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Peer-to-peer transactions—typically accomplished by sending money through a smartphone app—have become ubiquitous. P2P spending is a common way to split checks, repay friends or purchase goods and services, things millions of Americans do every day in lieu of paying with cash or a credit card. But bad actors lurk, meaning users should be on the lookout for payment app scams.
Key Facts
- Total P2P transactions are expected to reach $1.4 trillion in 2023, a 28.5% increase from 2022. [1] Transactions are expected to increase to nearly $2.3 trillion annually by 2026.
- Some 8% of all banking customers say they’ve been victimized by a P2P scam in the last 12 months. [2]
- The median P2P scam monetary loss was $176 per customer in 2022. [3]
How Peer-to-Peer Payments Work
P2P payments are a way for individuals to send money to people or businesses without using traditional banking methods like a debit card, credit card, cash or check. These transactions occur through a mobile app or online through a website.
Popular P2P apps include PayPal, Venmo, Cash App and Zelle, the last of which operates on the mobile platforms of some of the country’s largest banks. P2P payments have become a convenient way to send money in an instant.
Consumers also can bypass banks when borrowing money, through peer-to-peer lending. Non-bank companies build up money to lend by attracting individual investors, who may receive larger returns than they’d find elsewhere, although there is risk involved. The investors collect the interest fees a borrower would normally pay to a bank when taking out a loan.
Common P2P Payment Scams
As with other financial transactions, P2P payment scammers are on the hunt to steal your money, identity or both. Common P2P scams include:
- Phishing
- Unauthorized money transfers
- “Accidental transfers,” where a scammer sends you money then claims it was a mistake; if you send the money back, you may later discover the funds sent to you were from a stolen source or fake account
- Impersonation or imposter scams, which often involve someone pretending to be calling from a business, government agency, bank or utility company in order to get access to money or personal information
General P2P Payment Statistics
Many Americans Make P2P Payments
More than 159 million U.S. residents are expected to make at least one P2P mobile payment in 2023 [1]. That means more than 47% of the country’s population is planning to or has used a P2P payment service.
P2P Payment Users Want to Incorporate the Tool More Into Their Finances
Some 42% of adult Americans have used P2P apps in the past week; 60% report doing so in the past month [4]. Frequent users also are looking for ways to incorporate both P2P transactions and other online payment activities into a “financial super app” that would bring all accounts—including checking, savings and investments—under one roof.
While Increasingly in Use, P2P Payments Are Still Niche
Six percent of Americans say P2P payments are their favored choice of payment for everyday services. Debit cards (42%) and credit cards (26%) remain the most popular payment choices [4].
Even Frequent Users Don’t Make P2P Payments Daily
P2P payment users make a payment using one of the services 1.6 days a month, on average [4].
Not Everyone Knows Where They Can Make P2P Transactions
Nearly half (47%) of consumers say they don’t know if their financial institution allows for P2P payments [4].
These Are the P2P Payment Apps Most Favored By Americans
The most popular payment app is PayPal, used by 57% of U.S. adults [5]. Cash App is favored more by Black Americans (59%) than any other payment service. Hispanic Americans use Zelle (54%) more than any other payment service.
Why Consumers Use P2P Apps
Seventy percent of people who made a P2P payment in 2022 transferred money as a birthday gift, 64% as a holiday gift and 52% to repay another person[6]. Consumers sent the largest average payments via P2P in 2022 to pay for their portion of rent ($399).
General P2P Fraud Statistics
P2P Fraud Rapidly Increased Between 2021 and 2022
Total P2P fraud losses reached an estimated $1.7 billion in 2022, a 90% increase over 2021 [7]. Complaints to the Consumer Financial Protection Bureau (CFPB) regarding payment apps increased 164% between 2019 and 2021.
Black and Hispanic Americans Are More Likely to Be Victimized
Some 13% of Americans who have used a payment app report they sent someone money and later realized it was a scam. Black and Hispanic Americans were more likely to have been victimized (22% each) than white Americans (10%). And lower-income adults (20%) were more likely to report being scammed than middle-income (12%) or upper-income (7%) Americans [5].
Consumers Make Tens of Thousands of Complaints Annually
The Federal Trade Commission (FTC) received 48,835 reports of payment app or service fraud in 2023 as of September 30 [8]. Fraud or scam-related reports accounted for more than 15% of all P2P fraud complaints to the CFPB between 2020 and 2022, more than any other type of payment app complaint [7].
Big Banks Are Seeing More P2P Fraud Reports
Consumers’ P2P fraud claims made to four large U.S. banks—Bank of America, PNC Bank, Truist and U.S. Bank—from the Zelle payment platform increased by an estimated $165 million between 2021 and 2022. Total customer loss was estimated at $255 million, according to a report published by U.S. Sen. Elizabeth Warren (D-Mass) [9]. P2P fraud cases at those four banks increased an estimated 24% between 2021 and 2022, to 238,777.
