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

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Comments

  • Reply 21 of 39
    irelandireland Posts: 17,798member

    It seems insane for the app to show you in-app notification for receiving $950 when the buyer has no money to give you in their account. Seems like a huge oversight for the developers of Venmo, which I believe is eBay now. Surely there has to be a simple method to solve this, like the app do a check to see if the money is there before sending it—duh.

  • Reply 22 of 39
    cnocbuicnocbui Posts: 3,613member

    Paypal have always upheld any disputes I have had and refunded my money.  Their currency conversion fees and rates may be unfavourable but it's a bit like paying for insurance.

  • Reply 23 of 39
    tenly wrote: »
    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".

    I was thinking pretty much the same as you. Absolutely no reason these transactions cant be instantaneous. Or at the least the notification email says it will semd a followup email once funds have in fact been confirmed and transfered.
    And im with you on those bank fees. I even saw my account was $29 negative once... AFTER a $35 overdraft fee. I never did get an explanation on how i was overdrawn if even after that fee i was overdrawn by less than the amount of the fee. Oddly, my current bank, BOA, does not charge me for being overdrawn for some things... But pre scheduled stuff does charge. You would think that they would want to encourage these, not punish for them.
  • Reply 24 of 39
    chadbagchadbag Posts: 2,007member

    One reason that things are not instantaneous in the US, for bank account transfers, is that it all uses the ACH system, which is an antiquated system.  There is no national bank system for dealing with money transfers that people and services like Venmo can use.  Some services use or are trying to use the debit card system, since that does do stuff into and out of bank accounts more quickly, but it has its own limitations and disadvantages, and pre-requisites.  And even then a person can complain to their bank and get things reversed.

     

    https://en.wikipedia.org/wiki/Automated_Clearing_House

     

    With ACH, transactions are fed up to the Federal Reserve (this can be done instantaneously, or all at once at the end of the day -- does not really matter).   Then the Federal Reserve processes them all in the middle of the night.  The banks get them the next day.  If a person does not have enough money in their account, their bank then signals back in the next days batch that status, which is then settled by the Federal Reserve that night, and your bank gets it back the next day.  2 days from when it started.

     

    The whole ACH system does work on the trust model though.   It assumes all transactions are valid and good.   You do a transaction and your bank will credit it to you before the actual money comes through.  If the transaction does fail the bank then yanks the money back out.

     

    I am not an expert but have had to learn about it (ACH) as we use this for our system's loading and unloading of accounts.   We don't credit a user until the money has actually come through, so if you pay someone with our system, the money was already in your account so it can't as easily be recalled (it can be recalled if you go to your bank and allege fraud, but we have checks and balances that makes that hard to sustain) so this sort of scam would be harder in our system.  Also, you can only send and receive money from people who are (at the moment of the transaction) in your friends list.   Not with random users.

     

    To be able to do instantaneous transactions with bank accounts in the US would require a new transaction system to be created and all banks to subscribe to it.  Other countries like the UK which have this are much smaller and have far fewer banks to deal with so such an undertaking in the US would be hard to accomplish.  It needs to be done but is hard due to the number of banks, the costs involved, etc.

  • Reply 25 of 39
    chadbagchadbag Posts: 2,007member
    Quote:

    Originally Posted by Ireland View Post

     

    It seems insane for the app to show you in-app notification for receiving $950 when the buyer has no money to give you in their account. Seems like a huge oversight for the developers of Venmo, which I believe is eBay now. Surely there has to be a simple method to solve this, like the app do a check to see if the money is there before sending it—duh.




    Venmo is owned by Braintree, which is now owned by PayPal.  Since eBay and PayPal split, eBay is no longer connected to Venmo.

     

    See my comments on ACH.  Venmo assumes you have the money you say you do and "floats" you the money.   When you don't have it, it takes it back.  They do their transactions through ACH with customer bank accounts, which takes multiple days to finish.   Just like a check. (I believe checks go through and are settled through ACH as well, with a different set of codes than transfers).

  • Reply 26 of 39
    Quote:
    Originally Posted by chadbag View Post

     

    One reason that things are not instantaneous in the US, for bank account transfers, is that it all uses the ACH system, which is an antiquated system.  


     

    It's not antiquated. Its done that way by design because it allows efficient netting, reducing liquidity requirements and therefore costs. Say a $1 M payment is made from Bank A to Bank B. Under the wire system, which is instant, Bank A needs to have $1 M on deposit with the Fed which is then transferred in full. Later that day, Bank B makes a payment to Bank A for $900 K. Then Bank A gets $900K of its own money back.

     

    FedACH (as well as Visa and Mastercard and debit systems) wait until the end of the day. They cancel out payments, so in this case, Bank A only needs to have $100K of cash, allowing $900K to be put into investments.

