Did you know that the name Venmo derives from the Latin word for “to sell”? How about that it was once a music start-up where users could text bands in exchange for MP3s being sent to them?
Still, regardless of how intriguing they may be, that is not the focus of today’s conversation. Instead, we’ll take a look at some of Venmo’s less obvious features that might end up saving you a lot of money over time.
It’s easy to be burned if you use Venmo without first learning the business fundamentals. Just how does Venmo turn its users into cash? I say we find out.
To begin, let’s define Venmo.
Venmo is a popular mobile payment service in the United States, founded in 2009 by Andrew Kortina and Iqram Magdon-Ismail. Money may be transferred between adults (over the age of 18) without any fees. With the tap of a button on your Android or Apple smartphone, you may send money instantaneously to loved ones or companies, and there are no fees associated with the transfer.
The social aspects of Venmo are also built in. Users may, for instance, connect with others who also use the app and, depending on their privacy settings, see information about their friends’ transactions, such as the timestamps and descriptions of such transactions. The payment procedure is made more fun when using Venmo since you may send and receive emojis along with your money transfers.
Venmo’s social component, together with its ease of use, quickly made it a favorite among users of all ages. In 2013, PayPal acquired Venmo after a string of similar deals in 2012 and 2013. It handles over $230 billion in yearly payment volume and has over 70 million customers.
What business model does Venmo use to generate revenue?
Now that we’ve got a basic understanding of Venmo, we can dig into the top three ways the company generates money. It is important to remember these income streams while you use this money-making tool. The information gained here may be used by anybody, company owner or not, to reduce wasteful usage of Venmo.
1. Paying using a Credit Card
We have seen that using Venmo to transfer money, receive money, and make everyday payments is completely free. However, when you pay with a credit card rather than cash or a debit card, the rules are different. There would be a 3% charge added to the total of the transaction in these cases.
That implies it will cost you $3 to transfer $100 to a buddy using the credit card associated with your Venmo account. You may not think that’s a lot, but it adds up over time.
2. Using Venmo as a Payment Method
With Venmo, consumers have a convenient and speedy option for making purchases. But did you know there’s a charge the vendor (the company you’re purchasing from) needs to pay for every transaction?
Venmo is free for consumers to use, but it charges businesses 1.9% of the transaction’s total plus a fixed $0.10 fee. If customers spend $100 at Home Depot, for instance, they will only get $98 back. The remaining $2 is for Venmo fees.
3. Instantaneous Funds Movement
Let’s imagine you’ve received funds through Venmo that you’d want to move to your regular bank account. The Instant Transfer feature makes this possible, and the money will be available to you in as little as 30 minutes.
Compared to the average turnaround time of three to five business days, it is very quick. The cost is something you have to consider. Withdrawals using the standard method don’t cost anything, however Instant Transfers are subject to a 1.75 percent fee. Therefore, each transfer will cost at least $0.25 and no more than $25.
What Kinds of Dangers Could You Run Into While Using Venmo?
Online applications, particularly those dealing with money, are not without their risks. As a result, users of Venmo, PayPal, Revolut, and other similar applications should weigh the benefits and drawbacks of using them.
The primary source of these problems is hackers. Those with malicious intent and the necessary technical know-how might theoretically bypass Venmo’s security measures.
A hacker who obtained access to the software may modify the associated email address and transfer money to a different bank account. Thus, the user would never know if a problem had occurred with a transaction since they would never get alerts.
Luckily, there are several easy ways to prevent this horror from happening. To begin, you should only use Venmo with people you know and trust and restrict the amount of money you keep in the app to that amount. Protecting your account by making it private and using a strong PIN/touch id is recommended.
However, if that weren’t a good enough reason to keep your Venmo balance low, remember that, unlike conventional U.S. banks, Venmo isn’t protected by the FDIC in the event of a financial emergency. That means if the firm goes bankrupt or loses your money, there is a chance you won’t receive it back.
Overall, if you are aware of the ways Venmo makes money off you, you will be more likely to avoid certain things. So be educated on their business aspects in the “Terms and Conditions” section of the application before using it on a regular basis.