“New internal data from the big banks shows that their platform Zelle is rampant with fraud and theft, and few customers are getting refunded—potentially violating federal laws and consumer rules,” Warren said in a statement accompanying the 2022 release of the P2P fraud report from the Senate Banking, Housing and Urban Affairs Committee.
Banks Rarely Compensate P2P Fraud Victims for Their Losses
The four banks in the Senate report refunded customers making P2P scam claims in only about 10% of cases. They refunded unauthorized transaction claims in just 47% of the cases.
Early Warning Services, Zelle’s operating company, changed its policy in 2023 and now requires its 2,100 bank and credit union participants to reimburse consumers victimized by imposter scams. In a response to Warren’s report, the company indicated that fraud reports have increased as usage of the service has grown.
Imposter Scams Are Among the Most Costly to Consumers
Imposter scams accounted for nearly 15% of all fraud reports to the Federal Trade Commission in the third quarter of 2023. The government received more than 193,000 reports of this type of scam, which includes both P2P and other scams involving imposters.
The top five types of fraud reported to the FTC in 2021 were primarily scam-related, including: imposter scams ($2.3 billion); online shopping scams ($392 million); prizes, sweepstakes and lotteries ($255 million); internet services ($216 million); and business and job opportunities ($206 million) [8].
Customers Still Mostly Satisfied With Response to Fraud Claims
Some 10% of banking customers were “not at all satisfied” with their bank’s response to P2P fraud claims, a J.D. Power survey found. Still, 54% said they were “completely satisfied,” while 35% said they were “somewhat satisfied” [2].
But They’re Not Confident About Payment Apps Protecting Them
About one-third of all payment app users say they have little or no confidence their personal information is being kept safe from hackers or unauthorized users. Americans 50 or over were less likely to find payment apps extremely or very safe (17%) versus 22% of Americans ages 18 to 49 [5].
P2P Fraud Statistics by State
London Reviews examined state-level fraud report data to the FTC to determine the states in which consumers were most likely to report imposter fraud, one of the most common types of fraud committed on P2P payment apps. The data include imposter fraud made both via P2P apps and through other financial transactions. [10]
States With the Highest Per Capita Imposter Fraud Complaints
- Oregon (125 complaints per 100,000 residents during the first half of 2023)
- Vermont (125 complaints)
- Washington (121 complaints)
- Colorado (110 complaints)
- Maryland (109 complaints)
States With the Lowest Per Capita Imposter Fraud Complaints
- South Dakota (54 complaints per 100,000 residents during the first half of 2023)
- Mississippi (56 complaints)
- North Dakota (59 complaints)
- Louisiana (63 complaints)
- Arkansas (64 complaints)
States Where Imposter Fraud Has Increased the Most
- Vermont (82% increase in per capita complaints between 2019 and the first half of 2023)
- Hawaii (39% increase)
- Utah (34% increase)
- Arizona (27% increase)
- Virginia (24% increase)
Top States Where Imposter Fraud Is Declining
- New York (25% decrease in per capita complaints between 2019 and the first half of 2023)
- Iowa (18% decrease)
- California (13% decrease)
- West Virginia (11% decrease)
- Nevada (11% decrease)
Bottom Line
P2P payment apps can be a convenience—or a curse if you fall victim to a payment scam, as reports of fraud have been on the rise. But there are things you can do to protect yourself when using mobile payment platforms:
- Make sure you know who you’re sending money to.
- Double-check all details before sending—a misplaced letter or digit could mean your payment isn’t going to the intended recipient.
- Regularly update your P2P apps as there may be new security enhancements included.
- Make sure to use multifactor authentication.
- Never provide sensitive details when talking to customer service representatives, especially if they’ve called you.
- Notify the P2P service immediately if you become suspicious.
Sources:
- eMarketer, US Peer-to-Peer Mobile Payment Transaction Value and Users 2020-2026
- J.D. Power Banking and Payments Intelligence Report, May 2023
- Better Business Bureau Online Scams Report 2022
- Fiserv 2021 and 2023 Expectations & Experiences surveys
- Pew Research Center, 2022 payment apps report
- Aite-Novarica U.S. P2P Payments Market report, June 2023
- Deloitte Risk & Financial Advisory Point-of-View, March 2023
- Federal Trade Commission fraud reports
- P2P Fraud Report, October 2022, U.S. Sen. Elizabeth Warren (D-Mass.)
- London Reviews analysis of FTC fraud data and U.S. Census data