     

    Quote:

    With ACH, transactions are fed up to the Federal Reserve


     

    There's an alternative network called CHIPS EPN, which handles 40% of ACH transactions in the US, which handles it differently. Banks put in a certain amount of liquidity, and the system clears transactions as much as possible. In the above example, the system would hold on to the $1M transaction until the $900K came along. It would check if Bank A had $100K of cash available, and if so, then clear the two transactions at once. Otherwise, it would hold on to them until a combination of transactions came along. This means its faster than daily, but not real-time.

     

    The other way is to do it like Visa and Mastercard. They separate the authorization from the clearing. Say somebody steals my card and makes a properly authorized in-person transaction. I report it within hours. That authorization is binding... my bank still has to pay the merchant even though they know it was fraudulent. Of course, the bank has higher fraud costs, and therefore merchants have to pay for it.

  • Reply 27 of 39
    chadbagchadbag Posts: 2,007member
    Quote:
    Originally Posted by konqerror View Post

     

    The other way is to do it like Visa and Mastercard. They separate the authorization from the clearing. Say somebody steals my card and makes a properly authorized in-person transaction. I report it within hours. That authorization is binding... my bank still has to pay the merchant even though they know it was fraudulent. Of course, the bank has higher fraud costs, and therefore merchants have to pay for it.


     

    And the bank will then do a chargeback to the merchant at the behest of the customer, who (merchant) then has to prove he acted in good faith.  Merchants are not guaranteed to lose bit it is a hassle and drives up costs to defend against these.

     

    I had a "customer" who was buying stuff with someone else's credit card.  Two months in a row.   The person whose card was stolen eventually reported it and it was all charged back to me.   I got the money in the end as I could show that the person whose card was stolen did not report it within the amount of time required by statute, since he had gotten statements a couple months in a row that showed the "fraudulent" purchases and had not reported it right away.   But I could have lost if the customer had been more timely in reporting it.  And I had to go through the motions and defend myself.

  • Reply 28 of 39
    chadbagchadbag Posts: 2,007member
    Quote:

    Originally Posted by konqerror View Post

     

    There's an alternative network called CHIPS EPN, which handles 40% of ACH transactions in the US, which handles it differently. Banks put in a certain amount of liquidity, and the system clears transactions as much as possible. In the above example, the system would hold on to the $1M transaction until the $900K came along. It would check if Bank A had $100K of cash available, and if so, then clear the two transactions at once. Otherwise, it would hold on to them until a combination of transactions came along. This means its faster than daily, but not real-time.

     


     

    Transactions between banks in the FedACH and the EPN systems (cross system) are still settled by the Fed, so that will slow down EPN based bank transactions when only one side is in the EPN system.

  • Reply 29 of 39
    Quote:

    Originally Posted by chadbag View Post

     

    And the bank will then do a chargeback to the merchant at the behest of the customer, who (merchant) then has to prove he acted in good faith.  Merchants are not guaranteed to lose bit it is a hassle and drives up costs to defend against these.


     

    Not if, at this point in the US, it is a EMV card used in person, properly authorized, with a valid PIN or signature, or underneath the verification limit. In the last two cases, the bank won't bother with a retrieval request because there's nothing to dispute.

  • Reply 30 of 39
    chadbagchadbag Posts: 2,007member
    Quote:

    Originally Posted by konqerror View Post

     

     

    Not if, at this point in the US, it is a EMV card used in person, properly authorized, with a valid PIN or signature, or underneath the verification limit. In the last two cases, the bank won't bother with a retrieval request because there's nothing to dispute.




    How do they know it is a valid signature?

     

    But it would not be in-person anyway with a Venmo type service or an online purchase or phone order.

  • Reply 31 of 39
    Quote:

    Originally Posted by chadbag View Post

     



    How do they know it is a valid signature?

     

    But it would not be in-person anyway with a Venmo type service or an online purchase or phone order.


     

    As long as something is scrawled down, it counts, since Visa and Mastercard have declared that the card shouldn't leave the customers hand, so there is no way for the merchant to check.

     

    I was just giving an example of how a binding real-time authorization leads to the settlement of funds that are known to be fraudulent. The bank can't go back on its word.

  • Reply 32 of 39
    ecatsecats Posts: 272member

    Thanks for the advice, payment systems only work if the provider is willing to provide some guarantee. It's the core reason why cashless transactions work at all, and regulated by the government to ensure that consumers are not harmed.

     

    It's time paypal, square, etc were held to the same banking standards as the companies they're trying to disrupt.

  • Reply 33 of 39
    The headline of the story says don't use services like Venmo and Squarecash. But the article discusses only Venmo? What are the Squarecash TOS? Are we certain the result would be the same with each of the impugned services? What about PayPal?

    Suggest to the author that if he's going to lump services together, then the story should have some factual reporting on each of this services, not just one of them.

