With Scams Targeting PayPal, Zelle, and Venmo Users, Here’s How to Guard Your Accounts Against Financial Fraud

Guy Bauman

November 28, 2022

  • # Payment Protection
  • # Account Protection
  • # Fraud Prevention
  • # Biometric Security

Digital financial fraud

Online financial fraud attacks have been on the rise over the last couple of years, as have many cybercrimes since the start of the global pandemic — but there’s already been an especially large uptick in financial fraud since the start of 2022.

These days, there are a lot of opportunities for bad actors to commit this type of crime. The proliferation of banking apps, digital wallets, and peer-to-peer (P2P) payment apps has drastically increased the instances of money changing hands online.

For that reason, it’s no surprise that criminals have launched targeted scams at some of the big-name payment apps like Zelle, PayPal, and Venmo. Considering how many exchanges are made on these apps every day, there are a lot of opportunities for scammers to strike. 

Odds are, you use at least one of these apps for settling up with friends, buying goods, or paying rent. If you do, it’s important to educate yourself about the potential risks. Cybercriminals make a business out of tricking people, so even savvy Internet users should equip themselves with knowledge to avoid being scammed.

Zelle scams

Zelle is a fee-free digital payment service that is offered through many online banking apps. Users can send money via Zelle by inputting the email address or phone number of the person they want to pay. Some of the common uses include sending money to friends or family, sending rent to a landlord, or sending payments to a contract employee.

This service was originally created to enable instant online money transfers, and one of Zelle’s big selling points is how quickly money sent through their service arrives in your account. You can receive funds almost instantly — within just a few minutes of someone sending them. 

While this immediacy is a big part of Zelle’s appeal to consumers, that also makes it an attractive target for scammers. And once a criminal can trick a victim into sending money on Zelle, they can potentially rob thousands of dollars within seconds. 

What type of fraud is happening on Zelle? 

As the usage of Zelle has increased, so have Zelle scams. In March 2022, the New York Times published an article detailing some instances of fraud reported by victims. There have been instances of scammers posing as officials from the victim’s bank and tricking them into sending funds, as well as instances where scammers promise goods or services that never actually arrive. Zelle fraud is tricky because the victims often technically consented to sending money, even though they were being tricked.

Can Zelle refund money if scammed?

Zelle has a resource on their own site intended to educate users about fraud, and it details two different types of instances: fraud vs. scam.

The company defines Zelle fraud as unauthorized activity on your bank account. This happens when someone gains access to your account and makes a Zelle payment without your consent. In instances of fraud, Zelle will typically refund your money. 

On the other hand, a Zelle scam happens when you are knowingly involved in a transaction and you approve or send a payment to a fraudulent actor. Even if you don’t receive something you were promised or you realize you’ve sent money to the wrong person, you’re unlikely to get a refund from Zelle in instances when you knowingly send money. That’s why it’s important to be careful about sending money and to look out for common types of scams

PayPal scams

PayPal was the first-ever P2P payment service, and it’s a payment app that can be used to send money to friends and family and buy items online. It’s basically a digital replacement for writing checks and wiring money, and it can also serve as a digital wallet. Many e-commerce sites have a PayPal payment option built in at checkout that allows you to complete purchases without inputting your credit card information each time.

In addition to the recommended uses of PayPal — like making purchases at online retailers or sending money to friends and family — people also often use PayPal to buy items from people they don’t know, like from Craigslist, Facebook Marketplace, or other online vendors. This is where instances of fraud tend to happen: when PayPal users send money to people they don’t know. 

What type of fraud is happening on PayPal?

Phishing was the number one most frequent type of cybercrime in 2020, and this type of scam is proliferating on PayPal. The company even published its own resource for PayPal phishing scam detection, which details the red flags of potentially fraudulent messages and phone calls.

Additionally, they offer a guide to the most common PayPal scams, all of which involve sending money to people you don’t know, including scams like fake charities, investment opportunities, prize money fees, and fraudulent fees.

Forbes also published an exposé revealing that illegitimate PayPal accounts are a huge issue as fraudsters have taken advantage of sign-up rewards. This is just more reason to be cautious when sending money through PayPal.

Does PayPal refund money if scammed?

PayPal’s refund policy is a bit more lenient than Zelle’s. The service has purchase protection coverage that promises a refund if you buy something that never arrives, if you’re charged for something you didn’t purchase, or if you receive something different than what was described. 

That said, there is a list of categories that aren’t covered by this purchase protection, including custom-made goods, motorized vehicles, donations, and any transactions sent through the “Friends and Family” designation on the platform. This last one is something to look out for, because scammers will often ask victims to send money via the “Friends and Family” setting. This is why it’s important to follow PayPal’s rules and to use the “Goods and Services” category when making a purchase.

