Mobile payment scams: How to avoid digital wallet fraud

November 2, 2020

Learn how you can spot mobile payment scams and avoid digital wallet fraud

Two people using mobile pay avoiding digital wallet scams

More and more, digital currency and mobile payment apps are becoming the preferred option for consumers across all demographics to pay for the goods and services they need. Of course, with this rise in popularity comes an increased risk of being targeted by fraudsters and scam artists that utilize these apps for their schemes. As is the case with most fraud, your first and best line of defense is awareness. That's why today, we'll tell you how you can spot mobile payment scams and avoid digital wallet fraud.

Mobile payment apps: What you need to know

A mobile payment or digital wallet app simply refers to a program you use on your smartphone that allows you to quickly and easily send funds to someone else. While these can often be used as an alternative to credit cards, they are frequently used to send money to a friend or family member as a form of repayment. For example, if you need to pay your friend for your portion of the restaurant bill, or if you have to pay your roommate for your half of the utilities, these apps can make that process simple.

There are many different mobile payment apps available today. These are some of the most popular apps that people are using to pay for goods and services:
  • Apple Pay
  • Google Pay
  • Venmo
  • Square Cash
  • Cash App
The features of each mobile payment app vary, but most of them can be used to send electronic payments, to accept credit card payments, and to manage an account with money.

The most common mobile payment scams

Mobile payment scams are becoming increasingly common, so it's important to remain vigilant. These are the most common mobile payment scams that are occurring right now.

Social contest scams

Scammers are becoming increasingly savvy at using social media in order to trick people into giving up personal financial information or sending a fraudulent mobile payment. With this type of scheme, the scammers will use social media platforms to launch a fake contest. Followers will submit an entry to the contest, and the scammers will contact people claiming they are winners. The scammers require the supposed winners to pay a fee to verify their account and receive their prize money. They get personal financial information and a chunk of cash out of the victims, and the alleged winners end up losing the game. While all social platforms may be used for these types of scams, they seem to be most common on Twitter.

Cash prize scams

Hackers are becoming adept at gaining access to the email lists for mobile payment app users. They send users a message saying they have qualified for a cash prize that will be deposited into their account. The scammers require the prize winners to send a processing fee, which is how they steal money from unsuspecting victims.

Fraudulent payment scams

In this scam, scammers will pose as users on the most popular mobile payment apps. While most authentic users will link their personal credit card or business credit card to their account, these scammers use stolen credit cards to make fraudulent payments across a variety of platforms. Often times, they convince the sellers to send an item prior to making the payment. They make the payment with a stolen card after the item has been shipped, leaving the seller completely empty-handed.

Overpayment scams

This scam is particularly frustrating for victims, as the scammers work to get an excessive amount of money out of them and leave them without the item they are selling. In this scam, a person who is selling an item may receive a fake e-mail that says they were inadvertently overpaid for the item they listed. The seller is convinced to send the item as well as the amount of money that was supposedly overpaid. In the end, selling the item ends up costing the individual a lot more money than they would have made on the deal in the first place.

Fraudulent customer service scams

In this scam, a target may receive a call, text, or email from an individual claiming to be from the customer service department of a popular mobile payment app. They may claim that there is an error with a transaction, or with your account, and ask that you navigate to a website to download a program to "verify" your account. Usually, this app or program is some sort of malicious software designed to give them control of your phone and subsequently, your digital wallet. 

While you can avoid this by being cautious of incoming correspondence, there are some instances where they trick search engines into displaying a tech support or customer service number that isn't actually associated with the payment app company. Again, once they have you on the phone, they'll do their best to get you to download something, click on a strange link, or give them sensitive information. 

How to avoid digital wallet fraud

Fortunately, by remaining aware of some of the most common mobile payment scams that are circulating and taking a few preventative measures, you can stay safe while using your favorite digital wallet apps. These tips will help you learn how to avoid digital wallet fraud.

Link your credit card rather than your debit card

When you link your personal or business credit card to your mobile payment apps, you will be providing an extra layer of protection in the event that you make a payment to a fraudulent person. Banks are able to easily trace credit card payments, but debit card payments are more difficult to keep track of. In addition, linking a debit card could compromise the funds that are available in your checking account.

Avoid making mobile payments over public Wi-Fi

Making financial transactions on an unsecured public Wi-Fi network is an easy way to give your personal information to prospective hackers. Because public Wi-Fi is open to anyone, they'll often insert themselves in between you and the internet in order to capture the sensitive data you're sending. Always make sure you use cash apps on a secure, password-protected network.

Only make peer-to-peer payments with people you know

One of the most convenient features of mobile payment apps is having the ability to pay a friend online. However, it's important that you only make peer-to-peer payments with people you know and trust, as this will help you avoid being the victim of a mobile payment scam.

Furthermore, with many apps, it is absolutely essential that you double check the recipient prior to sending the funds. A slight misspelling can result in sending your payment to the wrong person, and there aren't many options for getting that money back if the person on the other end isn't aware or refuses to do so. 

Create unique, secure passwords and safely store it

The password that you create for your preferred mobile payment app should be completely unique and include a variety of letters, characters and numbers. Make sure that you safely manage all of your passwords as well.

Many payment apps can make use of your phone's biometric locks, such as facial recognition or thumbprint scanners, to provide an extra layer of security called "two-factor authentication," or "2FA" for short. Even if the specific app doesn't use these features, make sure to activate them on your phone to prevent someone from simply picking up your phone and sending themselves money from your account. 

Learn to spot and avoid phishing and SMShing (or Smishing)

Because many of these scams rely on text messages and emails to operate, you can further protect yourself by learning how to spot and avoid phishing attempts.

Beware of texts and emails from strange addresses and phone numbers, and be especially cautious of messages that instruct you to download a file or click a link. Even if the message appears to be from a legitimate source, like your bank or a shipping company, ask yourself if you even signed up for those types of alerts.

If a message from a company appears to be authentic, the safest move is to simply open a new internet browser tab and navigate to the appropriate website to check your account or correspondence. When in doubt, never hesitate to call the company directly. 

If you ever have a problem, question, or concern when using these mobile payment apps, make sure to navigate to their website directly for contact information. You can verify that you're in the right place by looking at the web address in your URL bar at the top of your browser. Additionally, most mobile payment apps have customer service and support links within the app itself, usually under a "Help" section or tab in the menu options.

Never ever give out sensitive information

You've probably heard the phrase, "Our company will never ask you for your password," before, but it's worth repeating. Whether you have a PIN set up on your mobile payment app, a password, or both, no company should ever ask you for that information, and you should never give it if they do. 

If you ever receive a phone call from someone claiming to work for one of these companies, and they ask you for your password, politely decline. Once the call has ended, you can then reach out to the app's customer support to ask if they had a need to contact you in the first place. 

Experts anticipate that digital wallet apps will continue to play a prominent role in our consumer-centric society, particularly as people become more comfortable with maneuvering the various mobile payment apps. Whether you are sending your friend a quick payment through Venmo, or you use Cash App to run your side hustle, you will want to know how to avoid digital wallet fraud and keep all of your mobile payments secure.

Two phones using peer-to-peer money transfer to avoid digital wallet fraud

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Read more: If you rely on technology to run a business, check out blog to learn how cyber insurance can help protect your company.

by Geoff Ullrich

About the Author

Geoff Ullrich is a writer and Content Marketing Strategist at Germania Insurance.

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