What Can I Do About Mobile Wallet Fraud?

Mobile wallets have recently been touted as a more secure payment method than using a physical card, checks or even cash in some cases. This is mainly due to some embedded protections that can make mobile wallets safer, but scammers always seem to find a way to keep scamming. Today, digital wallet fraud numbers are climbing with U.S. consumer losses exceeding $347 million dollars in 2024 according to Federal Trade Commission data. Whether you’re using Google Pay, Samsung Pay, Apple Pay or another type of mobile wallet, you’ll want to take a few precautions to keep your money and your personal information safe.

What is a digital wallet?

A digital wallet is an electronic payment storage system that houses your credit card, debit card and other financial information so you can conveniently pay for purchases by tapping your phone or other connected device at a merchant’s contactless checkout terminal. It’s usually facilitated by payment applications like Google Pay, Apple Pay, Samsung Pay or Venmo.

As an added layer of security, your digital wallet typically requires you to authenticate the payment with a PIN or biometric input, such as facial recognition or your fingerprint. Many digital wallets also require you to password protect your phone or other devices that are capable of contactless payment before you can add your cards to the mobile wallet.

How mobile wallets work

Instead of loading all your physical cards into a physical wallet, you use the digital wallet to select which card you want to pay with. For instance, when checking out at a store, just tap your phone or even your smartwatch at the payment terminal to enable the digital wallet payment. Then the digital wallet will prompt you to confirm the purchase and authenticate it using a PIN, password or biometric option.

Mobile wallets typically encrypt your card’s sensitive data when it is transferred to the merchant as another line of defense. So even if a security breach occurred with the merchant, your real card number isn’t compromised. Plus, it works the same as using your rewards credit card, so you won’t miss out on credit card rewards by using your digital wallet to pay.

What is digital wallet fraud?

Mobile wallet fraud makes scammers work a little harder since they can’t just grab your card number and PIN to make fraudulent charges. Digital wallet fraud often starts with sneaky social engineering tactics that trick you into giving up your account details.

Avoid falling victim to scams

You probably don’t think twice about sending your friend half of the check over Venmo after dinner or tapping your Apple Wallet at your local coffee shop — after all, the convenience is one reason mobile wallets are so popular. But convenience is why scammers love them, too. In 2024, digital payment scams accounted for 12 percent of fraudulent dollar losses with compromised credentials ranking as the primary method fraudsters used to steal across all forms of fraud, according to a recent PYMNTS report.

A newer scam involves receiving a suspicious text message demanding payment for unpaid tolls and threatening large fines. Once you click the link in the text and enter your information to pay, the scammer adds your card information to their digital wallet allowing them to make fraudulent purchases almost immediately.

How fraudsters can target your digital wallet

Fraudsters have tons of tricks up their sleeves and frequently come up with new ways to steal. But there are a few common ways they tend to target your digital wallet. By staying diligent and questioning the circumstances around your payments, you could avoid a costly mistake.

Contacting you about an accidental payment

Scammers are notorious for sending messages via your mobile wallet app like Cash App or Venmo saying that they accidentally sent you money and asking you to return it. You’ll see the money in your wallet, but the fraudster has typically linked a stolen credit card to their digital wallet to make the payment. After transferring the money to them, they will unlink the stolen card and link their own card details to pocket your money. The next thing you know, the bank has reversed the transaction for the stolen card and you’re left in the negative since your funds were withdrawn from your account.

Posing as customer support to get your credentials

Criminals may pose as customer support personnel or technical support for a business you frequent. Their goal is to get you to click on a link sent via text or email that leads to a compromised site where you provide your digital wallet information.

Representing themselves as buyers

If you own a business or sell products on the side, thieves may act like buyers and use a digital wallet linked to a stolen credit card to pay you. The card issuer will later reverse that transaction when the real cardholder finds out, and you will be out of the money and item you sold.

Posing as a friend or family member in need

You may suddenly hear from a friend or family member saying that they need money in a hurry. Some even use cloned voices with AI technology to imitate your loved ones. Fraudsters are hoping you’ll turn to your digital wallet to send the money without checking with your social circle first.

Representing themselves as government officials

Scammers could represent themselves as government officials from the IRS, Social Security or FBI and ask you to make an immediate payment to clear up legal issues. To be clear, these government agencies will never contact you by phone, email or text requesting payment.

How you can prevent mobile wallet fraud

Digital wallet scammers are smart but with these tips on preventing mobile wallet fraud, you’ll outsmart them:

• Be cautious. Don’t give out your mobile wallet or account information to anyone, even if they’re claiming to be a government official or customer support.
• Set up two-factor authentication. Protect your mobile wallet by setting up a password, biometric authentication or PIN to the wallet and your phone.
• Keep track of your phone. With a mobile wallet, losing your phone means losing your wallet. Use your phone’s “find my phone” app to help you locate it if it’s lost or stolen. This may also help you erase sensitive data on your phone remotely to avoid it getting into the wrong hands.
• Verify apps and software. Don’t download unknown apps or software. Verify that it’s coming from a legitimate company.
• Take a pause. Scams often employ a sense of urgency to get you to act quickly before you have a chance to think or verify. Take a moment to question it before sending money or putting in your payment details. If it’s an urgent request from someone you know, check in with your friends or family to make sure it’s true.
• Keep it private. Don’t reveal personal information on social media that could provide fraudsters with details to trick you.
• Not on public WiFi. Don’t use your digital wallet, or log in to your financial institution, over public WiFi which could be intercepted by criminals.
• Set up account alerts. By setting up account alerts for the cards you have attached to your mobile wallet, you can catch fraud quickly and shut your cards down as soon as you see it.
• Credit instead of debit. Credit cards have more robust fraud protections than debit cards and can keep you from taking a financial hit if your mobile wallet is compromised. If you’re concerned about mobile wallet fraud, link one of the best credit cards instead of your debit cards for an extra layer of protection.

What to do if you become a victim of mobile wallet fraud

Payment apps themselves don’t have robust user protection policies, so you’ll likely have to involve your bank or credit card issuer to file a dispute and begin an investigation.

According to the CFPB, when consumers reached out to customer support on payment apps, they responded that they cannot reverse fraudulent transfers because of how the apps are designed and customers are responsible for their own security.

If you have experienced mobile wallet fraud, you should follow up with the regulatory authorities after contacting your financial institution. File a complaint with the CFPB or the Federal Trade Commission. You could also file a report with the FBI’s Internet Crime Complaint Center.

The bottom line

Digital wallets offer a more secure way to pay with tokenized card numbers, encrypted sensitive information and required authentication measures. But where there’s a will, there’s a way — and scammers have circumvented many of those protections with social engineering schemes. To avoid mobile wallet fraud, consumers have to be vigilant when using these digital forms of payment. Be wary of phishing texts or emails and question family or friends’ urgent requests to send money. If you do fall victim to mobile wallet fraud, contact your bank immediately to start an investigation and make a complaint with the regulatory authorities.