Experts warn that digital wallet services including Apple Cash and Venmo are prime targets for scammers.
Photo: Jenny Kane/Associated Press
Photo: Jenny Kane/Associated Press

The dangers of using digital wallets including Apple Cash

The situation

Con artists often get away with scams such as these because digital payment services including Venmo and Apple Cash don't protect consumers the same way credit cards do. As a rule of thumb, the newer the service, the more likely con artists will target it. 

"The regulations haven't caught up with these technology capabilities," said Krista Tedder, head of fraud management at the advisory firm Javelin Strategy & Research. 

What it means

With credit cards, a federal law caps your liability at $50, and most companies go further with zero-liability policies. Debit cards typically offer similar protections if you report the fraud immediately. In addition, banks go through a series of verifications before letting someone open an account. 

But digital payment services work more like cash. When fraud occurs, it's as though someone took off with your $20 bill. 

Because such services aren't bound by the same regulations as credit and debit cards, it's up to individual companies to offer protections themselves. 

»RELATED: Woman says scammer cleared out her bank account using Venmo

Experts say Western Union, which has been offering money transfers long before smartphones, devotes a team to monitoring and validating transactions. Tedder said Western Union would even call a customer if something looks suspicious. 

"They really treat every transaction as a potential risk," Tedder said. 

A more recent service, PayPal, offers reimbursements when merchants ship damaged or counterfeit items, but digital money transfers aren't covered. 

The newest ones, including Apple Cash, are still figuring out how to deal with fraud, experts say. Others, including Facebook's proposed Libra currency, are on the horizon. 

»RELATED: Visa, Mastercard shun Facebook's Libra digital currency plan

"These payment systems should carry a big red flag that says you're not protected," said Avivah Litan, a senior analyst at Gartner. "I never use them because I know of all the perils." 

Western Union and PayPal, which also owns Venmo, declined comment about their fraud protection policies. 

Apple also declined to comment but offers online tips that warn, "If you're not sure about their identity, don't send the payment." 

While a person’s phone may warn them to use Apple Cash only with known parties, they may ignore the warning in desperation to get the tickets. 

Signs to look for

Never wrongly assume that because Apple Cash is drawing money from your debit card account that you’ll be protected if anything goes wrong. 

If looking for tickets online, beware of obvious scammers: the ones who won't send pictures of the tickets, or if their social media account is too new to be real. 

In a recent case, a private online ticket hawker had a plausible story about just wanting to get some money back for a show he couldn't attend. The buyer talked twice to the anonymous seller through a Facebook Messenger call but ignored the biggest red flag: the scammer's insistence on using Apple Cash, a payment method the buyer was unfamiliar with.

Launched in 2017, Apple Cash lets iPhone users send money to each other through Apple's Messages app.
Photo: Jenny Kane/Associated Press

Launched in 2017, Apple Cash lets iPhone users send money to each other through Apple's Messages app. Money you send comes out of your bank account. Money you get can be spent at merchants that take Apple Pay or moved back to a bank account. 

»RELATED: Services like Venmo proving convenient for scammers

Five minutes after the buyer sent $75 through Apple Cash, the scammer's Facebook account disappeared, and so did any way of contacting him. Needless to say, the tickets were never delivered.

 "A lot of people have this happen to them and blame themselves, and it's not their fault," Tedder said. 

Why it matters

It's not clear how widespread these scams are. The Department of Justice found only 15% of all fraud victims report it to law enforcement. The FBI said while it's unclear why so few people report fraud, many of the complaints they receive show victims were embarrassed or worried their family would be devastated. 

Tedder said if more people reported these scams, it could better inform government agencies tasked with tracking, and in turn, creating solutions and policies for these type of crimes. 

Experts also say consumers are typically unaware what is and isn't protected. Litan said she believes the government should do more to educate people. 

What’s next

There are some hopeful developments. Apple has partnered with Goldman Sachs for an Apple-branded credit card, which some experts say may put pressure on Apple to get more serious about protecting its consumers on other services such as Apple Cash.

»RELATED: Digital payments forecast: 726 billion transactions a year by 2020, study says 

But even newer services — and newer targets for scammers — are coming. Facebook is working on a digital currency called Libra, which the company says will allow for easier buying and selling across the internet. Facebook says when people spend libras through Facebook's own wallet, Calibra, their identities will be verified to help guard against fraud. But well before the currency's launch, scammers are already trying to sell fake libras. 

Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.

Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.