The internet has transformed the way we send and receive money. Thanks to digital payment platforms, brick-and-mortar banks have become more of a luxury than a necessity for many people. As a growing number of online transaction sites become available, it’s hard to know which is the best for your own needs. This quick rundown of Venmo will help you understand if this tool is the one for you.
What Is Venmo?
You might know Venmo as the payment app that makes it easy to pay your friend back for the concert tickets she bought or the Uber ride she covered. It actually began in 2009 as a text message payment system and grew over the years. In 2012, Braintree bought Venmo, and in 2013, PayPal acquired Braintree.
Overall, the app makes it possible to send and receive money virtually and instantly from anyone in the world. You create an account, link a credit card, debit card, or checking account and find the person with whom you want to send or request money. It’s an extremely easy process, and all transactions happen instantly.
Venmo also differentiates itself from other payment platforms by offering a social experience. It managed to transform the awkward situation of owing and exchanging money into a conversation. Say you owe your neighbor $30 for a shared bottle of wine. Rather than handing her $30 in crumpled cash and offering an embarrassed apology, you can virtually send her $30 on Venmo and add a few wine glass and dancing emojis in the note section.
Is It Safe?
Most millennials don’t think twice about using app-based payment platforms, but it’s still important to understand how Venmo keeps its users safe. Though nothing connected to the internet is totally impenetrable, the app uses data encryption to protect all users against unauthorized transactions. User information is stored on servers in secure locations to prevent breaches, and Venmo users have PIN codes and security questions to stop hackers.
With this said, Venmo isn’t perfect. There have been instances of users losing up to $3,000 in cases of fraud. Use these tips to make sure your account doesn’t become vulnerable to hacking:
- Never leave large amounts of money in your Venmo balance
- Only transfer money with people you know and trust
- Use the “private” setting to keep your transactions hidden from the public social feed
- Turn on all push notifications so that you’re alerted to any suspicious activity immediately
- Use all security measures, including setting a PIN and Touch ID
Since most personal Venmo transactions are on the smaller side, you can enjoy ease-of-use with minimal risk.
How Does It Make Money?
Venmo makes money the same way that other financial institutions rake in profits: by charging transaction fees. Depending on the way you use Venmo, the following fees may be assessed:
- You are charged a 3% transaction fee if you send money with a credit card (debit cards, bank accounts, and Venmo balance transactions are not assessed a fee).
- You are charged a 1% fee for using the Instant Transfer feature to withdraw cash from Venmo, up to $10.00.
Merchants who use it as a source of payment must pay a 2.9% plus a 30-cent fee per transaction. For example, in 2018 Uber added a Venmo payment feature on its mobile app so that riders could use Venmo without leaving the Uber app. This means Uber pays 2.9% plus 30 cents on every payment transaction.
Overall, Venmo has the potential to serve as a valuable tool when you need to send money instantly and virtually. It only takes a few minutes to set up your account and get rolling.
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