

    Why anybody would use these services is beyond me. Just use your bank's person-to-person payment service. Easy and secure.

  • Reply 3 of 39
    maestro64maestro64 Posts: 4,596member
    Quote:

    Originally Posted by GadgetCanadaV2 View Post

     

    I guess we all can't be writing articles about a service while asking it for a refund. You do realize that you only got your money due to the position you are in right?

     

    "In my case, Venmo resolved my dispute in about 17 hours. The money was refunded Tuesday about an hour after I asked the company for a comment for this story."

     

    So your case would in no way represent the real world for all the other users of this service. Saying that, your advice to avoid services like this is valid.




    Neil, I have to agree your experience is not going to be the same as everyone else's which you did note.

     

    I can not believe the things people will do. Remember deal in cash and only cash and anyone seeking paying or money any other way is most likely looking to rip you off. I can not tell all the method scammer have tried to use to get money out of me when I am selling something or buying. I have a stack of certify check which are all fake and the idiots expect me cash them and immediately send them the item.

     

    The most recent scam is to ask you to trade and item and they send you a link to another craigslist item but it ask you to log in first so they trying to get your log in information so they can scam other people.

     

    As the saying goes, a foul and his money are soon parted. Remember Cash is king and in your hands is the only way to deal with people you do not know.

  • Reply 4 of 39
    The lesson here is don't use Venmo. Thanks for the heads up. These people are jokers.
  • Reply 5 of 39
    mike1mike1 Posts: 1,898member
    Quote:

    Originally Posted by LordJohnWhorfin View Post



    The lesson here is don't use Venmo. Thanks for the heads up. These people are jokers.

    One could argue that a credit card is best for people you don't know. At least there are protections available for undelivered goods/services. Of course, I recognize this really doesn't apply to individuals doing Craigslist transactions or the like.

  • Reply 6 of 39
    radarthekatradarthekat Posts: 3,093moderator
    I guess we all can't be writing articles about a service while asking it for a refund. You do realize that you only got your money due to the position you are in right?

    "In my case, Venmo resolved my dispute in about 17 hours. The money was refunded Tuesday about an hour after I asked the company for a comment for this story."

    So your case would in no way represent the real world for all the other users of this service. Saying that, your advice to avoid services like this is valid.

    Pretty sure that was the wink and nod implication Neil was putting out there for us to pick up on, while attempting to be even-handed with Venmo since they were kind enough to make him whole out of their own pocket. (Clearly they didn't get the money from the scammer.)
  • Reply 7 of 39
    Quote:

    Originally Posted by GadgetCanadaV2 View Post

     

    I guess we all can't be writing articles about a service while asking it for a refund. You do realize that you only got your money due to the position you are in right?

     

    "In my case, Venmo resolved my dispute in about 17 hours. The money was refunded Tuesday about an hour after I asked the company for a comment for this story."

     

    So your case would in no way represent the real world for all the other users of this service. Saying that, your advice to avoid services like this is valid.




    I agree with RadartheKat....

    The article made it pretty clear that he was lucky enough to get a refund due to his position.  So not sure why you are ripping him for that or thinking that he is not aware of that.  Heck, why else would the whole point of the article be that such transfers are not safe.  

  • Reply 8 of 39
    Had an experience exactly like the author, even for a very similar amount of money ($900). Only difference was that I thought I knew the person who was sending me money, albeit not very well. Still, after our exchange they disappeared off the face of the earth and I was out $900. This was over 4 months ago and I am still locked out of my Venmo account and Venmo customer service never gave me a reasonable answer about how I could even get my account unfrozen. It's incredibly frustrating. If anybody has any suggestions about what I can do, I'd really appreciate it. Ideally I'd like the money back, but understand that at this point I'd be lucky to even get them to acknowledge me. Truly horrible customer service.
  • Reply 9 of 39

    I may be missing something here but these money transfer services are as safe as cash. They offer to transfer money from your account to someone else's. No representation is made that the other person will deliver value for that money. It's like someone in the street asking for $10 and saying they will bring you your concert tickets later. You hand over your $10 and the person goes away. They'll be back, right?

