Fraud Protection & Compliance
I’m not big on reading tabloid confessions at the grocery checkout, but as a payments professional, I have a shocking admission to share: I am a late bloomer in adopting mainstream person-to-person (P2P) payment apps like Venmo, Cash App (owned by Square), Snapcash and a slew of others. Maybe it’s because I am a late Baby Boomer that I still view Venmo, specifically, quizzically, as a user-supported privacy breach.
Nevertheless, as I recently showed my parents how to use Zelle — a method I do use, through my bank’s mobile app — I wondered, “How can my parents, and all consumers, protect themselves from fraudulent P2P activity on their checking accounts? And how will banks increase their fraud protections?”
These are important issues, since all P2P payment apps offer instant, or near-instant, money transfers between users, taking immediate authorizations against the payer’s checking account (also known as a DDA account) balance.
Why P2P Payments Need Fraud Protection
Despite younger generations’ mocking of the cash-clinging payment habits of us “olds” — “Apparently, young people today hate cash almost as much as they love mocking Baby Boomers and watching reruns of Friends” — the use of instant P2P payments is growing across all ages. The Wall Street Journal reports, “Neither Square nor Venmo parent PayPal Holdings Inc. discloses demographic data on their users, but a Square spokesman said people of all ages use the app for a broad range of purposes, from parents paying babysitters to churches collecting donations.”
The Journal article also quotes a Square study that found, in January through March of 2019, consumers used cash in 37% of transactions under $20, compared with 46% in 2015. Simply put, rising P2P payment volumes make traditional account types (checking accounts) vulnerable for increased fraud.
Setting up Safeguards
When it comes to financial health, being your own advocate is always a good first step. Consumers should take advantage of notification features in mobile banking apps to keep on top of checking account activity. You can set your preferences to be notified of all manner of transactions, including:
- Domestic and international
- Online, mobile or mail
- Gas station
- Recurring payments
- ATM withdrawals
- Balance alerts
Setting these alerts is easy to do, and you can tailor them to keep you informed on transactions that concern you the most. For example, you might want to put an alert on your checking account that sends a text notification every time a payment greater than $200 is initiated. Folks whose kids have access to a family checking account often like to be alerted whenever an ATM withdrawal or any payment secured by the kid’s card is made.
In this way, account notifications can keep you apprised of P2P and all payment activity, to help protect your checking account. In addition, many financial institutions keep in touch with periodic customer emails on how to protect against fraud. The next time you get one, read it. The fraud landscape changes very quickly, and you can use this information to proactively set up protections for your accounts.
How Banks Can Protect against P2P Fraud
Now more than ever, banks need to look at data from a customer-centric relationship view. With customer channels shifting and money moving in real time, viewing activity through the lens of a single payment type or channel entry point is not good enough. Being able to make contextual decisions that take in data from the entry point, such as the device used to make a transaction, while understanding the typical behavioral patterns that are consistent for this type of consumer, will strengthen an institution’s defenses against the fraudsters testing them for weaknesses.
For example, forward-looking banks already use the FICO® Falcon® Platform to monitor payments activity in real time; Falcon covers all banking interactions including credit applications, card transactions, P2P payments, retail banking and non-monetary transactions. Many institutions are adding a frictionless layer of security with behavioral, biometric and multi-factor authentication, using solutions like the FICO® Falcon® Authentication Suite.
AmEx Teaches “Old” Boomers New P2P Tricks
Wrapping up, I wanted to tip my hat to the banks that are helping spur P2P adoption with easy, seamless customer experiences. For example, I recently discovered a clever feature on my AmEx smartphone app: integration with Venmo and PayPal. This feature makes it easier to split bills by directly sending friends Venmo or PayPal requests from the AmEx app — friends can pay for their share of a dinner bill while the AmEx member still earns points for the total amount charged. This spin on reward points is a brilliant move to build loyalty to the AmEx brand.
On a practical note, although millennials, Gen X-ers and Gen Z-ers are notoriously frequent users of Venmo, Boomers — who comprise 17.7% of AmEx users — can always fall back to sending requests through PayPal. We Boomers may not be paying with emojis like the cool kids, but at least 73% of us have used PayPal.
Finally, it bears mentioning that the COVID-19 pandemic is driving even more US consumers to mobile payment apps, around perceptions that cash may be a transmission vehicle for coronavirus. In an interview with CNBC, Jodie Kelley, CEO of the Electronic Transactions Association, said, “Contactless payments have come up as a new option for consumers who are much more conscious of what they touch.”
Stay safe. Wash your hands. And follow the payments adventures of this Venmo-avoiding but still OK Boomer on Twitter @FraudBird.