Peer-to-peer (P2P) payments are essential in a world where cash is less commonly carried, digital transactions are popular and convenient, and ease, privacy, and security drive consumer preference. However, despite their undeniable value and well-deserved place in the pantheon of electronic funds transfers, P2P payments have an Achilles’ heel. P2P platforms are an attractive target for criminals and a vulnerable spot for consumers who are easily persuaded to unwittingly send P2P payments in response to scams or wittingly send or receive payments in connection with money laundering. 

Congress, consumer advocacy groups, and the Consumer Financial Protection Bureau have all taken aim at resolving P2P “vulnerabilities” for consumers. These controversial endeavors, though well-intentioned, threaten the unique elements of P2P systems that distinguish them from other electronic funds transfers. Shifting fraud liability from consumers to financial services providers for disputed P2P payments, coupled with the rising fraud losses overall that financial institutions are forced to absorb, could ultimately harm consumers. Public posturing and rhetoric aside, P2P providers and FIs are in a precarious position absent clear regulatory guidance about how to handle P2P scam fraud. Until explicit and official regulatory guidance is provided by the CFPB or the Federal Financial Institutions Examination Council, financial institutions must find a way to balance security interests with scam-defense expenses that mitigate consumer vulnerability and risk. 

Key questions discussed in this report:

• How does the prevalence of P2P scams compare with scams overall? 
• Why should public sentiment about P2P scams matter to banks and credit unions? 
• What strategies can financial institutions employ to detect P2P scams before fraud losses occur? 
   

Companies Mentioned:

Cash App, CFPB, Consumer financial protection bureau, Federal Financial Institutions Examination Council, FFIEC, Payment Systems Regulator, PayPal, Venmo, Zelle