     

    The only advantage to cash is that you can demand the tickets right away and there is no real need to let the person out of your sight. The advantage to the P2P is that the "scammer" has an account that at some point might have cash in it from which a future refund may be made (albeit essentially coming from someone else who was scammed but has not yet successfully complained).

     

    The only real safety comes when an independent third party gets involved who performs both sides of the transaction (essentially an escrow). Or, perhaps if the party on the receiving end of the money has something to lose if they don't deliver (vendor reputation or a bond of some kind). Dispute resolution becomes non trivial in these systems though.

     

    So, as in all things, buyer beware.

     

    (All donations to my "buy a bridge" fund gratefully received).

  • Reply 10 of 39
    chadbagchadbag Posts: 1,096member
    Quote:
    Originally Posted by softeky View Post

     

    I may be missing something here but these money transfer services are as safe as cash. They offer to transfer money from your account to someone else's. No representation is made that the other person will deliver value for that money. It's like someone in the street asking for $10 and saying they will bring you your concert tickets later. You hand over your $10 and the person goes away. They'll be back, right?

     

    The only advantage to cash is that you can demand the tickets right away and there is no real need to let the person out of your sight. The advantage to the P2P is that the "scammer" has an account that at some point might have cash in it from which a future refund may be made (albeit essentially coming from someone else who was scammed but has not yet successfully complained).

     

    The only real safety comes when an independent third party gets involved who performs both sides of the transaction (essentially an escrow). Or, perhaps if the party on the receiving end of the money has something to lose if they don't deliver (vendor reputation or a bond of some kind). Dispute resolution becomes non trivial in these systems though.

     

    So, as in all things, buyer beware.

     

    (All donations to my "buy a bridge" fund gratefully received).




    No, Venmo is not as safe as cash.   

     

    IIRC Venmo allows you to make a payment to someone that is drawn from your bank account.  Venmo does not wait for the money to clear from your bank account before letting you pay your "friend."  So you get credited with that money immediately.  So the scammer says he'll pay you $950 and Venmo okays this and credits your account the $950 and sends a request to the scammer's bank to get the $950 from him.   You give the scammer the iPhones he is buying and he takes off.  When his bank account refuses to give Venmo the $950, they come to YOU for it and unwind the payment.

     

    Scammer has your iPhones, you have nothing.

  • Reply 11 of 39
    sdw2001sdw2001 Posts: 17,037member
    Quote:

    Originally Posted by softeky View Post

     

    I may be missing something here but these money transfer services are as safe as cash. They offer to transfer money from your account to someone else's. No representation is made that the other person will deliver value for that money. It's like someone in the street asking for $10 and saying they will bring you your concert tickets later. You hand over your $10 and the person goes away. They'll be back, right?

     

    The only advantage to cash is that you can demand the tickets right away and there is no real need to let the person out of your sight. The advantage to the P2P is that the "scammer" has an account that at some point might have cash in it from which a future refund may be made (albeit essentially coming from someone else who was scammed but has not yet successfully complained).

     

    The only real safety comes when an independent third party gets involved who performs both sides of the transaction (essentially an escrow). Or, perhaps if the party on the receiving end of the money has something to lose if they don't deliver (vendor reputation or a bond of some kind). Dispute resolution becomes non trivial in these systems though.

     

    So, as in all things, buyer beware.

     

    (All donations to my "buy a bridge" fund gratefully received).


     

    You're absolutely missing something.  In this case, it's not the goods that were fraudulent, it was the money itself.  You could sell me an iPhone for $500, and I could "pay" you.  You get the notification and give me the phone.  Then you realize I have NSF and you're out the phone.  

