What can I do about mobile wallet fraud?

The move towards cashless transactions also includes the increasing adoption of mobile wallets. Alas, with the rising use of these payment methods, fraudsters have also been trying to get a share of the action.

According to the Consumer Financial Protection Bureau, consumers have raised multiple complaints about fraud associated with their mobile wallets. In fact, the CFPB reports that almost half of the complaints about money services it received in 2021 were about mobile wallets. A major concern for consumers was about being victimized by fraudulent activity on a mobile wallet.

What is a digital wallet?

What is a digital wallet anyway? It’s a digital version of your wallet, typically using a payment application such as Google Pay, Apple Pay or Venmo that allows you to store your credit card, debit card and other financial information.  Instead of loading all your physical cards into a wallet, you would just use the digital wallet to make payments.

For instance, when checking out at a store, you would use the merchant’s contactless checkout to tap your phone or other device to enable the digital wallet payment. You would enable a payment method, such as a specific credit card you’ve stored to the digital wallet, to make this payment.

And you would also need some way of authenticating the payment, such as a pin code or biometric input. Your actual card information is not transmitted, which provides a layer of security from hackers. And the transaction can go through speedily.

Avoid falling victim to scams

Apps such as Venmo and Zelle are convenient to make payments to others. For instance, after a meal with friends, you could share the costs using such products. Their convenience of use has made digital wallets a favorite target of scamsters.

You do have better protections if you link your credit card to your digital wallet, rather than your debit card. For instance, credit card issuers have policies that limit or prevent any loss to you. On the other hand, if you link a debit card, your loss is less likely to be contained. And the scammers will be able to access funds from your bank account. That’s why you should link your credit card to your digital wallet.

How fraudsters can target your digital wallet

Contacting you about an accidental payment

A fraudster could send you a message on your digital wallet saying that they accidentally sent you money and asking for its return. You will see the money in your wallet, but the fraudster has typically linked a stolen credit card to their wallet to make the payment. After you transfer the money to them, they will unlink the stolen card and link their own card details. You will find that the bank has reversed the transaction for the stolen card, with the funds withdrawn from your account.

Posing as customer support to get your credentials

Criminals could pose as company personnel and send you links via email or text message trying to lure you to a compromised site to provide your digital wallet information.

Representing themselves as buyers

If you are selling something, they could represent themselves as a buyer and use a digital wallet linking a stolen credit card to make a payment. The card issuer will later reverse that transaction when the real cardholder finds out, and you will be out of the money and your sold good.

Posing as a friend or family member in need

You may suddenly hear from a friend or family member saying that they need money in a hurry. Fraudsters expect that you will heed this urgent request for funds and turn to your digital wallet without first checking in with your social circle.

Representing themselves as government officials

Scammers could represent themselves as government officials and ask you to make an immediate payment to clear up legal issues.

Prevent mobile wallet fraud

Here are steps you can take to prevent mobile wallet fraud:

• Always be cautious about giving out your digital wallet information to anyone representing themselves as company support.
• You could install apps on your smart phone that can help you locate it in case it is lost, lock the phone to prevent access by others, and wipe out sensitive mobile wallet information from the phone.
• Don’t download any apps or software that say they are for payment support.
• Before sending money to someone in your network, confirm that it is a legitimate request by checking in with them.
• Don’t reveal personal information on social media that could help give fraudsters input to trick you.
• You could set up your phone for two-factor authentication so that you need to complete an additional layer of verification when signing on to your digital wallet.
• Don’t use your digital wallet, and phone, over public wi-fi which could be intercepted by criminals.
• Keep a record of your mobile device’s information (such as make, serial number and device identification number) to help identify it if it is lost.
• Keep an eye on your financial accounts to ensure that there are no discrepancies.

What to do if you become a victim of mobile fraud

Payment apps themselves don’t have robust user protection policies, and you will have to take recourse to any protection offered by your bank or credit card issuer.

According to the CFPB, when consumers reached out to customer support on payment apps, they responded saying that they cannot reverse fraudulent transfers because of how the apps are designed, and that customers are responsible for their own security.

If you have experienced mobile wallet fraud, you should follow up with the regulatory authorities. You could file a complaint with the CFPB or the Federal Trade Commission. You could also file a report with the Federal Bureau of Investigation’s Internet Crime Complaint Center, and also follow up with your bank.

The bottom line

With the rise in the use of digital wallets, scammers have found another avenue to ply their trade. Consumers have to be vigilant in using these digital forms of payment, be cautious about people you don’t know, and verify before sending money. You should link credit cards rather than debit cards to your mobile wallets. If you do fall victim to mobile wallet fraud, make a complaint with the regulatory authorities, and follow up with your bank.