Carrying cash seems an outdated version of transactions in today’s generation. We’ve come a long way with how money transactions work and now is the era of online transactions.
The interesting fact is that there are countless e-payment wallets available in the market.
So what is it that makes Venmo special and why is everyone going crazy for Venmo and most importantly – How Does Venmo Make Money?
Venmo started in 2009 when two friends and founders of Venmo- Andrew and Iqram thought of the idea of paying cashless or without writing cheques.
From SMS to Peer-to-Peer online money transfer apps, Venmo has come a long way from its original prototype.
The social element in Venmo is what makes it unique and one of the most used methods for payment transfers in the US. Let’s briefly talk about what Venmo is and how it works.
What is Venmo?
Venmo is based on peer-to-peer technology that allows people to transfer money through a cellular device. The term Venmo comes from “Ven” (Latin for “to sell”) and “mo” which stands for mobile.
This changed the way people pay for products and services in their day-to-day life. Currently owned by PayPal, the giant considers Venmo as the secret sauce.
It not only enables users to transfer money between peers, but it also allows the users to pay merchants, split costs or as a social media app with an interface somewhat like Facebook messenger. It allows users to chat and send emojis through the app.
Venmo has a feature that some would consider creepy while some would find it cool – It enables a friend to view their friend’s transaction. Though, if we look at certain tweets, this feature has its own advantages.
Since it’s an integrated version of social media and e-wallet, it is also one of the major targets of hackers and cyber-attacks. But PayPal continuously works towards making it safe for the end-users and regularly updates the security of the portal.
How does Venmo Work?
Venmo is a mobile app that you need to download to your cellular device. Using Venmo is quite easy. All you need to do is create a Venmo account, connect the account with your debit or credit card.
The app is all set for money transactions: pay your rent, pay for your groceries, transfer money, split bills at dinner, and chat with your friends.
You can also get a Venmo card that you can use at groceries and various other stores that take Venmo as a payment.
With its increasing demand, if you haven’t already been using Venmo, you will soon start.
Also Read: Best Cryptocurrencies to Invest in 2021
Why Should You Use Venmo?
There’s always some upsides and downsides to every technology ever built, no matter what the real motive behind it was. The same is the case with Venmo, and here is what makes Venmo an amazing online payment app.
- It is mostly free. You can send or receive money through your bank accounts or cards linked with Venmo for free, but if you would like to withdraw cash, you will be charged a certain %.
- It has an easy to use interface.
- It comes with a social element enabling users to chat with each other.
- It is quick and efficient.
- You can opt for a Venmo Debit or Credit Card.
- Venmo allows payment to select merchants.
- It can be easily integrated into an eCommerce site, making it easier for the users to transact.
Why You Shouldn’t Use Venmo?
Let’s figure out the downsides for using Venmo:
- The settings are set to public on default. So, if you haven’t changed the privacy settings, everyone on the app will be able to view your transactions and the little memos attached to them.
- Even though the company promises to ensure security, there are always cases of phishing, hacked passwords and other forms of security attacks on the app.
- If you’ve paid for the products or services that were not delivered to you, the money is non- returnable unless the receiver decides to pay back. The company policy states that in such cases, it will not be able to help the customer’s .
- If you pay someone by mistake, there is only one way to get your money back- a polite request that the receiver accepts.
- It does not accept international transactions.
How Much Does Venmo Make a Year?
Its users have also grown from 40 million in 2019 to 52 million in 2020. We’ll have to wait for its next annual report to find out how many more users Venmo has acquired.
Venmo contributes to 16% of PayPal’s total revenue. No doubt, PayPal is proud of its acquisition of Venmo.
How Does Venmo Make Money?
The way Venmo or any other online money transaction apps make is by taking their cuts or charging interest for its certain services.
Venmo is mostly free, but if you’ve used Venmo to cash in cheques, or to withdraw money, you would have realised that it charges a certain % in interest.
- If you transfer money using your credit card, you will be charged 3% fee.
- If you are withdrawing money from your Venmo balance to your bank account instantly, you will be charged a 1% fee by Venmo, with a minimum of $0.25 to a maximum of $10.
- Venmo also charges fees for using out-of-network ATMs wrt Venmo debit cards.
- It also charges $2.50 for using ATMs, not in MoneyPass.
- It charges $3 for over-the-counter cash withdrawal at a bank.
- Venmo also charges merchants for transactions at their stores. Since Venmo is preferred by maximum customers, the merchants are usually happy to pay the fees.
- A user can upload the picture of a cheque and after Venmo has identified its authenticity, it cashes the cheque to the user’s bank account. For this service, Venmo charges 1% and the minimum transaction should be $5.
This is a new feature called Cash A Check that Venmo launched in January 2021 with the help of which a user can directly cash their cheques through Venmo without having to go to a bank.
- Venmo rolls out cashback programs where a user is offered cashback as a reward at select merchants. These merchants offer a commission to Venmo along with cashback to customers as this reward works as an incentive for the customers to return to the merchant.
Frequently Asked Questions
How does Venmo make money without fees?
Venmo is mostly free for transactions but it charges interest for use of credit card for transactions, transferring money from Venmo to a bank account, cashing a cheque, withdrawal of money from non-network ATMs and charging the merchants for transactions at their stores with Venmo, getting commissions for Cashback rewards etc., through which Venmo makes money.
Are there fees with Venmo?
If you are using Venmo balance or your debit card and bank account linked with Venmo for transfer, then it does not charge you any fees.
What’s the catch with Venmo?
It is advertised as a free online payment platform, however, there is a limitation to it. If you are using a credit card for transfer, cashing a cheque or withdrawing money from no-network ATMs, you will be charged with an interest that you can read about in the article.
Why you shouldn’t use Venmo?
There is no particular reason why you shouldn’t use Venmo. However, if you do use Venmo, ensure that you are cautious while using it just like any other e-wallet.
Make sure that you don’t share your password, if you think that someone has tried to login into your account without your permission, ask for help, check your privacy setting and set it to private if you don’t want the users to know where you spend your money.
Also, be careful to send the money after your products or services have been delivered as the money can not be refunded if the receiver doesn’t want to return it.
Be careful that you are not sending the money to a stranger or the wrong person.
Venmo is a well-liked app that is used by over 2 million people in the US. It has been over-hyped but it is an app that makes transactions easy with an added social factor, so it deserves to be.
I hope that I was able to answer your questions like how does Venmo makes money and how much is it worth.
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