Digital payments are increasingly used worldwide as more people move online for shopping, work, and banking. Paypal has become a critical player in this new and growing industry. But how secure is Paypal for sending, receiving, and storing your money? Find out below.
What Is PayPal?
PayPal Holdings, Inc. is a worldwide online payments company that handles money transfers and payment processing for individuals and companies. They offer free money transfers, as well as charging a fee for faster one-click transactions and password memory.
Paypal includes many brands under its umbrella, including:
- Braintree
- Venmo
- Xoom
- HOney
- GoPay
- Hyperwallet
Paypal’s Security Measures
According to PayPal, they use the highest level of encryption technology. They also only keep data stored on servers that do not have direct internet connections. PayPal allows for transfers of payments using just email and a password and they do not force users to send extensive financial information to merchants when making purchases. PayPal is also a highly recommended online payment platform by financial professionals.
To keep PayPal security up-to-date, the company hires security professionals (and even hackers) to find security flaws and vulnerabilities.
PayPal offers the following (but not limited to) security protections:
TLS Connection
PayPal uses only TLS 1.0 or higher and HTTPS for connections. HTTPS helps in preventing passive and active internet attacks on Paypal users.
TLS or Transport Layer Security is a cryptographic protocol intended to make computer network communications more secure. TLS can be found in applications related to email, web browsing, voice over IP (VoIP), and instant messaging apps. TLS is designed to make communications between servers and web browsers more secure. TLS is an accepted industry standard currently in use for trusted communication channels.
Key Pinning
PayPal uses key pinning to make sure mobile devices are connected only to real PayPal servers. This prevents interception during connection requests to PayPal.
Key pinning works with HTTPS websites to prevent hackers from using fake or stolen digital certificates. Servers also use key pinning to send hashes of public keys that verify a domain name is reliable to users of internet browsers.
Data Protection
Data protection mechanisms include many industry accepted types for network and online data transmission.
These inlude:
- HTTPS
- PCI-DDS (Payment Card Industry Data Security Standard)
- SSL
- TLS
- FTPS
PayPal uses selected mechanisms to protect user data as well as have their policies reviewed by independent third parties such as Sarbanes-Oxley, American Institute of Certified Public Accountants. They seek to follow all requirements related to industry-wide data protection standards. PayPal also encrypts data it stores so to prevent it from being hacked or tampered with in any way.
Threats to Paypal
There are several major threats to PayPal and its users. These include:
#1. PayPal Scams
Since online shopping and banking has grown tremendously, so has the opportunities for cybercriminals to steal. This creates threats to both buyers and sellers in the form of scams and fraud.
Potential PayPal scams can include:
- Phishing attempts through fake PayPal websites.
- Social media scams.
- Fake hyperlink scams.
- Fake charities or investment offers.
- Advanced fee scams.
- “There was a problem with your account” email scam.
There are ways to avoid these scams, which include:
- Only transfer money to and from people you trust.
- Know the signs of fake Paypal emails.
- Always research the products and companies you buy from.
- Only pay for online items on the primary seller’s website.
You can file a complaint with PayPal customer service if you are caught in a scam or attempted money transfer fraud. Most scams succeed with the help of the users, so make sure to have proper security-minded online behavior. PayPal is always on the watch for any new vulnerabilities that appear on the company’s website.
#2. Unsecured Internet Connections
The biggest threat to individuals or businesses using online payments may be the unsecured internet connection they use to connect to PayPal. PayPal also scans users’ browsers to make sure they have the most up-to-date encryption.
Is Paypal More Secure Than Banks And Credit Cards?
Using credit cards means there is always a chance of fraud. They can be lost, recorded through secret gas station cameras, or stolen through card reader machines that have been tampered with. Their numbers can also be phished or intercepted when the card details are sent to websites.
Read this post for more information about credit card scams.
PayPal in this respect may be considered more secure. However, it has its own unique set of risks. Since online transactions include both a sender and receiver of payments, there can be the possibility of fraud or transaction errors on either side.
PayPal stores all of its user’s financial data in one secure place which cannot be accessed during transactions. Credit card numbers, however, can be phished or intercepted either physically or online by cyberthieves. Bank account transmissions can also be susceptible to hacks and interference
between the buyer and seller.
PayPal does not reveal the buyer’s billing information to sellers, so shady businesses cannot use this to steal funds. It also acts as another financial intermediary alongside banks and businesses. So, if another institution fails, your funds can be in another secure place.
PayPal users may be able to receive “payback” protection for payments they made or were sent to them. These include funds that did not go through or for products they had purchased but did not receive.
Is Paypal FDIC Insured?
PayPal offers pass-through insurance through extra features that provide FDIC insurance on your balance. This service will place your funds into an FDIC insured standard bank custodial account, which by default is set to Wells Fargo Bank. Users can request to have this custodial account switched to another available bank if they so choose.
The standard user PayPal account may not be FDIC insured without this additional insurance option selected, and company policies may change in the future. It is up to each user to make sure they have clarity on this issue by contacting PayPal and requesting further information if needed.
Getting Extra PayPal Security
There ways for users to enhance PayPal’s security. These include:
#1. Set Up Two-Factor Verification
PayPal has the option of setting up 2-step verification at any time for users. This is not turned on by default, so users must do this themselves.
Click Settings (gear wheel in upper right)> Security tab > 2-step verification.
Click “Set Up.”
You will need to choose between a text code sent by PayPal every time you log in (alongside your password), or a code supplied by an authenticator app you install yourself.
#2. Run Anti-virus and Anti-malware Software
PayPal users should have antivirus and data security software installed on their system and always keep it updated. Do not use public wi-fi to make purchases on any device because these make your data more available to hackers to intercept. It is also recommended to transfer funds from a credit card rather than your bank account because credit card companies are more receptive to handling payment disputes and grant refunds.
Even though PayPal is always seeking to lower financial risks for its users, it is best for users to only use secure, locked websites to make purchases regardless of the payment platform.
To get extra security for your system, see our Mega Review Roundup of antivirus and anti-malware options available today.
#3. Do Not Use PayPal When On Public Wi-fi
Public Wifi is notoriously insecure and makes users more vulnerable to cyberthieves. Avoid using PayPal (or any financial service for that matter) when using public Wifi.
To Recap…
PayPal is a secure online payment platform that can provide users with convenience and speed when handling working and shopping online. However, no online payment system is one-hundred percent secure so it is up to each user to be aware of any potential security risks that could impact their finances.
