By Guest Columnist Bonnie Coblentz
Using digital resources to buy products from individuals can be as easy as making online purchases from major sellers, but consumers need to ensure financial security.
In combination with online marketplaces, Mississippians, increasingly, exchange money electronically peer-to-peer -- or "P2P."
“Peer-to-peer apps like Venmo, Cash App and Zelle are meant to transfer money between people who trust each other,” says Becky Smith, director of the Mississippi State University Extension Service Center of Economic Education and Financial Literacy. “They are not meant to buy or sell goods and services from strangers. Once the payment is made, the money is gone.”
Some of the apps require users to link a bank account or credit or debit card. Others simply require users to create an account, and users do not have to link the account to an existing financial instrument.
Smith says that in 2021, more than four out of five U.S. consumers used some form of digital payment rather than cash or checks. “It is projected that contactless payments will continue to increase in popularity as more merchants adopt the technology and consumers become more educated about their safety,” she adds.
“Because most mobile payments are tied to bank accounts or paid with credit cards or prepaid cards, these transactions rely on the same underlying financial system infrastructure and offer the same consumer protections as traditional credit cards and debit cards,” she explains. “Protections against unauthorized usage now also exist for funds stored directly on a mobile app or wallet or peer-to-peer app.” Mobile payments have significant safety features built into them, including such things as tokenization, encryption and biometric identification. Tokenization means a token or code is assigned to each transaction, rather than a card number. Bio-identification includes facial recognition software that is standard of many mobile devices.
You still need to watch out for scammers and thieves, however. “A scam becoming popular is when strangers agree to a sale via a P2P app, and the seller hands over the item being sold once the funds are electronically transferred,” Smith says. “Later, the financial app recognizes it was a commercial transaction and voids it for violating the app’s use policy. The seller has already given away the item, but the buyer cannot be found."
At the same time, the old axiom “caveat emptor” -- buyer beware -- also applies as much as ever today as ever. “See if the seller has reviews and make sure there are no complaint or scam alerts associated with that person or online business,” Smith advises. “Check to see if the seller has an actual physical address and a correct phone number, and determine shipping information before you buy. Avoid individuals and businesses that only accept gift cards, cryptocurrency or money transfers through a third party.” Security concerns aside, another danger of digital transactions is the ease of spending money. It can lead to spending more than is wise. “Being able to hold cash connects us to it more than going cashless, so consumers tend to spend less when the money is in their hand,” Smith points out. “No matter how you spend the money, keep track of your expenditures and keep them in check.” MSU Extension has a variety of publications on financial matters, including P1738, “Steps to Successful Money Management,” available at http://extension.msstate.edu/publications. EDITOR'S NOTE: Bonnie Coblentz writes for the Mississippi State University Extension Service.