Venmo

Venmo
Original author(s) Andrew Kortina
Iqram Magdon-Ismail
Developer(s) Venmo, LLC (subsidiary of PayPal)
Initial release 2009 (2009)
Platform iOS
Android
Web
Available in English
Website venmo.com

Venmo is a mobile payment service owned by PayPal. It allows users to transfer money to others using the service using a mobile phone app; both the sender and receiver have to live in the U.S. It handled $12 billion in transactions in the first quarter of 2018.[1][2]

Since 2008 cash transfers using Venmo were not instantaneous and could be canceled after an initial transfer is sent. Like traditional wire transfer they can take one to three business days to become final.

Starting from January 2018 [3] PayPal has rolled out its Instant Transfer feature on Venmo. This feature allows to deposit funds to their debit cards typically within 30 minutes rather than days. A $0.25 fee is deducted from the transfer amount for each transfer while the standard bank transfer (typically completed within 1-3 business days) is still available for no fee. [4]

Product

Users create an account via a mobile app or website and provide basic information and bank account information. Recipients of transactions can be found via phone number, Venmo username, or email.

Users have a Venmo balance that is used for their transactions. They can link their bank accounts, debit cards, or credit cards, to their Venmo account, alternatively users can order a Venmo MasterCard and pay through it.[5] Paying with a bank account or debit card is free, but payments via credit card have a 3% fee for each transaction.[6] If a user does not have enough funds in the account when making a transaction, it will automatically withdraw the necessary funds from the registered bank account or card.

When users first create an account, total transactions cannot exceed $299.99 until their identity is verified.[7] After their identity has been verified, users can send up to $2,999.99 in each seven day period.[8]

Venmo MasterCard

The card runs on the MasterCard network and offers ATM access and overdraft protection. It can be used anywhere that accepts MasterCard, and it enables up to $400 in daily ATM withdrawals, though transactions at non-Money-Pass ATMs come with at least $2.50 in withdrawal fees.[5]

In addition, the service offers a reload function, which, when enabled, takes money from a user’s linked checking account in $10 increments if their Venmo balance drops too low to cover a purchase, though customers could be subject to fees or other consequences from their bank if they overdraft that account.[5]

Card purchases show up in a user’s Venmo transaction history, and the card can be canceled from within the app.[5]

These features make the card similar in many ways to a traditional bank debit card, but the ability to directly track spending in-app, which makes the card appealing to consumers who prefer digital banking tools.[5]

Social component

Social feed of transactions on Venmo[9]

Venmo includes social networking interaction; it was created so friends could quickly split bills, whether that is for movies, dinner, rent, tickets, etc. When a user makes a transaction, the transaction details (stripped of the payment amount) are shared on the user's "news feed" and to the user's network of friends.[10] This mimics that of a social media feed. There is a "world wide" Venmo feed, a "friends only" feed, and then personal feed. Venmo encourages social interaction on the application through comments using jokes or emojis and/or likes. Early on, Venmo required new users to sign up through Facebook, which made it easy to find peers they wanted to pay and also provided Venmo with free marketing.[11] For users not friends on Facebook, the application allowed the opportunity to search by username and phone number. Profiles are personalized with profile pictures, usernames and Venmo transaction history. The transactions can be made private, but most users keep the default and do not change the privacy settings.[12] Venmo does not have either buyer or seller protection.[13]

Venmo includes three social feeds: a public feed, a friends feed, and a private feed. By default, all Venmo transactions are shared publicly. Anyone who opens the app to the public feed, including people who do not themselves use Venmo, can see these publicly shared posts. The privacy settings can be changed so that all posts are either shared only with a user's Venmo contacts, or even kept private. If posts are shared only with contacts, they still appear in a friends feed, whereas private transactions are only visible to the two parties involved in the transaction. If two users involved in a single transaction have differing privacy settings, Venmo applies the most restrictive level. Users can override their overall preference for any individual transaction, including after the transaction has been made.[14]

Each transaction includes a description of what the payment is for in text, emoji, or both. This description is required to complete the transaction, but Venmo does not enforce content requirements (e.g., someone could describe the transaction as "nothing"). Venmo recommends emoji when a common expense is entered as the description. Overall, 30% of Venmo transactions include at least one emoji.[14]

Regardless of a transaction's privacy, only the two people involved in a transaction can see the transaction's amount. Transactions are persistent within the feed and scroll infinitely. A previous transaction may be difficult to revisit if a user or their contacts have many transactions.[14]

Venmo's social model has attracted attention from researchers. A research group from University of Washington observes that the social feed in Venmo differs from other social networks in that activity is driven by financial transactions. A user could make a trivial transaction to make a post (e.g., sending someone $0.01, or requesting $0.02), but only one participant in their studies reported ever doing this. Further, neither reading the feed nor sharing a transaction memo publicly or with friends is necessary to send or receive money.[14]

On Venmo, people transact with both friends and businesses via the app.[15] Analysis of public transactions identifies a spectrum of use patterns, from regular users who create transactions for a variety of expenses, to niche users who use Venmo with a small cluster of friends to pay for just a few things (e.g., bills among roommates).

