Venmo is a mobile payment service owned by PayPal, and has a HQ in the United States, which can be used to transfer money.
Is it a good option as a money transfer company or do better options exist in the market?
Can it work internationally? If not, what are the alternatives to it?
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Often times, especially for expats, it makes sense to invest money in a portable way, as opposed to sending money home to invest.
Here we are to talk about another money transferring company called Venmo. But this is not an international one, Venmo is a mobile peer-to-peer (P2P) money transfer app, which has a social media feature: you can send or request money using emoji text messages that appear in a Facebook-style feed.
One of the best reasons to use Venmo is that there is a good chance that anyone you want to pay or receive money to is using it as well.
While the same can be said for the app from its parent company PayPal, Venmo remains the most popular mobile peer-to-peer payment app.
This makes easier cash flows between friends, turning them into social entertainment. There are some drawbacks to this visibility, but the app also offers real benefits. Splitting payments, requesting money, and transferring funds to your bank account are all part of Venmo’s secure execution.
The biggest news for Venmo is the Venmo Card, a debit card that allows you to access funds in your account at ATMs and shops, about what we’ll talk later and in details. Despite some caveats, Venmo is a mobile payment app worth considering.
So Venmo is a peer-to-peer (P2P) payment application available on iPhones and Android phones that allows you to quickly and easily exchange money directly between people.
Founded in 2009, Venmo started out as a text-based payment delivery system. Then, in March 2012, the company unveiled a social media-integrated platform to capitalize on the growing P2P economy.
Less than six months later, Braintree, the mobile payment service used by Airbnb, Uber and other e-commerce giants, acquired Venmo for $ 26.2 million.
Less than a year after that, Venmo significantly increased its user base when payment company PayPal Holdings Inc. acquired Braintree for $ 800 million and quickly monetized Venmo’s user base.
Venmo has dominated the P2P payments market making transferring funds fun and engaging. Users can spice up the exchange by using emoticons to describe the items being sold.
For example, if a friend offers his/her friend the price of a piece of pizza, they can write out a Venmo payment with a pizza emoji added as a game gesture.
According to Venmo’s website, there is ultimately no fee for sending money through the platform if the money comes from Venmo’s balance, bank account, or debit card.
But transactions funded with credit card payments incur a standard 3% fee that comes from credit card companies and Venmo simply passes it on to consumers.
Venmo earns more revenue from transaction fees that are charged to merchants. With PayPal infrastructure, Venmo is compatible with at least two million merchants, allowing Venmo to generate two separate types of revenue streams.
The first type of income comes from a ‘smart checkout button’ that can be integrated into other apps for in-app purchases.
In 2018, Uber added a service that allows its app users to pay for rides and Uber Eats with Venmo without leaving the Uber app. In addition, the cost of travel and food can be split among multiple users via the Uber app.
Now let’s see where does Venmo shine and where it has some significant issues to be corrected.
- Sending and receiving cash is super easy
- Can be used on a few sites and apps that accept PayPal
- The application is great
- Default privacy setting shares your payment history with the world
- Can’t pay via website
- No international payments available
- Unfortunately no payment protections
- Scammers are known to take advantage of it
How does it work?
After installing the app on their phones and then linking their Venmo accounts to their credit card, debit card, or checking accounts, Venmo users can instantly start exchanging funds with each other, with Venmo acting as a virtual fiscal intermediary.
In other words, Venmo can be thought of as an intermediary between two bank accounts of two users conducting a payment transaction.
Now everything more detailed. First of all you can easily and quickly register using your Facebook account or by entering your name, email address, mobile number and password.
Next, you confirm your account with SMS text. You then assign and verify a bank account for your profile by entering your debit card or bank account details.
You can enter your online bank login details, or ask Venmo to send a test payment by telling it your route and account numbers.
Also you can add a credit card as a payment source, but you still need a connected bank account as the credit card does not accept payments.
Then you connect with your friends already on the platform, usually through Facebook. Identity verification will give you more opportunities, it increases the transferrable amount of money you can send or receive in one go from an initial weekly limit of $ 299.99 to $ 6,999.99.
Unfortunately, there is no way to avoid the 3% fees Venmo charges from a credit card or non-mainstream debit card.
However, the same goes for most payment apps, including Apple Pay Cash. Square Cash doesn’t even allow you to use your credit card for payments. If you want to exchange money with businesses and not your friends, you need to use an NFC payment app like Android Pay or Apple Pay, or a payment app like LevelUp.
