4 risks to know about when using payment apps
Payment apps like PayPal, Venmo, Cash App and Zelle are more popular than ever — but are they safe to use?


In an age where few people are carrying around cash, peer-to-peer (P2P) payment apps like PayPal, Venmo, Cash App and Zelle make it easy to send and receive money. People are turning to these apps now more than ever before to repay a friend for a dinner bill they covered, or to contribute their portion to the family phone plan.
This level of convenience has led these apps to soar in popularity — "almost three-quarters of U.S. consumers used payment accounts such as PayPal, Venmo and Cash App in 2023, according to the Atlanta Federal Reserve — up from 68% in 2022," said The Washington Post. People are not just using the apps for one-off expenses either, as the Consumer Financial Protection Bureau "estimated that payment volume on these apps quadrupled between 2018 and 2022, with usage especially concentrated among younger Americans."
But hidden beneath the sleek interface and obvious convenience, there are risks lurking in these apps that are worth being aware of before hitting 'pay.'
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
1. Sending money to the wrong person
Perhaps the most obvious risk of P2P payment apps is accidentally sending money to the wrong person or otherwise making a typo. "Users can lose money if they accidentally pay the wrong person" or "mis-type a dollar amount," said The New York Times.
That may not seem like such an issue if you sent the money to a good friend, but these apps are also susceptible to fraud. "About a quarter of bank customers in an October survey by J.D. Power said they or a close relative had experienced fraud via a peer-to-peer service," said the Times. Examples of fraud that people experience on payment apps include when a "scammer masquerading as a legitimate business asks for payment of a product or service," or a scammer "'accidentally' transfers money to you and asks you to return it," said Experian.
2. Difficulty getting issues resolved
If you encounter an issue using a payment app, whether due to fat-fingering a number or getting caught up in fraud, there is also no guarantee that you will have your problem easily resolved. It is estimated that "about 77% of people who reached out to a payment app to resolve an issue have faced at least one problem during the process, and 1 in 5 reported not being able to resolve their most recent issue," said the Post, citing Consumer Reports.
This is because "many of the legal rights you have when using a credit card do not exist with P2P payments," said Consumer Reports. Instead, "users are mostly on their own in those situations because payment apps fall into a regulatory 'gray area,'" said the Times. "It's kind of a user-beware situation," Delicia Hand, the director of financial fairness with Consumer Reports, said to the Times.
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
3. No insurance on money stored
Another potential problem with payment apps may happen if you tend to store money there. Unlike, say, funds in your bank account, "cash stored on some payment apps might not be federally insured by the Federal Deposit Insurance Corp. (FDIC)," which means that "money kept on an app might not be protected if the company behind the app shuts down," said Experian.
Further, if you happen to need access to the funds you have stored on the app, there is no guarantee you will get that money quickly. "It may take days to complete a transfer to your bank account," and even if an app offers an instant transfer, "it could come with an extra fee," said Experian. If you have a lot of money tied up in an app, it is possible this "could cause a late fee or missed payment, which can have consequences in terms of your financial health."
4. Limited transparency and oversight
A final risk with payment apps is that the federal oversight that exists for banks "doesn't exist for payment apps," said the Post. "In some states, app companies have free rein to invest in speculative ventures," and "many apps also have unclear user agreements that don't specify where users' funds are stored."
Privacy is another concern. "The apps may collect and share personal information widely, often for 'vague' purposes, and some make it difficult for users to delete their data," said the Times, citing Consumer Reports.
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
-
Taking aim at Venezuela’s autocrat
Feature The Trump administration is ramping up military pressure on Nicolás Maduro. Is he a threat to the U.S.?
-
Comey indictment: Is the justice system broken?
Feature U.S. attorney Lindsey Halligan has indicted former FBI Director James Comey on charges of lying and obstructing Congress
-
Government shuts down amid partisan deadlock
Feature As Democrats and Republicans clash over health care and spending, the shutdown leaves 750,000 federal workers in limbo
-
When should you use a personal loan vs. a credit card?
The Explainer Determine whether you need a lump sum upfront or a borrowing limit
-
Child trust funds explained as over £1.5 million remains unclaimed
The Explainer HMRC data shows hundreds of thousands of young people have yet to claim money they are entitled to
-
How will Fed rate cuts affect the housing market?
the explainer An anticipated series of Federal Reserve cuts could impact mortgage rates
-
What to know about investing in ETFs
The Explainer Exchange-traded funds can be a great choice for beginners
-
How to ditch ‘buy now, pay later’ debt
the explainer Recent changes mean BNPL will soon affect your credit score
-
The biggest changes to Social Security coming in 2026
The Explainer They will include an annual cost of living adjustment and a higher wage cap
-
Is duty-free shopping worth it?
the explainer How to determine whether you are actually getting a good deal
-
What's a bridge loan and how could it make buying your next home possible?
The Explainer This type of loan has both pros and cons