Non-bank competition is increasing with the rising popularity of mobile payment apps such as Venmo, Zelle and Square, just to name a few. Millennials and younger credit union members, in particular, have discovered the convenience of these apps and the ease with which funds can be exchanged and transferred. Using P2P (peer-to-peer) mobile payment systems, restaurant bills and bar tabs can be paid, pizza money contributed and concert tickets repaid with just a few clicks, all while never leaving the couch. However, with all this virtual money exchanging hands, should there be concerns these transactions are being adequately protected and secured?
Credit unions must educate their members on the risks of utilizing "non-bank" cards. A closer look will tell you that while convenient and offering the same basic services, there are some differences between apps. Venmo, in particular, has been rising in usage within the younger member population because of the social settings incorporated into their app. Exchanging funds can be done with a small note or even an emoji, making the exchange conversational and social. However, that’s not the only thing that sets Venmo apart from the rest. With Venmo, the first-time user must set up a Venmo specific account within the app to act as the ‘middle man’ in transactions. Funds can then either be stored in the on-platform account for future Venmo transactions or transferred out to an external personal account.
Requiring the establishment of such an account has afforded Venmo the opportunity to issue a physical Venmo debit card, usable on the MasterCard network. This provides the account holder the option to use their Venmo cash to purchase things at POS terminals, like that cup of coffee on the way to work. The new card will be issued by Bancorp and offers a chip for security. It also says it will offer support for contactless payments.
Though there are security measures in place for both the card and the Venmo app itself, (Venmo offers data encryption on secure servers to protect against fraud and a pin/password option as well,) there is still the possibility of a security breach. Venmo’s use of text messages (SMS) for example, advising users of transactions and account activity, could provide another potential point of hacking and theft.
Here are some basic tips that can be shared with members to help ensure safe transactions if they insist on using Venmo's new card:
- Never store large amounts of money in your Venmo balance. Always transfer Venmo transactions to your bank account right away.
- Only use Venmo to exchange funds with people you actually know.
- Opt out of Venmo’s social network. Users can update their setting to “private,” which keeps their transactions hidden.
- Turn on notifications—Push, Text, Email, or some combination—in order to keep track of login attempts, requests and payments received, and requests and payments sent.
- Set up available security measures, like a PIN and Touch ID.
Your members may come to you for guidance if a security incident occurs, and unfortunately, as with any online transaction, there is a certain amount of risk, and there may not be a lot of recourse.
Remind your members of the card services your credit union offers and how these can be beneficial from a security and insured funds perspective. Your credit union may be offering services such as remote control cards that a member isn't currently aware of. Train your staff to have a working knowledge of the card features you offer and how they are equal or superior to the Venmo card.