  • Reply 12 of 39
    Got scammed on Flippa using PayPal. Seller didn't deliver and PayPal only covers physical goods... Not electronic.
  • Reply 13 of 39
    This is an old scam that is common on eBay. The buyer manually marks the item as paid. Then a red PAID stamp appears on your seller page. But no payment has been sent. They are trying to dupe sellers into shipping before payment has actually occurred. I contacted eBay and they said never ship until you get an email from PayPal indicating the money was transferred and the transaction was Seller Protection eligible.

    There is a notorious fraud ring on eBay, all using the same shipping address, a freight forwarding company in Delaware. If you google that address, you will find hundreds of complaints about this fraud ring, complaints go back for years and nothing has been done. Some people even contacted the local Delaware Police and they refused to take action. I notified eBay security, they did nothing. They told me the fraudulent buyer said his account was hacked. Yeah right. Ebay also scammed me for a relisting fee, they make more money when fraudulent auctions are cancelled. They only care about making more fees. They are exploiting sellers.
  • Reply 14 of 39
    Quote:

    Originally Posted by SDW2001 View Post

     

     

    You're absolutely missing something.  In this case, it's not the goods that were fraudulent, it was the money itself.  You could sell me an iPhone for $500, and I could "pay" you.  You get the notification and give me the phone.  Then you realize I have NSF and you're out the phone.  


     

     

    Quote:

    Originally Posted by chadbag View Post

     



    No, Venmo is not as safe as cash.   

     

    IIRC Venmo allows you to make a payment to someone that is drawn from your bank account.  Venmo does not wait for the money to clear from your bank account before letting you pay your "friend."  So you get credited with that money immediately.  So the scammer says he'll pay you $950 and Venmo okays this and credits your account the $950 and sends a request to the scammer's bank to get the $950 from him.   You give the scammer the iPhones he is buying and he takes off.  When his bank account refuses to give Venmo the $950, they come to YOU for it and unwind the payment.

     

    Scammer has your iPhones, you have nothing.




    Oh my - that's HUGE. Thanks for the clarification. What poor programming that does not wait for end-to-end verification of electronic transactions. Hopefully ApplePay will just do card-to-card transfers that are backed by the card companies and properly confirmed.

  • Reply 15 of 39
    Quote:

    Originally Posted by tknull View Post

     



    I agree with RadartheKat....

    The article made it pretty clear that he was lucky enough to get a refund due to his position.  So not sure why you are ripping him for that or thinking that he is not aware of that.  Heck, why else would the whole point of the article be that such transfers are not safe.  




    Fine....call me Captain Obvious then :rolleyes:. I really wouldn't call that "ripping him". I said his point was valid.

  • Reply 16 of 39
    citycity Posts: 522member

     Deleted

  • Reply 17 of 39
    chadbagchadbag Posts: 1,096member
    Quote:

    Originally Posted by softeky View Post

     

     

     



    Oh my - that's HUGE. Thanks for the clarification. What poor programming that does not wait for end-to-end verification of electronic transactions. Hopefully ApplePay will just do card-to-card transfers that are backed by the card companies and properly confirmed.




    The reason is for the immediacy of it.   It takes about 2 days or more for an end to end request from your bank to get back to the company -- from when Venmo submits the request to when they get the money back.   They don't want you to have to wait that long.

     

    Last time I used it, which was about a year and a quarter ago, Venmo did not allow you to pre-load your Venmo account out of your bank account so that you have a balance there already.  So they "float" you the money instead when you pay someone and then get it from your bank account.  (This may have changed since I don't know -- I just tried to log in but can't remember my login details).

     

    disclaimer:  I've been working for a small P2P payment system that launched this Spring (not Venmo).

  • Reply 18 of 39
    maestro64maestro64 Posts: 4,596member
    charles1 wrote: »
    This is an old scam that is common on eBay. The buyer manually marks the item as paid. Then a red PAID stamp appears on your seller page. But no payment has been sent. They are trying to dupe sellers into shipping before payment has actually occurred. I contacted eBay and they said never ship until you get an email from PayPal indicating the money was transferred and the transaction was Seller Protection eligible.

