Block Stops $2 Billion in Cash App Fraud by Alerting Customers to Scams

Watch more: Block Stops $2 Billion in Cash App Fraud by Alerting Customers to Scams

There are signs that the good guys are gaining momentum against the bad guys.

Scammers have refined their methodologies, increasingly injecting a palpable sense of urgency into their schemes. Texts begging for money to help stranded family members and friends are seemingly everywhere. Romance scams are commonplace.

Nefarious players impersonate banks, the IRS and government agencies to catch victims off guard and get them to send money to ward off possible legal action or penalties.

These psychological ploys are tied to a deliberate effort to circumvent critical thinking and prompt immediate action from unwitting victims. The fraudsters have banded to form organized and industrious networks.

No one is immune. As PYMNTS CEO Karen Webster said in an interview with Block Risk Lead Brian Boates, PYMNTS Intelligence found that even tech-savvy young consumers who use their phones as a conduit to everyday life reported the challenges of avoiding scams.

“The last time we went into the field, we found that about 3 in 10 consumers say they’ve been scammed, and about 40% of Gen Z” has fallen prey to the fraudsters, Webster said.

This statistic underscores a challenge for the payments industry. It must protect individuals who value and use peer-to-peer (P2P) payments as a staple of their daily financial lives. To that end, Block announced Thursday (June 26) the prevention of approximately $2 billion in potential P2P fraud scams since 2020, aided by advanced technologies and the in-app Cash App payments warnings feature that alerts customers in real time to examine their transactions before moving ahead.

A challenge in combating scams lies in the nature of the transactions themselves. Many of them are authorized transactions.

Unlike traditional fraud where an unauthorized party gains access to an account, in scam scenarios, “the customer is willing and wants to proceed with the payment,” Boates said This makes intervention particularly complex, as it requires interrupting a user’s determined intent.

The emotional conviction tied to these transactions often supersedes rational caution. Beyond direct scams, the payment industry also grapples with the persistent issue of first-party fraud. This occurs when an individual misrepresents a legitimate transaction as a scam to reclaim funds.

Block’s various lines of defense against these evolving threats are rooted in its technological prowess.

“Block is a technology company,” Boates said. “We take a very technology-forward approach to solving these kinds of problems.”

He said that “when it comes to fraud and scam detection, it’s really rooted in machine learning. We’ve built a number of models internally using all of the data points that we have historically that have gotten really, really good at detecting potentially scam payments in real time.”

Machine learning powers the warning feature where the company intervenes with users when the models signal a transaction may be high risk, rather than introducing friction into each payment, he said.

The warning “gives customers a moment to pause, reflect and reconsider [the transaction], if it feels right, and if they’d like to proceed with the payment or not,” Boates said.

The precision of these warnings is a key factor in their effectiveness. They are issued for only about 1.5% of P2P payments made through Cash App, he said.

Beyond these warnings, Block’s models can take more definitive action when risk levels spike.

There are “instances where our models detect an incredibly high riskiness associated with a payment, and we might still automatically block the payment,” Boates said. This “can lead to some customer frustration, but ultimately we’re protecting them from a potential scam.”

Block’s multilayered defense strategy combines user education with technological interventions.

The threat landscape in fraud is perpetually shifting, a reality Block addresses through the continuous evolution of its models.

“We frequently retrain our machine learning models for scam detection” through feedback loops, Boates said.

Block has developed a “customer scam reporting flow” within Cash App, allowing users to report suspicious payments, he said. Each report is investigated, and confirmed scams are then fed back into the next iteration of model development.

Block’s commitment to fighting fraud has also been underscored by regulatory scrutiny. Webster pointed out that the Consumer Financial Protection Bureau levied a $175 million fine on the company related to Cash App security protocols.

“We had our consent order this year with the CFPB,” Boates said. “It’s obviously something we take incredibly seriously.”

Addressing these issues is not a new endeavor for Block, he said, adding, “We’ve been investing in trust as one of our top strategic priorities for many years. We’ve grown the team focused on solving these issues over that time period.”

He also expressed confidence in the company’s current trajectory, saying, “I feel really good about the systems and the approach and the program that we have.”

Looking ahead, Boates said Block’s strategy remains focused on two key objectives: making its platform inhospitable for fraudsters and safeguarding vulnerable new user segments. The aspiration is to make Cash App so challenging for fraudsters that they are compelled to, in Webster’s words, “go somewhere else,” a strategy that’s being borne out by Block’s own internal intelligence.

An area of future investment for Block involves its teen product within Cash App. This initiative aims to provide teens with the ability to engage in P2P transactions under parental guidance and use a debit card, fostering financial literacy in a secure environment.

The scammers will always evolve, and new models and technologies will help meet them on the battlefield. Boates pointed to the sheer scale of $2 billion in scams prevented and the high-tech weapons wielded.

“It’s a big number,” he said. “It surprises me even when I see it, but it just goes to show how much the investments that we’ve made have helped protect our customers over the years.”

For all PYMNTS digital transformation coverage, subscribe to the daily Digital Transformation Newsletter.

The post Block Stops $2 Billion in Cash App Fraud by Alerting Customers to Scams appeared first on PYMNTS.com.