Law professor Adam J. Levitin often pays with cash, reasoning that parting with greenbacks makes him a more prudent spender.
But for his students at Georgetown Law in Washington, D.C., cash continues to lose cachet.
“Almost none of them carry cash,” says Levitin, 42, who teaches courses on the federal regulation of financial institutions and consumer finance.
Though not as often as his students, the professor sometimes turns to a mobile app on a smartphone to make a so-called peer-to-peer (P2P) payment electronically. He’s used a digital money-transfer service, Venmo, to split a bar tab with friends, or, if he forgets to bring a check, pay for his kids’ music lessons.
While Venmo and its competitors are popular, especially among young adults, Levitin and other experts urge consumers of all ages to pay attention to detail when they embrace new payment technologies. Such services are marketed as fast and easy — even fun — but the transactions carry fewer consumer protections than those done with credit and debit cards. And when cybercrooks prowl the platforms, the ease and speed of the new services can hasten misdeeds, experts say.
Launched in 2009, Venmo is a mash-up of “ vendere ” (Latin for to “sell”) and “mobile.” Based in New York, the firm in 2018 processed $62 billion in payments, a 79 percent increase from a year earlier, according to Venmo spokeswoman Juliet Niczewicz.
Venmo, owned by PayPal Holdings Inc. in San Jose, Calif., works this way: Users download the Venmo app and create an account tied to a bank account or debit or credit card. They send money or receive funds from other users, and if there’s a balance in a Venmo account, it can be transferred to a bank account.
But unlike money in the bank, funds parked in a Venmo account are not insured by the Federal Deposit Insurance Corporation and do not earn the user interest. Venmo invests account balances and keeps all interest and earnings, according to the company’s 37-page user agreement. The firm charges for some services, such as instantly transferring money from a Venmo account to a debit card.
Levitin, the professor, says one set of problems arise when you use Venmo or another service and transmit money to the wrong person. Funds are transmitted to a named person, handle (@username), phone number or email. Since he and a sister have similar emails, a few misplaced keystrokes means “my sister gets the money and says, ‘Thank you very much.’ And good luck getting it back from her,” Levitin says.
Another headache: You try to buy concert tickets online from a stranger, transfer the money, and, Levitin says, “they never ship the item and they don’t take your calls. They disappear. They just abscond.”