Funding and receiving methods
Actually Venmo does not provide its customers with a big variety of funding or receiving options, but anyways, here they are. You can refill your account:
- With a plastic or bank account. To send money to Venmo, you need to link the app to a US bank account, debit card, prepaid debit or credit card. If you are receiving money and want to withdraw it from Venmo, you need to link a bank account.
- Link a checking account. Savings accounts have a standard limit of six online withdrawals or transfers per month.
And for sure to receive the money you can use Venmo’s mentioned feature:
As PayPal is Venmo’s parent company, Venmo also stores the money you receive in an in-app balance, which can be used for your future payments (if you have enough money) or withdrawn to your bank account.
Otherwise, the money will remain in place, which is not ideal. The Venmo app balance is not federally insured like bank accounts, so you could lose it if Venmo goes bankrupt.
Paying with Venmo
To start, let us introduce the minimum and maximum amounts you’ll be able to send to your friends.
As already noted, to get started with Venmo, you need to download the mobile app, create a login and verify your phone number, email address and bank account.
Your initial transfer maximum per week is $ 299.99 until you verify your identity. When you submit your Social Security number, zip code, and date of birth, you are “verified” and can send up to $ 4,999.99 per week in one or more transactions.
Previously, Venmo only allowed users to send $ 2,999.99 per week, but increased the send limit during the COVID-19 crisis.
The maximum amount you can transfer from Venmo to a bank account starts at $ 999.99 per transaction, but once confirmed, the limit increases to $ 19,999 per week.
How to process a payment via Venmo?
To help you send and receive money from friends, Venmo needs to know who your friends are. The app syncs and analyzes your phone’s contact list to find other Venmo users. You can also invite anyone you want to send money so they could also try out the service.
These two methods work fine, but Venmo prefers to automatically sync your Facebook profile to create a list of potential friends.
If you are not connected to a social platform and your contact is within reach, you can ask them to scan a QR code to connect for payment.
To make or request a payment, you simply click the “Pay” or “Request” button, select a friend or use the QR code, choose between paying and requesting money, write a description of the transaction and click Pay or Request.
In the next step, you will select a source of payment, with any Venmo balances listed first. Entering a description is an extra step that is not required by other payment apps, but is part of the social aspect of Venmo.
Once the amount, beneficiary and note have been specified, you will receive a final confirmation button in case you are hesitant to reduce your assets.
To make sure, Venmo warns you if and when your friend is compliant or when you have new debt pending.
Another great feature that Venmo offers is the Venmo Code. Performing a transaction with someone with whom you are physically present but who you are not friends with on Facebook has been greatly simplified by the Venmo Codes feature.
In this case, you simply point your phone’s camera at the recipient’s QR code and you can immediately send or request money. Amazing, right?
Venmo runs on iOS, Android and the web. The registration page clearly lists all service fees. There are very few of them and there are no monthly or yearly fees, although this is common practice for mobile payment apps.
It’s possible to avoid fees altogether when using Venmo, but if you prefer certain services, there are two charges.
The largest fee is the 3% transaction fee when using a credit card (required by credit card companies).
You also pay 1% if you want to transfer money from your Venmo account to your bank account faster than the standard waiting time of one to three days.
Venmo is free for payments funded from a bank account, debit card, or prepaid debit card. There is a fee to use a credit card to send money, but purchases from merchants who have Venmo’s payment option, even with a credit card, are free.
If you are using standard bank transfer, there is no commission, although delivery takes one to three business days.
Venmo Debit Card
Venmo debit card is another way of income for the company, which comes directly from the user’s Venmo balance.
This card works through MasterCard and can be used by any company that accepts MasterCard. This feature has helped Venmo go beyond its exclusive P2P platform, allowing customers to transact directly with online stores and local establishments.
In both revenue scenarios, Venmo charges merchants a 2.9% commission plus $ 0.30 per transaction. Companies are willing to pay above average at these rates due to the large number of new customers Venmo brings to their doors.
Additionally, Venmo users are more likely to bring up the profiles of participating companies on their social media accounts.
Like many working cards, the Venmo card offers cashback rewards for certain purchases. One of the advantages of this system is that the cash reward appears in your Venmo account as soon as the transaction is completed, although this can take up to 30 days.
Credit cards usually only provide rewards after receiving a monthly statement, and then it takes up to three days after you make a request.
Venmo latest updates
Venmo team always works on new ideas to attract customers, to always be innovative and regularly surprise with new features. Below you’ll find some features that are being planned or are already actualized.
- Direct deposit
Venmo claims that you can access your payment faster if you opt for direct deposit, although this does involve the extra step of transferring money to your bank if you don’t pay everything with Venmo.