Security

Venmo has claimed that its security is bank-grade, and that personal and financial data are encrypted and protected on secure servers to guard against any unauthorized transactions.[16] Journalists, security researchers, the California Department of Business Oversight (DBO) and the Federal Trade Commission have all disputed these claims.[17][18][19] In February 2018, the FTC settled with Venmo, after an investigation uncovered false representations about "bank grade" security and failures to comply with the Gramm-Leach-Bliley Safeguards Rule and Privacy Rule.[20][21] Under the settlement, Venmo will be required to undergo third-party audits every two years for the next ten years. The FTC also complained that Venmo "misled consumers about the extent to which they could control the privacy of their transactions" and misrepresented the availability of funds for withdrawal.[22] Venmo states that customers need not worry about their security or privacy, and encourages users to set up a PIN to increase security.[23] On July 17 2018, The Guardian[24] released an article showing that Venmo is insecure because privacy protection is not set by default. According to the researcher who found this privacy issue, Venmo publishes all transactions along with names openly into the World Wide Web. The Better Business Bureau has reported that some scammers exploit the cancellation period to appear to pay, but ultimately avoid paying for an item.[25]

History

Venmo quarterly US payment volume and annual growth

Venmo was founded by Andrew Kortina and Iqram Magdon-Ismail, who met as freshman roommates at the University of Pennsylvania. According to Kortina, the duo were initially inspired to create a transaction solution while, in the process of helping start a friend's yogurt shop, they "realized how horrible traditional point of sales software was". At a local jazz show, Kortina and Magdon-Ismail conceived the idea of instantly buying an MP3 of the show via text message. Finally, the idea was cemented when Magdon-Ismail forgot his wallet during a trip to visit Kortina. The process of settling their debt was a considerable inconvenience, especially compared to the possibility of mobile phone-based transactions. Shortly after, they began working on a way to send money through mobile phones.[26] Their original prototype sent money through text messages, but they eventually transitioned from text messages to a smartphone app.[27]

In May 2010, the company raised $1.2 million of seed money in a financing round led by RRE Ventures.[28][29]

In 2012, the company was acquired by Braintree for $26.2 million.[30][31][32]

In December 2013, PayPal acquired Braintree for $800 million.[33][27][34]

Prior to October 2015, Venmo prohibited merchants from accepting Venmo payments. On January 27, 2016, PayPal announced that Venmo was working with select merchants who would accept Venmo as payment. Initial launch partners included Munchery and Gametime.[35] All merchants that accept PayPal can now accept Venmo.[36] As of May 2018, Venmo's merchant product did not permit "selling goods or services in person",[37] however research into mobile payment trends among mom-and-pop restaurants in New York City that month revealed a grey market use case whereby some Chinese takeouts and food trucks used personal Venmo QR codes to accept payments from customers. This QR payment behavior was similar to that used via Chinese mobile applications WeChat and Alipay within these same establishments.[38]