    There is a notorious fraud ring on eBay, all using the same shipping address, a freight forwarding company in Delaware. If you google that address, you will find hundreds of complaints about this fraud ring, complaints go back for years and nothing has been done. Some people even contacted the local Delaware Police and they refused to take action. I notified eBay security, they did nothing. They told me the fraudulent buyer said his account was hacked. Yeah right. Ebay also scammed me for a relisting fee, they make more money when fraudulent auctions are cancelled. They only care about making more fees. They are exploiting sellers.

    Because of this any time I sold things on eBay I would get their name and address and do a reverse look up on the name and address and few time they did not match up so I would not ship. I would get pooh it's my work address our my parents house, too bad I not shipping to and unknown address.
  • Reply 19 of 39
    Cash can be fake too. The only really safe payment is a wire transfer. Sounds like Venmo and the like are no different than checks.
  • Reply 20 of 39
    tenlytenly Posts: 707member
    I don't get why we still don't have instantaneous transfers. If I am out shopping and try to use my credit or debit card to make a purchase, the transaction is reflected if there are insufficient funds available.

    Why can't this same system be utilized for person to person payments? There is no good reason why someone should be able to "complete" a transaction with funds they don't have, and there is no good reason why a seller should have to wonder if the money that was just deposited to their account is "real".

    In Venmo's defense, it does appear that they have been upfront and straightforward about what their service is. It's just a crappy service. I'm wondering though if there is any way a receiver can tell by looking at their account how much money has been fully received and how much is still at risk of being clawed back?

    I recently had a pre-authorized bill payment rejected because I was $12 short due to a account service fees being deducted the day before. Sure - I should have kept a better eye on it, but it's an account I seldom use and there is usually more than enough money in it to cover this one monthly payment - but I was shocked to find out that the banks and merchant still treat that as if it was a bounced check! The bank charged me $45 and the merchant charged me $75 for being $12 short on a $58 ELECTRONIC bill payment! If I hadn't agreed to do the pre-authorized payment, I could have ignored the bill completely and I would have been charged a 2% late fee the following month. In the old days these fees might have been somewhat justified because it may have triggered some manual accounting to correct the NSF....but in this day of electronic transfers and computers, the whole process is automated and $120 in penalties for accidentally being $12 short on a $58 bill payment is completely ridiculous! I'll NEVER sign up for pre-authorized payments again and I would encourage all of you to learn from my mistake and think twice before agreeing to let a merchant pull money directly from your account! Just say NO to pre-authorized payments! It may seem slightly more convenient but it's definitely not worth it if you ever miscalculate or forget to transfer money in on time.

    Apologies for that tangent. The point I was trying to make was that instantaneous transfers should be possible today - and they ARE possible for transactions that suit the banks (ATM withdrawals, debit card purchases, etc). I'm almost certain that the reason they don't offer it for person to person transfers is greed based. Somehow they are able to collect more in the way of fees, service charges and/or interest by intentionally delaying the transaction.

    One more good example of an antiquated system that should have been modernized a long time ago is the stock market. Transactions take 3 days to settle? WTF? Why is that? If I sell Apple stock today, why do I have to wait 3 days to get the money for it? Is there still a chance that the sale doesn't go through? Even with my money held in a MoneyMarket fund by my brokerage, they make me wait a full day before I can get the cash. They hold the fund and therefore the cash comes from them. Why can't they give it to me immediately? The answer is that they can. They just won't. I'm not sure exactly HOW it benefits them to build in these artificial, unnecessary delays - but I am quite sure that it DOES benefit them. Eventually - some bank will offer the "instant" transfer and you can bet that when they do, they'll have found a way to charge you extra for the "added convenience".
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