The company says its direct transfers are faster than bank transfers, many of which add a couple of days in processing time.
To set up a direct transfer, you need to verify your identity and provide the Venmo routing number to your employer. You can even create a direct deposit for tax refunds and government incentive money.
- Business features
While Venmo’s standard accounts are not designed for business transactions and do not offer the protection inherent in other payment methods, the company is conducting flight testing of accounts designed for sole traders to conduct business.
Another recent Venmo business feature is Venmo Payouts, which allows some big companies like Chipotle and PepsiCo to send rewards and discounts to consumers.
This is currently a pilot program, part of Venmo’s push for wider business use. Venmo was not originally designed for commerce, but rather for friends who pay each other, and lacks the protection found in other platforms designed specifically for business transactions.
For example, if you sell something and accept payment through Venmo and the customer uses a stolen credit card, you lose money when Venmo receives a complaint about the stolen card. This does not apply to credit card transactions.
Customer service is available to Venmo MasterCard holders by telephone on weekdays from 10:00 to 18:00. If not, you can also write or speak to the support team via email in the mobile app.
In-app security features include PIN and fingerprint login options, as well as two-factor authentication.
If your phone is lost or stolen and you don’t have these security measures configured, you can deny access to your account by logging into the Venmo website and changing your permission settings.
Venmo’s parent company, PayPal, reached an agreement in 2018 with the FTC on complaints that customer access to funds is being delayed without notice, and that Venmo was misleading users about how to maintain privacy settings for their transactions.
Pros and cons of using money transferring applications
In countries like North America or the United Kingdom, mobile money accounts are growing and will only grow as technology advances.
Apple Pay, Google Wallet, PayPal, and other transferring supporters are at the forefront. In truth, the market is saturated with hundreds of startups, while some banks, retailers and financial services agents are launching their own channels.
It is the smartphone that is driving this revolution, which, in turn, is fueled by smartphone apps that allow users to store, send and receive money using their phones, thus generally reducing the need for physical banking.
But using mobile money transfers can have both its ups and downs, and now we are going to discover some really worthy advantages and disadvantages, let’s go.
Ubiquitous – Mobile payments cover everything, including utility bills, tuition fees, taxes, and international transfers from family and friends. You can pay bills, transfer funds, check account balances, view a recent transaction, block your ATM card, and more – all through your smartphone. Mobile payments do everything your bank does the same and faster.
Cheap – Mobile money transfers avoid high interest rates and bank exchange rates, which, in particular, are very high in some remote areas of the United States or Canada. Banks offer this service at very low or no cost to customers who make mobile money transfers very cost effective.
Safe – Mobile payments are as safe as bank transfers as they are protected by local financial regulations such as the Consumer Financial Protection Bureau (CFPB) in the US or the Department for International Development (DFID) in the UK. All transactions are secured with a private PIN, and Mobile Money keeps a record of every transaction.
Accessible – Going to the bank takes time and hassle. One of the professors of anthropology at American University, is contributing to bringing mobile payments to ease of access. Moreover, mobile banking is available around the clock 24/7/365 and is always close to you – unlike your bank.
Security – While sending money via mobile money transfers is secure, it is still possible that users may receive fake messages called “Smishing” that ask for bank details, and this has caused many users to fall victim to fraud and theft.
Accessibility – you need a mobile banking app and some apps may only be available on certain high-end smartphones.
In addition to these disadvantages, it is also possible that your bank may start charging you more for mobile banking services, as well as the fact that mobile phones are limited in processing speed, screen size and battery life, which could interfere with your transfer of payments.
More and more people around the world are turning to mobile payments rather than banks. It’s cheaper, faster, safer and more affordable. On the other hand, you need a high-end smartphone for service, you may need to pay more in the long run – and beware of scams. However, even with these shortcomings, money transfer agencies still see mobile payments as the future for sending funds from one country to another.
Venmo tries to make payments between friends not only easily but socially. Despite the potential for fraud that can be avoided by using the service correctly, this trick is of great importance, especially for those who love to share.
For those more privacy-minded, they can customize the visibility of their transactions to suit their comfort level, or simply use another service.
Anyways, it is fun, interesting and different to use Venmo. It is totally another more realistic way to transfer money. We all have Facebook accounts and iPhones and we all adore emojis, Venmo tried to make money transfers more pleasant and extraordinary.
So if you are bored of traditional ways of money transferring, you can easily switch to Venmo and get new emotions.
Yesterday I released the Adam Fayed Academy, which focuses on providing services which I couldn’t previously offer, but were requested.
On this article I explain what the academy is, how you can access it and future plans.