With bill splitting apps like Venmo rising in popularity, especially among younger demographics, many businesses are wondering about accepting those payment methods directly. While Venmo does allow for business use, there are limitations – as well as some concerns – to be aware of.
In this article, we’ll take a look at what Venmo is, current acceptance options, and the company’s plans for expanded business acceptance to answer the question, “Can I take Venmo at my business?”
- What is Venmo?
- Venmo and Business
- Issues with Venmo for Commercial Transactions
- Competitors: Symple
What is Venmo?
Venmo is perhaps the best-known app in the payments splitting space. Venmo was acquired by PayPal as part of Braintree. Users can link a bank account, credit card, or debit card to the app to make and receive payments easily. It allows money to be moved quickly between other people, the app, bank accounts, and attached credit or debit cards.
Using the app to collect payments from others is free — Venmo makes money by charging a 3% fee if users want to send money to another person using a credit card. (There is no fee to the user for sending money from a Venmo balance, bank account, or debit card.)
In 2016, Venmo began allowing some businesses to accept Venmo for payment. Using Venmo for business transactions incurs processing fees that follow your Discover processing fees. That means that the rates you pay may be different than the rates other businesses pay, depending on your merchant agreement.
Venmo and Business
It’s important to understand that Venmo interacts with businesses in several ways. To begin with, select businesses can choose to accept payments via Venmo and can integrate with the application. Venmo is one of the most popular ways for millennials to pay for goods and services, so integrating with Venmo will make the purchasing experience easier for many consumers.
At the moment, Venmo is only available to a handful of businesses selling goods and services through a native app, but they are looking to roll the service out more widely.
Braintree’s website states that Venmo for businesses is currently in a limited release phase. The list of businesses that cannot currently use Venmo for business transactions includes those that are:
- Selling products/services in person
- Selling products/services only online
- Accepting donations as a non-profit
Essentially, that means that the only businesses currently able to utilize Venmo for commercial transactions are those that accept payment in your business app. If you’re eager to start accepting Venmo, you have an option – you can accept Venmo through PayPal.
Venmo Through PayPal
Businesses that accept PayPal can choose to accept Venmo through the PayPal online checkout. Venmo users will be able to select “Venmo” after choosing the PayPal payment option. Some users may not be aware of this option, as there will not be a separate Venmo button at checkout. It’s up to you to educate your customers that want to use Venmo about the option to do so through PayPal.
Customers using Venmo will receive the Venmo branded receipt in addition to any other receipts you provide.
When accepting Venmo payments through PayPal, PayPal will charge its usual processing fees. For most businesses, that means a rate of 2.9% + 30 cents per transaction.
Related Article: Taking PayPal at Your Business.
Issues with Venmo for Commercial Transactions
Unfortunately, all is not roses in the world of Venmo payments, as an article on Slate highlighted.
It used to be that Venmo could not be used for business transactions, and at the time that article was written (2015), there was a line in the Venmo terms of service that read, “Business, commercial, or merchant transactions may not be conducted using personal accounts.” That has now changed, and Venmo does allow for (limited) business use, with explicit permission.
The issue in 2015 is that scammers could use Venmo to defraud people out of thousands of dollars, and if it was deemed a “business transaction,” the users had absolutely no recourse. Indeed, the security page of Venmo’s website currently states:
“Venmo is designed for payments between friends and people who trust each other. Avoid payments to people you don’t know, especially if it involves a sale for goods and services (like event tickets and Craigslist items). These payments are potentially high risk, and you could lose your money without getting what you paid for. Venmo does not offer buyer or seller protection. Business usage of Venmo requires an application and explicit authorization.”
That will create some raised eyebrows from business users. There were regular issues with payments reversed without authorization, accounts frozen, and money removed without recourse. Although Venmo’s TOS does now allow for business transactions, the fact there is no protection for buyers and sellers is a big red flag. There’s no real separation between the ease of logging into Venmo and paying $7 for your share of a bar bill as there is in sending $1,500 for your share of buying a data server.
Since the Slate story came out, Venmo has apologized for these issues and taken on more staff for customer service and security. Despite those efforts, Venmo remains an app primarily for exchanging money between users who know each other, and for these reasons we cannot recommend Venmo as a secure, protected, and reliable app for managing business transactions, especially large amounts.
Unless you’re explicitly authorized as a candidate for Venmo business, it’s better not to accept Venmo at this time. That may change as Venmo continues its expansion plans for accepting commercial transactions.
There’s a new startup that’s worth keeping an eye on. Known as Symple, it aims to be the “Venmo for Business.” It wants to be the way that vendors, businesses, suppliers, distributors, and retailers transfer funds between different organizations. It plans to take snapshots of invoices, issue requests for payment, and collect and distribute funds directly through bank accounts.
There are still authentication, authorization, and security issues to overcome. Despite that, Symple is certainly an app that it’s worth keeping an eye on.
Venmo gets a lot of attention as a trendy new app, and the company does have plans to expand commercial transaction acceptance, but until that point, it’s best to keep your Venmo-ing to peer-to-peer payments and use a traditional credit card processor at your business
Need help finding a competitively priced payment processor to accept cards at your business? Try CardFellow’s free quote comparison tool.
Paul Maplesden contributed to this article.