Venmo: A Student Perspective

“I will venmo you once I get back to my room!”—a statement familiar to many college students. Indeed, Venmo has become an app ubiquitous to many millennials possessing smart phones. Just by pressing one button, one can split the cab fare, rent, dinner bills, coffee money with friends without needing a wallet.

The most welcoming aspect Venmo is: the app itself is free, and no additional charge follows post downloading. So is Venmo too good to be true? Venmo is a P2P payment, or person-to-person payment, meaning an online platform that allows individuals to perform transactions extracting from their accounts or cards to another via the Internet or the phone. Like Apple pay and PayPal, Venmo is a paradigm of P2P payment. Yet unlike Apple pay or PayPal, Venmo does not make money via advertisements.

So how does Venmo actually profit? Two main revenues prevent Venmo from bankruptcy. First, Venmo does charge a 3% transaction fee for credit card usages. Specifically, If one pays with their Venmo balance, linked debit card, or bank account, then the transaction is completely free for both parties. In a sense, it is analogous to handing someone cash in person. However, if one links Venmo with a credit card, then a 3% transaction fee applies, just as it would for an ATM. On Venmo’s official page, it says free if you link it to your debit card or bank account. Strategically, Venmo leaves out the option of credit card, and many that glance through the page will be negligent or misinformed and link it with a credit card. Thus, contributing to Venmo’s main revenue of profit. Not only transaction fee from individuals, but also merchant fee from small businesses does Venmo benefit--the second way for Venmo to profit. With the prevalence of smartphones, many smart businesses have come to accept Venmo as a way to pay. These businesses include many hipster cafes, brunch restaurants, food delivery places like Munchery and ticket sellers like Gametime. Venmo does not ask for an additional charge from the users, but charges the businesses a 2.9% transaction fee. Although being charged, the merchants still accept Venmo payments because Venmo gives them a portal for a strong and steady base of millennial users.

The popularity of Venmo is increasing day by day. In the fourth quarter of 2015, Venmo took in an overall of 2.5 billion in payment, up 174% from the same quarter in 2014. Continuing with the trend, Venmo is estimated to reach 17 billion in payment by the fourth quarter of 2019. No wonder PayPal bought Venmo in 2012 for its potential marketability and growing popularity. One caveat of using Venmo is safety. Venmo is, at the end of the day, an online payment method. If there lacks a password, one can easily be hacked by others on Venmo. Even with a password, such concerns cannot be prevented completely. Moreover, users should be extremely careful when dealing with a transaction with a stranger, for instance, if one is selling on eBay and accepts Venmo. It takes two days for payment to transfer from one bank, or a card, to another, yet the notification shows on the phone immediately. Essentially, the notification might trick the seller to think that he or she already got the money, and thus ship out the item.

The lag of time between the notification and the actual transfer might be used to some people’s advantage as a scam. So avoid transactions with strangers and be sure to frequently check one’s bank account to make sure everything is on the right track. Besides this bit of drawback, Venmo is a convenient and user-friendly tool. Let’s just be aware about the transactions, and be careful before pressing the “send” button.