See also


References

  1. ↑ BARY, EMILY (April 26, 2018). "PayPal says Venmo is starting to pay off". Marketwatch.
  2. ↑ Gagliordi, Natalie (April 26, 2018). "PayPal adds 8 million new active users in Q1". ZDNet.
  3. ↑ "Venmo can now instantly transfer money to your debit card for 25 cents". www.theverge.com. TheVerge. January 26, 2018. Retrieved September 8, 2018.
  4. ↑ "Instant Transfers FAQ". help.venmo.com. Venmo. September 8, 2018. Retrieved September 8, 2018.
  5. 1 2 3 4 5 "PayPal's Venmo now offering physical credit cards aimed at millennials". ameinfo.com. Retrieved 2018-07-03.
  6. ↑ "Pricing". Venmo.
  7. ↑ Allan, Patrick (January 11, 2016). "Money Transfer Showdown: Square Cash vs. Venmo vs. PayPal".
  8. ↑ "Payment Limits". Venmo.
  9. ↑ "Venmo-Braintree". Braintree.
  10. ↑ Moorthy, Neelesh (March 25, 2015). "Cash, credit or mobile app: the rise of Venmo". The Chronicle.
  11. ↑ Bird, John (November 4, 2015). "How Venmo Won In One Of The Most Crowded Spaces In Tech". Retrieved June 23, 2017.
  12. ↑ Wener-Fligner, Zach (March 20, 2015). "The emoji of Venmo: food, booze, partying, and, occasionally, rent". Quartz. Retrieved April 18, 2015.
  13. ↑ "Security". Venmo.com.
  14. 1 2 3 4 "Venmo Unveils Most Emoji-Loving Cities in Honor of #WorldEmojiDay". The Venmo Blog. Retrieved 2018-02-25.
  15. ↑ Xinyi, Zhang (2017). "Cold Hard E-Cash: Friends and Vendors in the Venmo Digital Payments System" (PDF). Proceedings of the International AAAI Conference on Web and Social Media (ICWSM 2017).
  16. ↑ "Venmo: App to make and share payments". Fiscal Today. Retrieved 24 June 2015.
  17. ↑ "Venmo security: it's not as strong as the company wants you to think". Slate. 2015-02-01. Retrieved 2015-10-23.
  18. ↑ "Security research of a social payment app" (PDF). MIT CSAIL. 2014-05-14. Retrieved 2015-10-23.
  19. ↑ "Venmo App: Users Raise Questions About the Security of Peer-to-Peer Money Transfer Service". ABC News. March 18, 2015.
  20. ↑ "PayPal Settles FTC Charges that Venmo Failed to Disclose Information to Consumers About the Ability to Transfer Funds and Privacy Settings; Violated Gramm-Leach-Bliley Act" (Press release). Federal Trade Commission. February 27, 2018.
  21. ↑ Fair, Lesley (February 27, 2018). "FTC Venmo Settlement addresses availability of funds, privacy practices and GLB". Federal Trade Commission Business Blog. Retrieved April 7, 2018.
  22. ↑ "Before the Federal Trade Commission: In the Matter of Paypal, Inc., a corporation (FTC Complaint against Venmo)" (PDF). Federal Trade Commission. 2017.
  23. ↑ Nath, Trevir (2015-03-24). "How Safe is Venmo and Why is it Free?". Investopedia. Retrieved 2018-02-23.
  24. ↑ "Venmo: how the payment app exposes our private lives". The Guardian. Retrieved 19 July 2018.
  25. ↑ "Scammers Use Venmo to Fool Sellers". Retrieved 2016-10-24.
  26. ↑ Elgar, Tyler (October 2, 2017). "Venmo. The wallet of the future". Medium.
  27. 1 2 Gillette, Felix (November 20, 2014). "Cash Is for Losers!". Bloomberg Businessweek.
  28. ↑ Schonfeld, Erick (September 16, 2010). "Social Payment Startup Venmo Raised $1.2 Million And Has A New iPhone App". TechCrunch.
  29. ↑ "Venmo-Funding Rounds". TechCrunch.
  30. ↑ "Braintree Acquires Mobile Payments Platform Venmo" (Press release). Business Wire. August 17, 2012.
  31. ↑ WORTHAM, JENNA (August 16, 2012). "Braintree, a Payments Company, Buys Venmo for $26.2 Million". The New York Times.
  32. ↑ Lardinois, Frederic (August 16, 2012). "Online Payments Service Braintree Acquires Venmo for $26.2M". TechCrunch.
  33. ↑ "eBay Inc. Completes Acquisition of Global Payments Innovator Braintree" (Press release). Business Wire. December 19, 2013.
  34. ↑ Rao, Leena; Perez, Sarah (September 26, 2013). "Ebay's Paypal Acquires Payment Gateway Braintree For $800M In Cash". TechCrunch.
  35. ↑ Rao, Leena (January 27, 2016). "You Can Now Use PayPal's Venmo to Pay Merchants". Fortune.
  36. ↑ Toplin, Jaime (May 1, 2017). "Venmo makes moves to monetize". Business Insider.
  37. ↑ "Payment Methods: Venmo". Braintree Support Articles. Retrieved 14 May 2018.
  38. ↑ Chester, Ken (10 May 2018). "Can China's 'WeChat Diaspora' Pioneer Mobile Payment in the US?". Sixth Tone. Retrieved 14 May 2018.
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