Venmo Scams: When Receiving Payments Is Not Safe

By Jen D., February 21, 2019

Making payments through an app or online can be fast and convenient. What isn’t suitable is fraud. Fraud through online payment systems can impact both the payer, payee, bank, credit card and the website or app.

According to the Wall Street Journal’s report, Venmo reported a loss of about $40 million in the first quarter of 2018 alone. Much of that loss, according to the documentation shown to WSJ (in the form of internal documents) is in the way of fraudulent payments.

Types of Venmo Scams and How They Work

While online reports about those same internal documents do not specify the kind of scam, the biggest scams Venmo experiences are likely stolen credit cards, hacked accounts, and other miscellaneous scams.

Stolen Credit Cards: Transfer money to someone using a stolen credit card and buy merchandise, services, or send the money to your bank. This creates a more complicated web trail to try and undo and, by then, the criminal is off with the funds or profits.

Hacked Accounts: Someone hacks into your account and purchases goods, services, or sends money fraudulently. By the time you catch on, you’re out significant funds.

Miscellaneous Scams: These can be things like someone who is real and uses their account for real items or services with some scams mixed in along the way. For instance, maybe they try and say service wasn’t authorized even though it was (to get a refund and not pay).

What Is Venmo Doing to Combat These Scams

Deleted Accounts: Thousands of potentially fraudulent accounts have been removed by Venmo. These include accounts that were flagged as fake or suspicious.

Instant Transfer: One of the most loved features on PayPal is the option of instantly transferring funds to one’s bank account (within 30 minutes). Apps like Zelle (which is PayPal owned) were using these sorts of features, but Venmo had to put the feature on hold (apparently due to fraud concerns). Since reinstating the feature, the company charges a 25 cent flat fee to 1% of the amount transferred. Time will tell if this helps the stock and company.

Bye Bye Website: No longer will you be able to send and receive money through the website. Although this was a tiny percentage of transactions, roughly 2% it led to a far higher amount of losses (15% of net losses). That much more significant contribution of scams and fraud coming from the website version made this a wise adjustment.

The next report from Venmo is coming out this month. Before you send or accept funds using Venmo, search the person(s) or company you’re sending it to. Whatever you’re seeking, Social Catfish can help!