What Can I Do About Mobile Wallet Fraud?

MoMo Productions/ DigitalVision/ Getty Images

The move to cashless transactions also includes the increasing adoption of mobile wallets. Alas, with the increasing use of these payment methods, fraudsters have also tried to get a piece of the action.

According to the Consumer Financial Protection Bureau, consumers have raised several complaints about fraud related to their mobile wallets. In fact, the CFPB reports that nearly half of the money services complaints it received in 2021 were about mobile wallets. A major concern for consumers was 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, usually using a payment app like 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’ll just use the digital wallet to make payments.

For example, when you check out at a store, you’ll use the merchant’s contactless checkout to tap your phone or other device to activate the digital wallet payment. You will activate a payment method, such as a specific credit card you have stored in the digital wallet, to make this payment.

And you’ll also need a way to authenticate the payment, such as a PIN or biometric input. Your actual card information is not transmitted, providing a layer of security from hackers. And the deal can go through quickly.

Avoid falling victim to scams

Apps like Venmo and Zelle are convenient for making payments to others. For example, after a meal with friends, you can share the cost by using such products. Their ease of use has made digital wallets a favorite target of scammers.

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

How Fraudsters Can Target Your Digital Wallet

Contact you about an incidental payment

A fraudster may send you a message on your digital wallet saying they sent you money by mistake and asking for it to be returned. You will see the money in your wallet, but the fraudster usually has a stolen credit card linked 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.

Impersonate customer service to get your credentials

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

They represent themselves as buyers

If you sell something, they can pose as a buyer and use a digital wallet that links a stolen credit card to make a payment. The card issuer will later reverse that transaction when the real cardholder finds out, and you’ll be out of the money and your merchandise.

Pretend to be a friend or family member in need

You may suddenly hear from a friend or family member who says that they need money soon. Scammers expect you to heed this urgent request for funds and turn to your digital wallet without first logging into your social circle.

They represent themselves as civil servants

Scammers may pose 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 careful about giving out your digital wallet information to anyone representing themselves as company support.
• You can install apps on your smartphone that can help you locate it in case it’s lost, lock the phone to prevent access by others, and erase sensitive mobile wallet information from the phone.
• Do not download any apps or software that say they are for payment support.
• Before you send money to someone in your network, confirm that it’s a legitimate request by checking in with them.
• Don’t share personal information on social media that could help give fraudsters input to trick you.
• You can set up your phone for two-factor authentication so that you have to complete an additional layer of verification when you sign in to your digital wallet.
• Don’t use your digital wallet and phone over public wi-fi that can 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 there are no discrepancies.

What to do if you become a victim of mobile fraud

Payment programs themselves don’t have robust user protection policies, and you’ll need to use whatever protections are offered by your bank or credit card issuer.

According to the CFPB, when consumers reached out to customer service about payment apps, they responded saying that they could not reverse fraudulent transfers because of how the apps were designed, and that customers were responsible for their own security.

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

The bottom line

With the rise in the use of digital wallets, scammers have found another way to ply their trade. Consumers should be vigilant when using these digital forms of payment, be wary of 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, file a complaint with the regulatory authorities and follow up with your bank.