Examining the Statistics on P2P Scam in July 2024 – Informed by Forbes Advisor

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A Closer Look at P2P Transactions

P2P or Peer-to-peer transactions, which are predominantly processed by leveraging smartphone applications, have become an inseparable part of daily financial activities for millions of Americans. They have replaced traditional modes of payment like cash or credit cards for regular activities such as splitting bills, repaying acquaintances, or procuring goods and services. As these transactions grow in popularity, so do scam instances related to payment applications, hence requiring individuals to remain vigilant.

Significant Highlighted Facts

• P2P transactions are projected to rise to a total of $1.4 trillion by 2023, marking an upswing of 28.5% from the preceding year. [1] Projections show a further leap to almost $2.3 trillion by 2026.
• A worrying 8% of all banking clients declare having fallen prey to P2P scam in the past year. [2]
• A median loss of $176 was reported by each client victim to P2P fraud in 2022. [3]

Understanding the Functioning of Peer-to-Peer Payments

P2P or peer-to-peer payments offer a means for individuals to transfer funds to people or businesses whilst bypassing the usage of conventional banking mediums such as credit or debit cards, cash, or cheque. These transactions typically take place either via a mobile app or online using a website. Renowned P2P apps include PayPal,
Venmo, Cash App, and Zelle, with the latter operating on the mobile platforms of some leading banks of the United States.

Users can also avail loans without the need to approach a bank using P2P lending. Non-banking corporations accumulate capital for lending by inviting individual investors who stand a chance to gain better returns compared to those elsewhere, albeit with a certain degree of risk. The investors collect the interest charges a loanee would normally compensate a bank when securing a loan.

The Widespread P2P Scams

Like any other financial operation, P2P transactions are susceptible to fraudsters who aim to snatch money, credentials or even both. Some prevalent P2P scams to be vigilant about are:

• Phishing
• Unsanctioned fund transfers
• Impersonation or imposter scams often involve fraudsters mimicking representatives from businesses, government agencies, banks, or utility companies to access cash or private information.
• “Accidental transfers” – Here, the scammer sends you funds claiming it to be an error; if you return the money, you may later discover that the funds they transferred were from a fraudulent account or stolen source.

A Rundown of General P2P Payment Statistics

The Increasing Popularity of P2P Payments Among Americans

An estimated 159 million U.S. residents are expected to initiate at least one P2P mobile payment in 2023. [1] This indicates that over 47% of the nation’s residents are planned to or have benefitted from a P2P payment service. Specifically, consumers employ smartphones to send increased volumes of funds daily because of the convenience and always-on availability they provide.

The Inclination Towards More Frequent Usage of P2P Payments

Survey data notes that 42% of American adults had utilized P2P apps during the past week whereas, for 60%, the app had been used in the preceding month. [4] Regular users are seeking ways to incorporate both P2P transactions and other online payment functions into a comprehensive “financial super app” which consolidates all accounts — ranging from checking and saving to investments — allowing for improved financial fluidity.

The Dominance of P2P Payment is Restricted

Merely 6% of Americans indicate P2P payments as their preferred choice for everyday services. The top spots are indeed occupied by debit cards (42%) and credit cards (26%). [4]

Even Frequent P2P Users Don’t Transact Daily

On average, P2P users make a payment using these services about 1.6 days a month [4].

Favorability of P2P Payment Apps in Various Demographics

A large majority of U.S. adults, specifically 57%, prefer using the most popular payment app, PayPal [5]. The Cash App holds a marginally higher favorability rate among Black Americans, at 59%, compared to any other payment service. The payment service Zelle is used more by Hispanic Americans (54%) than any other.

A Glimpse at Key P2P Payment Statistics

Why Do People Turn to P2P Apps?

Among the individuals who made P2P payments in 2022, 70% sent money as a birthday gift, 64% as a holiday gift, and 52% to repay another person. [6] The most common highest payment made by consumers via P2P was for their share of rent, with an average of $399.

General Statistics on P2P Fraud

Supplementary Statistics And Facts

In 2022, the total losses attributable to P2P scams rose to an estimated value of $1.7 billion, which marks a shocking surge of 90% from the prior year. [7] A similar trend of escalation is seen in complaints about payment apps to the Consumer Financial Protection Bureau (CFPB), which grew by 164% from 2019 to 2021.

Communal P2P Fraud

Approximately 13% of total Americans are operating a payment app affirm they sent money to someone only to later ascertain it to be a fraud. Black (22%) and Hispanic (22%) Americans have reported a significantly higher victim rate compared to their white counterparts (10%). Also, the low-income population section reports a higher frequency of scams (20%), over the middle-income (12%) or upper-income (7%) segments of American society [5].

