Money transfer apps, also called peer-to-peer (P2P) payment apps, let you quickly and conveniently transfer funds from person to person or entity to entity without having to use a bank or credit card. Some apps specialize in bank-to-bank transfers, some work well for sending money to friends and family, and others facilitate international transfers. Common examples of these P2P apps are Popmoney, Venmo, PayPal, and Cash App.
How do money transfer apps work?
A user sets up a money transfer app and then links it to an existing bank account or credit card. Once a payment source is connected, you can make electronic transactions and payments through the mobile app. Senders and recipients are identified by their email addresses or mobile phone number. Some apps hold your money as a balance; others can transfer it from one bank to another.
Are money transfer apps safe to use?
Generally, money transfer apps offer robust security features to protect your money. However, it is important to understand that you may not get your funds back if you send money to the wrong recipient or authorize a payment in what turns out to be a scam.
Because the funds transfer quickly, you should only send payments to people you know and trust. Think of P2P apps like you’re using cash—be cautious about where and how you send it.
It is important to remember money transfer apps are not banks, and any balance you accumulate in a money transfer app is not FDIC-insured. As a best practice, transfer your app balance to your bank account as soon as possible.
Another key point to keep in mind—these apps are not intended for business use. If you are looking to use a payment app for your business, it’s best to use one designed for businesses, like Clover.
How long does it take to transfer money with an app?
The length of time varies. Some transfers are immediate; others can take up to a few days. Be sure to closely read the terms and conditions for each money transfer app.
Protect yourself from scams and fraud.
Only send money to those you trust.
Money transfer apps should be used only with friends, family, and others you trust. Why? Because most of the time you cannot cancel a payment once it has been sent and you cannot recover the funds. If you send money to someone you don’t know, or you do not get what you expected, you likely will not get your money back.
Treat money transfer apps like cash.
While money transfer apps and cash are undoubtedly different, both provide the recipient with fast access to the money you send. With money transfer apps, funds move directly into the recipient's account within minutes. And again, once you authorize a payment to be sent, you cannot cancel it.
Beware of payment scams.
If an offer sounds too good to be true, it probably is. For example, a stranger selling online concert tickets at a steep discount and insisting you pay with a money transfer app may be a scam. Money transfer apps offer no protection for authorized payments that are scams, so play it safe. Only send money to people you know and trust.
Confirm your recipient's contact information.
Ensure you have the correct mobile phone number or email address for the person you want to send money to. When in doubt, contact your friend to double-check. If you authorize a payment to be sent to the wrong person, you may not get your money back.
Understand your payment options.
If you don't know someone or aren't sure you will get what you paid for, using your credit card may be a better option. Unlike a credit card, money transfer apps may not offer protection if you authorize a payment but are dissatisfied with the purchase or service – for example, if you do not receive the item or the item is not as described or as you expected. Many credit card companies offer built-in buyer protections for cardholders. Check the terms and conditions of your credit card to see what's offered.
Watch out for fraud.
Scammers may impersonate your app's customer service employees. These thieves will contact you by phone, text, or email. Some scammers will even go so far as to create fake websites with fake support phone numbers, which victims believe are real when they appear in a Google search. These bad actors want to trick you into disclosing your login credentials, hijack your account, and make purchases.
Remember, a legitimate customer service representative will never ask for your login, username, password, PIN, multi-factor authentication code, or other sensitive information such as your bank account information or social security number (SSN). Additionally, a legitimate customer service representative will never require you to send a payment, make a purchase, download any application for "remote access," or complete a "test" transaction.
When in doubt, hang up, delete, and don't click.