    #badreporting
  • Reply 34 of 39
    tenlytenly Posts: 710member
    theedge wrote: »
    The headline of the story says don't use services like Venmo and Squarecash. But the article discusses only Venmo? What are the Squarecash TOS? Are we certain the result would be the same with each of the impugned services? What about PayPal?

    Suggest to the author that if he's going to lump services together, then the story should have some factual reporting on each of this services, not just one of them.

    #badreporting
    I think the story is fine the way it is. It would be difficult to track down and time consuming to research all of the terms of service of every P2P money transfer company out there - so the author did the next best thing...

    He didn't say "Don't use P2P money transfer services" - he said "Don't use P2P money transfer services *LIKE* Venmo" and then he went on to describe how Venmo is. He further limited his advice to apply only to "people you don't know" - which actually implies that it may be fine to use with friends and family.... But what you're asking for is up to you, in the course of your everyday life. Read the terms and services of any P2P service you are considering joining - those that exist now and those that are yet to come - and if they are *LIKE* Venmos ToS - the author is advising you don't use them!

    Sure - if he had time to research the other popular offerings, it would have been nice to hear how they compare - but in the absence of time to do all that research - I still appreciate what he did take the time to share. I certainly don't think it's worth being labeled "bad" reporting.
  • Reply 35 of 39
    Quote:

    Originally Posted by tenly View Post


    He didn't say "Don't use P2P money transfer services" - he said "Don't use P2P money transfer services *LIKE* Venmo" and then he went on to describe how Venmo is. 



    The author didn't say "like Venmo," he said "the lesson here is to only use services like Venmo or Square Cash..."  The article is about Venom.  Zero information about SquareCash.  You can't say something like that when reporting unless it's backed up with facts, which it's not.  Would be similar to saying "George is a rapist.  He was convicted on Friday, so don't go on a date with George and Jeff."  If I were Jeff, I'd be a bit irritated.  If the author stuck to Venmo, I'd have no objection; but, he didn't, so I do.  If I were Square, I'd be pretty pissed and probably lean on AI to change the article.  But I don't work for Square, so all I can do is cry foul and call it #badreporting.

     

    ?BTW, on a related note, "Venmo" autocorrects to "Venom."  Coincidence?  :-)

  • Reply 36 of 39
    Quote:

    Originally Posted by ECats View Post

     

    Thanks for the advice, payment systems only work if the provider is willing to provide some guarantee. It's the core reason why cashless transactions work at all, and regulated by the government to ensure that consumers are not harmed.

     

    It's time paypal, square, etc were held to the same banking standards as the companies they're trying to disrupt.




    I'd say people should vote with their virtual feet.  Stop using the providers that don't protect you.  Companies like Venmo respond to customers.  If they start hemorrhaging customers because the transactions are untrustworthy, they'll offer a guarantee.  This is one of those situations where they'll respond quickly to market forces, no government intervention necessary.

  • Reply 37 of 39
    tenlytenly Posts: 710member
    theedge wrote: »

    I'd say people should vote with their virtual feet.  Stop using the providers that don't protect you.  Companies like Venmo respond to customers.  If they start hemorrhaging customers because the transactions are untrustworthy, they'll offer a guarantee.  This is one of those situations where they'll respond quickly to market forces, no government intervention necessary.
    Right - but the reason that people don't vote with their feet is because very few of them read the fine print. Articles like this help to educate - but perhaps some sort of government regulation that requires companies like these - or any company for that matter - to provide a brief, but comprehensive summary - in laymans terms - of what the ToS actually contains. At a minimum it would have to call out all of the items that put the customer at risk either financially or physically. It's easy, but unrealistic to just say that the customer should read the ToS before using the service. Even if people were willing to take the time to do so - the legalese will end up confusing more people than it helps.
  • Reply 38 of 39
    cnocbuicnocbui Posts: 3,613member
    Quote:

    Originally Posted by ECats View Post

     

    Thanks for the advice, payment systems only work if the provider is willing to provide some guarantee. It's the core reason why cashless transactions work at all, and regulated by the government to ensure that consumers are not harmed.

     

    It's time paypal, square, etc were held to the same banking standards as the companies they're trying to disrupt.




    What standards, exactly, do you think Paypal should be held accountable to?

  • Reply 39 of 39
    I have been scammed recently. The buyer said they have no enough cash, and insisted on Venmo. They paid me, get the goods, and then leave. Then all the money they transferred just disappeared. I lost over $18k in this case and Venmo keeps blame me. However, despite their user agreement, they did provide so many misleading information. Like this quote: 

    "Once you make a payment to a registered user the funds are sent to the recipient’s Venmo balance for them to use. At this time, it’s not possible to cancel a payment that’s been sent to a registered user in Venmo. "

    So they just make the transfer appears to be irreversible, and then they reverse it. In some ways, they are a part of such scam.
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