Scam-Related Consumer Complaints

According to information from the Federal Trade Commission (FTC), a total of 48,835 instances were reported involving fraudulent activity related to payment app or service, as of September 30, 2023 [8]. The FTC’s findings indicate that, between 2020 and 2022, scam-related reports make up over 15% of all P2P fraud complaints submitted to the CFPB, making it the leading category of complaints [7].

The State of P2P Fraud Reports at Large Scale Banks

Major U.S banks, including Bank of America, PNC Bank, Truist, and U.S. Bank, saw customer claims of P2P fraud resulting from the Zelle platform increase by a worrying $165 million between 2021 and 2022. A report published by U.S. Senator Elizabeth Warren (D-Mass) estimated the total customer loss to be around $255 million [9]. Further emphasizing the worrying escalation, the number of P2P fraud cases at those four banks rose by an estimated 24% between 2021 and 2022, amounting to 238,777.

The report highlighted the need for regulation and further action to address this rising issue, as Warren stated: “New internal data from big banks shows that their platform, Zelle, is beset with fraud and theft, with only a few customers receiving refunds, potentially violating federal laws and consumer rules.”

Rare Instances of Fraud Loss Compensation to Consumers by Banks

Of all the fraud victims who made claims, only about 10% were refunded by the four banks in the Senate report. Unauthorized transaction claimsAccording to a report from the organization run by Senator Elizabeth Warren, there’s a significant rise in fraud cases as service usage surges.

Imposter Scams: A Major Loss for Consumers

In the third quarter of 2023, the Federal Trade Commission received nearly a quarter million reports on imposter scams, making up around 15% of all fraud complaints. This category includes Person-to-Person (P2P) and other imposter-related scams.

The primary forms of fraud reported to the FTC in 2021 were scam-centered, comprising: 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).

Fraud Claims Reponses – Mostly Positive Customer Feedback

A survey by J.D. Power disclosed that about 10% of banking customers didn’t appreciate their banks’ handling of P2P fraud claims. On the other hand, 54% and 35% of them were “100% satisfied” and “partly satisfied,” respectively.

Payment App Protection – Existing Doubts Among Users

Approximately a third of all payment app users lack faith in the security of their personal data against hackers or unauthorized access. The demographic of Americans aged 50 or over found payment apps to be extremely or very safe at a lower rate (17%) compared to those aged between 18 and 49 (22%).

State-Specific P2P Fraud Statistics

Forbes Advisor analyzed state-specific fraud report data provided to the FTC to find out which places had the highest imposter fraud cases, which are prevalent in P2P payment apps. This included all imposter fraud cases, regardless of their transaction method.

States with the Most Imposter Fraud Complaints per Capita

– Oregon (125 complaints per 100,000 residents during 2023’s first half)
– Vermont (125 complaints)
– Washington (121 complaints)
– Colorado (110 complaints)
– Maryland (109 complaints)

States with the Least Imposter Fraud Complaints per Capita

– South Dakota (54 complaints per 100,000 residents during 2023’s first half)
– Mississippi (56 complaints)
– North Dakota (59 complaints)
– Louisiana (63 complaints)
– Arkansas (64 complaints)

States with a Significant Rise in Imposter Fraud Cases

– Vermont (82% rise in per capita complaints between 2019 and 2023’s first half)
– Hawaii (39% rise)
– Utah (34% rise)
– Arizona (27% rise)
– Virginia (24% rise)

States with a Decline in Imposter Fraud Cases

– New York (25% fall in per capita complaints between 2019 and 2023’s first half)
– Iowa (18% fall)
– California (13% fall)
– West Virginia (11% fall)
– Nevada (11% fall)

Key Takeaways

P2P payment apps can either be comfortable to use or a curse if you become a victim of a payment scam. With increasing fraud reports, it’s imperative to protect yourself when using these platforms:

– Always know your recipient.
– Double-check all data before sending – a single error could mean your payment goes to someone else instead.
– Regularly update your P2P apps for potential security upgrades.
– Ensure your account has multifactor authentication.
– Never share sensitive information with support staff, especially if they called you.
– Contact your P2P service immediately if you smell something fishy.

Frequently Asked Questions

Which types of fraud were most reported to the FTC in 2021?

Among the most-reported fraud types to the FTC in 2021 were imposter scams, online shopping scams, prizes, sweepstakes and lotteries scams, internet services, and business and job opportunity related scams.

What are customers’ perception of their banks’ handling of P2P fraud claims?

A survey by J.D. Power indicated that approximately 10% of banking customers were not satisfied with their bank’s response to P2P fraud claims. However, 54% said they were completely satisfied, while 35% claimed they were somewhat satisfied.

What can users do to protect themselves when using P2P payment platforms?

Some of the measures users can take to enhance their safety while using P2P payment apps include always ensuring they know who they are sending money to, frequently updating their P2P apps, using multifactor authentication and promptly reporting any suspicious activity to their P2P service provider.