My F&M

Online Payment Apps: Are They Secure?

Share This Article

If you have a teenager, or consider yourself a tech savvy adult, you have probably heard of the newest and simplest way to transfer money. No, it doesn’t involve driving to a bank; it doesn’t even involve making a phone call; you can do everything through an app.

Venmo, Zelle Pay, and Square Cash are all relatively new apps that allow friends and family to connect on a whole other level, a financial level, at the touch of a button. The convenience factor is fantastic, and as someone who has used Venmo regularly for the past two years, and Zelle Pay on occasion, I can tell you that it’s hard to compete with the ease of use.

Each of the apps work a little bit differently, but I’ll focus on Venmo for this article. Venmo allows you to create an account through its app, which you can think of as a mini-checking account. After that, you can link this to your other financial accounts, like traditional checking or savings accounts, or even credit cards. For added connectivity, you can link your Twitter account to Venmo, which will use your profile picture and Twitter handle, making it easier for people to connect with you.

When you are ready to complete a transaction, simply open the app, search for the person you would like to pay (or request money from), include an amount and a description, and hit send. It’s that easy. If you are paying someone, the money will be deducted from either your Venmo balance (remember it’s like a mini-checking account, so it can carry a balance), or if your balance is less than the transaction amount, it will come directly from the primary financial account that you linked (either a bank account or credit card).
*Note: If you use a credit card, there is a 3% transaction fee associated with each transaction.

Long story short, at the drop of hat, anywhere in the world, a Venmo user can transfer money to anyone that they need to pay. For frequent international travelers, this has become an incredibly useful tool. Instead of paying a friend in foreign currency, you can simply transfer them an equivalent amount of US dollars. There are benefits at home as well. Instead of splitting a check five or six ways at a restaurant or everyone going online to buy their own tickets to a show (and trying to get seats together!), one person can foot the bill then request payment from the others through Venmo, saving time and avoiding the hassle of waiting on others to pay them with cash.

Once you get started, the usability and ease of use are obvious. However, the question everyone wants to know the answer to is, is it secure? The Venmo app uses thumbprint authentication to identify a user upon logging in. According to the website, it uses encryption to help protect your account information, although Venmo fails to specify the level (PayPal – Venmo’s parent company – uses SSL 3.0 which is 168-bit. For reference, banks typically use 256-bit encryption). To Venmo’s credit, the website is https: certified, although experts have widely held that this is not cause for celebration. Https: sites are better than traditional http: sites but are less secure than the general population has been led to believe.

So, what should you do? Your friends or children are using the app, and you want to engage too. Here are some suggestions for making it more secure:

First, link as few external accounts as possible. Credit card fraud is insured by the Federal Trade Commission beyond $50, so the risk is minimal in that respect. However, those come with a 3% fee. For added security with a bank account, do not carry large balances in those accounts. The less money available in those accounts, the less potential loss you could suffer.

Second, only complete transactions between people you know and trust. By doing this, you know exactly who you are doing business with and reduce the opportunity for fraud on the platform significantly.

Third, making your payments private can protect your personal information. Venmo’s default is for transactions to be public information which allows anyone to see what you have paid, who you have paid it to, and how much the transaction was for. For example, if you pay someone for a concert that hasn’t happened yet, criminals could identify times you aren’t at your home, and the information could help them more easily commit crimes. By simply making transactions private, you can avoid those potential pitfalls.

Lastly, make sure to enable Touch ID or password security. Venmo gives you the option to turn it off, but if your phone gets hacked or stolen, turning these optional security features off increases the likelihood your accounts could be compromised.

On the bright side, Venmo has instituted a maximum transaction limit of $3,000 and a weekly rolling limit of $4,999.99, which helps limit the potential for fraud. However, that is still a large sum for someone just trying to pay back a friend for dinner.

None of these mobile payment platforms have run into major negative news headlines yet, but that is a possibility and you don’t want to be the one affected. To enjoy the convenience and benefits of technology, you sometimes have to give up some level of privacy but it still pays to be diligent and understand the potential consequences.