Can You Really Trust Venmo With Your Payments? Full Review

Venmo is a personal cash transfer service owned by Braintree Payments and PayPal. Launched in June 2012, the service enables users to make direct bank (ACH) transfers or card payments to one another using a mobile phone app. Bank and debit transfers are free through Venmo, but the service charges a per-transaction fee on credit card payments. Additionally, as of 2021, Venmo has added a feature that allows a buyer to flag a purchase as “goods and services,” which will allow the buyer to enroll in a purchase protection plan and which adds a charge of 1.9% to the seller’s end of the transaction. Venmo is similar in many ways to Square Cash or PayPal, but its easy-to-use app and free transfer service make it one of the best mobile apps for sending money to people. Venmo has also recently launched a feature that enables businesses to accept payment from Venmo users within those businesses’ mobile apps, and users can now pay with Venmo in places that have a PayPal button.

Additionally, it became news in 2022 that Venmo (along with other online payment processors) must report transactions to the IRS if someone sends over $600 a year. This may heavily affect those using Venmo for business.

A Surge in Popularity

Venmo’s rise has been meteoric, particularly among Millennials and Gen Z. This demographic, characterized by their comfort with technology, finds Venmo’s user interface intuitive and its features highly appealing. The social feed, where transactions are shared among friends, adds a unique twist to the otherwise mundane process of transferring money. User’s report that this social aspect not only enhances the user experience but also builds a community feel around financial transactions.

Impact on Credit and Debit Card Usage

The rise of Venmo and other digital wallets is reshaping the landscape of traditional payment methods. According to recent data, digital wallets accounted for 32% of global point-of-sale (POS) transactions in 2022, slightly higher than the 26% captured by credit cards​​​. This shift indicates a growing preference for the convenience and speed of digital wallets over traditional cards. In North America, digital wallets were used for 36% of POS payments, closely trailing credit cards at 34%​​.

Reasons For Shifting Preferences

Several factors contribute to the younger generation’s preference for Venmo over traditional payment methods:

• • Convenience and Speed: Venmo allows instant money transfers and payments, which is crucial for a generation accustomed to on-demand services.

• • Cost-Effectiveness: With no fees for standard bank transfers, Venmo is a cost-effective alternative to credit and debit cards that often come with transaction fees.

• • Social Integration: The ability to share payments and transactions within a social network makes Venmo not just a payment tool but also a social platform. This integration resonates with younger users who value connectivity and social interaction.

• • Mobile-First: As a mobile application, Venmo aligns perfectly with the smartphone-centric lifestyle of younger consumers, providing a user-friendly and efficient payment solution.

Business Implications

For businesses, the rise of Venmo signifies a need to revisit their payment acceptance methods. Incorporating Venmo into their options can attract a younger, tech-savvy customer base. Additionally, understanding the preferences and behaviors of this demographic can inform marketing strategies and customer engagement efforts. As Venmo continues to evolve and expand its services, businesses will likely need to adapt early in order to leverage this shift in consumer behavior.

Is Venmo Holding Your Funds Right Now?

Thousands of users have had their payments frozen by Venmo. If you’re one of them, then you might find these resources helpful:

• • How To Make Your Payment Processor Release Your Money

• • Best Mobile Apps for Sending Money

• • Best Mobile Credit Card Processing Apps

Venmo Comparisons

Many merchants find themselves debating between Venmo and PayPal for their payment service needs. We welcome our readers to check out the PayPal vs Venmo section of our PayPal review.

Payment Processing

Sending funds through Venmo involves a straightforward process. The user opens the app using a biometric scan or PIN, and enters the recipient’s username, phone number, email address, or Twitter handle. The user then selects either the Pay or Request button to specify the transaction type, enters the amount, and adds a brief note describing the transfer, similar to a memo line on a check. Once the payment is initiated, the money is sent, and both parties receive confirmation via email. Users need to manually transfer funds from Venmo to their personal bank accounts to withdraw cash, similar to PayPal. Venmo is available for iPhone and Android devices, and the service can also be accessed through the company’s website.

Frozen Funds a Major Issue

Over 1,000 negative Venmo reviews have been documented on consumer protection sites, with some labeling the service as a scam. A common issue is unexpected fund freezes in users’ Venmo accounts, often triggered by actions Venmo deems suspicious. It appears many users are unaware that their transactions could be flagged or that they might be breaching Venmo’s usage policies. While Venmo’s anti-fraud measures are understandable, better user education on fund holds and their reasons could improve their experience.

Other Venmo Complaints

Other issues include delayed or lost payments due to account errors or unauthorized use. As Venmo is primarily designed for personal transactions, it is not suited for large-scale or regular business use. Complaints also encompass grievances about the app’s social media features and occasional customer service problems. While Venmo offers phone and email support, these channels are likely managed by parent companies Braintree or PayPal.

Venmo Lawsuits and Fines

In 2018, Venmo settled an FTC complaint about failing to adequately inform consumers regarding fund availability and privacy/security practices. The settlement necessitated clearer business practice disclosures.

A 2021 inquiry by the Consumer Finance Protection Bureau focuses on Venmo’s collection practices, particularly regarding overdrafts and scam victims. Details will be provided as they emerge.

In 2022, Venmo’s supporter Plaid faced a $58 million class-action suit for allegedly unlawful data collection practices.