Venmo scams

Venmo was created as a digital way to pay back friends and family — or get paid back by them — when you split a bill or share a charge. It’s basically a digital replacement for settling up in cash, and it was intended to help people split costs for everyday items like a lunch bill, a rent payment, or a utility charge. More recently, the platform added a category for businesses that users are meant to select when they purchase goods or services from a vendor on Venmo. 

Venmo is very similar to PayPal in how it functions and how it’s used, and similarly, fraud tends to happen when users send money to people they don’t know. 

What type of fraud is happening on Venmo? 

Venmo’s guide to common scams is very similar to PayPal’s. Most Venmo fraud involves phishing of some kind, whether it’s a promise of fake prize money, fraudsters pretending to be a Venmo official or tech support, or strangers posing as someone you know. 

2020 story from the Better Business Bureau detailed a scam in which bad actors pretended to “accidentally” send money to users using a stolen bank account, then request it back to deposit into their own account. This is one of many stories that have cropped up around Venmo scams, highlighting why it’s important to only use P2P payment apps like Venmo to send money to people you know and trust.

Will Venmo refund money if scammed?

Unlike Zelle and PayPal, Venmo doesn’t have clear guidelines on whether or not it will refund fraudulent payments. They do have a page on their site for what to do when you pay the wrong person, but this simply recommends having the recipient send the money back to you, which of course isn’t an option if you’ve been scammed. With this in mind, it’s important to be especially careful about who you send money to on Venmo.

How to avoid financial fraud

An Identity Fraud Study from Javelin Strategy & Research found that theft related to digital wallets and P2P payment apps spiked significantly in 2020 — with nearly 18 million Americans defrauded through these types of scams. 

Here are some tips for protecting yourself from financial fraud amid rising attacks.

Watch out for phishing

Phishing is the number one most frequent way that bad actors steal funds through P2P payment apps like Zelle, PayPal, and Venmo. In general, phishing involves fraudulent messages that trick victims into sending money to criminals. While this sounds like a scam that would be easy to spot, phishing messages are often extremely convincing, and anyone can fall prey.

Here are some common types of P2P phishing attempts to look out for:

  • Charity scams: Criminals will make calls or send messages pretending to be from a charity asking for donations. These types of scams increase in frequency around the holidays and significant natural disasters.


  • Debt collector scam: Fictitious debt collectors will contact victims and try to trick them into believing that they owe an unknown debt, or that they still owe money on a debt they've actually already paid off.

  • Grandparent scams: Scammers will target grandparents, pretending to be their grandchild and asking for money that they urgently need.

  • Imposter scams: Imposters will pose as trusted figures, like local law enforcement or a local government official, and try to convince targets to send them money. They may even manipulate caller ID so it appears that they're calling from a government office.

  • Prize scams: This type of fraud aims to convince victims that they’ve won a prize or sweepstakes, then asks them to send personal information or make an up-front payment for fees or taxes in order to claim their rewards.

Beyond these specific phishing scams, you should also watch out for messages from a P2P company that asks you to input your login info or bank credentials outside of the app, like in an email or text message link. There have been numerous instances of bad actors creating fake emails that appear to be from PayPal or Venmo but that actually steal the account information of their targets.

To avoid being the victim of phishing, you should always double-check a person’s or organization’s legitimacy before you send them money or personal information. If you receive a call, email, or text asking for money, even if it seems legitimate, it’s worth taking the time to look up the individual or business through the Internet or a trusted third-party source.

Don’t send money to people you don’t know

This one is pretty straightforward: to stay safe when using P2P apps, it’s best to stick to their intended use — which is sending money to people you know. This is the surest and easiest way to avoid a scam. 

You should especially never use Zelle to send money to unknown individuals, because if you send money to the wrong person or to a bad actor, you’re unlikely to ever get it back based on their refund policy.

If you do use PayPal or Venmo to buy goods or services, don’t use the “Friends and Family” setting, as this will make it impossible to get money back in the event of a scam. Always choose the “Goods and Services” or “Business” option when you’re paying a company or vendor, and if someone asks you to pay them via “Friends and Family” mode but they aren’t your friend or family member, this should be a red flag. 

Beware of impostors

Always pay close attention to email addresses and P2P app usernames. Sometimes, phishing scammers will mimic the email or username of someone you trust, but with hard-to-spot changes like a missing letter, a slight misspelling, or something along those lines. They may even use a friend’s profile picture in hopes of tricking you.

Before sending money through P2P services — especially large amounts — always verify with the contact that you have their correct email or username. While this may seem like overkill, it can save you from a lot of hassle in the event of a scam.

You should also be wary of unexpected money requests that appear to come from friends or family. If you receive a request via PayPal or Venmo that you weren’t expecting, check with the person before you send money to verify that it’s a legitimate charge.

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