Apps are in­creas­ingly adding fea­tures to pre­vent mis­takes

The Buffalo News - - MONEYSMART -

lar­ity. Most re­cently, a New Jersey bill was in­tro­duced in Jan­uary that would crim­i­nal­ize the fail­ure to re­turn an accidental P2P pay­ment.

The accidental pay­ment risk

It’s hard to put a pre­cise num­ber on how of­ten accidental pay­ments hap­pen. Last year, the Con­sumer Re­ports in­ves­ti­gated the is­sue by min­ing on­line data and hold­ing fo­cus groups on the sub­ject. While the con­sumer com­plaints weren’t vet­ted, the ev­i­dence sug­gests the is­sue isn’t iso­lated.

“It hap­pened so of­ten that all of the ser­vices that we looked at made some men­tion of it, whether it was on their web­site or in their dis­clo­sures or in their FAQs,” says Christina Te­treault, se­nior pol­icy coun­sel for Con­sumer Re­ports.

While the ser­vice providers recommend con­tact­ing the per­son who re­ceived the accidental money first, Te­treault says the onus ought to be on the com­pa­nies.

“We think that type of mis­take is cov­ered un­der fed­eral law,” Te­treault says. “You should get help from the ser­vice provider.”

But that’s still un­clear. Con­sumer Re­ports has asked the Con­sumer Fi­nan­cial Pro­tec­tion Bureau for clar­ity on the law. The how is hazy, too – with some caveats. Venmo, for in­stance, said in an on­line post that it can re­verse the funds with the re­cip­i­ent’s per­mis­sion in some in­stances.

In a way, the is­sue is just the lat­est wrin­kle on a long-stand­ing pay­ments risk. Con­sider blow­ing the restau­rant tip by scrib­bling in a num­ber that is too much or too lit­tle.

“This is just a new medium in which it’s hap­pen­ing, and norms and care need to evolve,” says Tyler Griffin, a man­ag­ing part­ner at Fi­nan­cial Ven­ture Stu­dio, a seed-stage ven­ture cap­i­tal firm.

It’s also not the only risk of us­ing a P2P app. Just like on any pay­ments ex­pe­ri­ence, there’s a chance of get­ting duped by a con artist. If scammed, don’t ex­pect much if and when you ask for your money back.

“If they were a crim­i­nal de­lib­er­ately mis­di­rect­ing your pay­ment, then they are not send­ing it back any­way,” says Craig Ram­sey, head of real-time pay­ments and prod­uct man­age­ment at ACI World­wide. “So, you can ask who you like, it’s not go­ing to hap­pen.”

In the U.K., it’s an area of faster pay­ments that the in­dus­try is work­ing to­gether on to build in ad­di­tional safe­guards for con­sumers. For ex­am­ple, it’s cre­at­ing a vol­un­tary in­dus­try code that would re­im­burse vic­tims in some in­stances. In the U.S., there is noth­ing quite so for­mal yet.

The good news is that the P2P apps are in­creas­ingly in­clud­ing fea­tures that could help pre­vent you from mak­ing pay­ment mis­takes.

Venmo, for ex­am­ple, lets you scan QR codes to find a friend to pay back – re­duc­ing the risk of en­ter­ing the wrong de­tails. Zelle, mean­while, added a fea­ture last year that dis­plays the name of the re­cip­i­ent that the funds are go­ing to be­fore you’ve com­mit­ted to send­ing the pay­ment, and also in­cludes a pop-up on the send screen that re­minds you to dou­ble-check that you’re send­ing the money to the right per­son. The list of safe­guards goes on.

Pre­cau­tions you can take

To help avoid pay­ment mis­takes, you can also em­brace sev­eral best prac­tices, in­clud­ing know­ing who you are pay­ing.

“First and fore­most, only trans­act with peo­ple who you know and trust,” Te­treault says.

Equally im­por­tant, dou­ble-check the de­tails be­fore tap­ping send. Here, you may also want to es­tab­lish some ground rules, such as not send­ing money to some­one af­ter a night of par­ty­ing. “Wait un­til the next day,” Griffin says.

Also, con­sider strength­en­ing your pri­vacy and se­cu­rity set­tings on the apps, such as set­ting a PIN or a fin­ger­print to un­lock your ac­count for some­thing im­por­tant.

“It’s your fi­nan­cial life that is at stake,” Te­treault says.

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