How Does Venmo Make Money? Answered With Simple Points!
Ever been at a bar with some friends and the cashier is crazy busy and you don’t feel comfortable asking them to take the extra time to split the bill several ways? Well, with Venmo, you no longer have to keep tabs on your phone or worry about debt. Venmo is a person-to-person mobile payment app that is available on smartphones, has a user-friendly interface, and is super easy to use. Using the Venmo app, users can both request money from another user or send it unsolicited.
Wondering How Does Venmo Make Money? Wonder No More!
Venmo: A simple story:
Venmo was founded in 2009 by Andrew Kortina and Iqram Magdon-Ismail. The two were college roommates at the University of Pennsylvania. They were initially inspired to create a product that would make transactions easier while helping another friend of theirs set up a yogurt shop. Then, at a jazz show, they both thought about how great it would be to be able to buy an MP3 of one of the band’s songs right over a text message. The last straw that led the two men to build Venmo was when Iqram came and visited Andrew, but forgot his wallet. Settling the debt was a headache that the idea for the app almost cemented itself. Since then, the company has had major success. In 2012, Venmo was bought by Braintree for $26.2 million. Then in 2013, Braintree was bought by PayPal for $800 million.
How Does Venmo Make Money?
Turning smartphones into wallets, Venmo is part of the movement making ease of transactions more accessible to everyone. But the question has to be asked, how does Venmo make money?
After you create a Venmo account, you’ll have the ability to enter payment information, such as a U.S. bank account or a debit/credit card and get sharing. Creating an account as well as using the Venmo app is free, so how does Venmo make money? Most people don’t know that the company has developed a strong business model to make some dough.
The first way is through Credit Card Fees.
Venmo offers their customers its own account system and if the customers choose to use their Venmo balance, then there are no transaction fees.
The same goes for when customers choose to make payments via a debit card or with their own linked bank account. It is when customers pay with a credit card that Venmo can take a small percentage. Why credit cards? Well, the app takes 3% of the total value of the transaction with credit cards.
The second way Venmo makes money is through Merchant Fees.
Paypal purchasing Venmo has really helped as all merchants that accept PayPal payments, now accept Venmo as well, and there are fees associated with that. The merchants that are accepting those payments pay around 3%, like with the credit cards.
Is Venmo the only app out there?
While Venmo is definitely the most widely used payment app, it definitely isn’t the only one out there.
Here’s a list of Venmo’s biggest competitors.
- Google Wallet: This is Venmo’s biggest competition, as well as the most similar app. They work pretty much the same. The main difference if Google Wallet is available in the U.K.
- Apple Pay/Android Pay: These apps, while popular, are far more limited than Venmo, and treat a far more specific purpose.
- Popmoney: This money-sharing app is also very similar to Venmo, but charges a $0.95 fee to transfer money from a debit card to a bank account.
- SnapCash: Think SnapChat but for money. With this money transfer app, there is no associated fee but the weekly limit is $250. However, Snapcash isn’t as efficient (or as snappy) as Venmo, as it can take several days for transactions to clear.
- Square Cash: Square was built by Twitter co-founder Jack Dorsey. It is big with businesses but is yet to make a splash in the person to person transaction world.
- Facebook: Facebook recently launched its own money transfer service through its messenger function. This permits Venmo’s customers to transfer money as easily as sending a test.
The Venmo money-sharing app seems to be an all-around great way to exchange money, but it does have some limitations.
- The main drawback of Venmo is that it is U.S. only. No transactions may be done outside of the country or with someone from outside of the country.
- Another drawback is that Venmo is only available for personal use. Businesses cannot directly use the app (but we all know that business owners could use it for certain things such as buying lunches and so on).
- The final limitation is a $3,000 cap on weekly spending and receiving. Venmo could be an excellent tool for landlords, but this can sort of throw a socket wrench in that plan.
The popularity of Venmo as a payment app is massive and the main reason seems to be because it’s more fun to use than other apps. Customers can interact with each other through the app just as they could on a social media site. The use of Emojis is paramount in the app. Exchanging or asking for money can sometimes be uncomfortable, so the playful and lighthearted emojis can really help to ease any kind of exchange.
“This takes the awkwardness out of asking your friend to pay back their portion of the bar tab, marrying the social element and the financial element,” stated Venmo spokesman Josh Criscoe.
Is Venmo secure as it’s linked to my social media?
With heightened tech like Venmo comes heightened tech to hack into such services and steal confidential information. Since the app’s creation, it has made sure to use only the highest standard of security. Venmo uses bank-level security and data encryption to secure transactions. Even with the app’s heavily advertised security features, worries still arise amongst customers. Cases of hackers have surfaced which only fuels the fire of doubt surrounding the apps security prowess. The main problems with security lie in the realm of human error. There are a number of instances where larger sums of money have been sent to the wrong person (there are a lot of “John” out there) and in that instance, there is no real way to get the money back, unless you get incredibly lucky with a good Samaritan!
Venmo has adopted the same principles as a social media platform, wherein anyone who you are “friends” within the app can see your activity. This doesn’t sit well with everybody. Other Venmo customers in your contacts list are not only able to see your transactions, but are also able to like them and comment on them, as they would be able to do on, say, Facebook. Some have described the Venmo platform as mocking and unnerving. The simple solution for people who feel like they are too exposed and are uncomfortable using the app is to just not use it. Of course, the app is really convenient, but the old ways still exist, and for now, have not been weeded out by this technology.