5 Money Transfer Technologies And Their Risks
New technology continues to make life easier. Everything from shopping, to keeping up with friends, to watching your favorite TV shows have all been digitized for convenience. Unfortunately, when it comes to transferring money through cell phones, social media and other less traditional methods, convenience comes with potential risks. Protect your funds and personal information by knowing the drawbacks to each method and the security measures that can protect you. (For related reading, also check out Paying Online: A How-To Guide)
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Alternative Payment Services
There are several websites that allow buyers and sellers to transfer money through email to avoid revealing bank account and credit card information online. By 2013, it is predicted that one-third of online payments will be made using one of these websites. PayPal, the most popular of these sites, hosts more than 87 million personal and business accounts. It touts itself as "The faster, safer way to pay and get paid online."
Although the website has an extensive online security center and fraud-prevention measures, transfers are not foolproof. Issues such as hacked accounts, phishing scams and identity theft are a source of concern. Experts advise consumers to link websites like PayPal to a credit card instead of a debit card or checking account, as credit cards offer better protection if financial information is stolen or if a seller dispute occurs.
Mobile Magnetic Stripe Readers
Busy individuals, particularly small business owners, can benefit from mobile applications that allow them to swipe credit cards on small scanners that can attach to smart phones. Companies such as Square faced criticism over the security of these devices, which led to a major overhaul of the infrastructure and delays in shipping. The end result was increased measures to protect users from fraud and chargebacks during transactions.
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The use of text messages to transfer money hit a fevered pitch in January 2010, when the American Red Cross used the technology to raise over $22 million in hurricane relief funds for Haiti. While the successful campaign was commended, it also raised questions about the safety of donating money via mobile phones. Scammers can take advantage of this tool by instructing people to text money to illegitimate numbers. To be safe, check the organization's website to verify that the number you are texting is associated with the cause you want to support.
As on-the-go digital money transfers continue to increase, we could soon see the cell phone replace the wallet. In March 2010, PayPal released an iPhone application that allows users to send and receive money by simply bumping their smart phones together. The company countered concerns about the risks of using the program by offering a 100% protection guarantee from unauthorized payments due to lost phones and compromised PINs. The application also requires users to enter a secure username and password before accessing it.
Those that dislike trips to the bank can now deposit checks from anywhere. Many smart phone applications allow customers to take a photo of the front and back of a check and download it into their account. Banks that accept remote checks say the process is secure, but critics have raised concerns about what happens if a phone is stolen or if financial information is intercepted. The checks are not stored on the phone, and the data is encrypted as it goes from the cell phone to the bank's computer system. The paper checks should be voided and shredded once the transaction is complete.
The Bottom Line
If used in a smart manner, money transfer technology can be a way to save time on financial transactions. The best way to protect your money and personal information is to do research on the products that you use. Only do business with reputable companies that have strong security safeguards in place. As an added precaution, do not save financial data on websites, as any site is vulnerable to attacks.