Is Venmo A Payment Processor?

Venmo is a ‘digital wallet’ service, owned by PayPal; friends and family on Venmo can easily make (and take) payments from one another, just like reaching into a purse.

As Venmo is also your ‘wallet’, you can use it to make payments for all kinds of services as a payment option. It’s all becoming very popular, with the original Venmo service now having more than 60 million users worldwide.

Get cash into an account instantly using echeck, and of course, since it is owned by it, using PayPal through Venmo is absolutely the easiest thing in the world. If you want to find out more about Venmo, keep on reading!

What Is A Payment Processor?

If you happen to be a small business and you’re looking to accept credit card/debit card payments from your customers online, via phone, or at the point of sale, then you’ll need to partner yourselves with a payment processor for any of that to happen.

Payment processors handle credit card and debit card transactions for businesses, moving the funds from a purchase from the account of your customers to your own. 

Pricing structures or fees for this service vary by many factors: like the amount/value of the transactions made, or the processing model you have chosen.

The most standard model is for a payment processor to charge a percentage of each transaction made; adding a small per-transaction fee as well as other fees, such as a monthly statement fee, a monthly minimum fee and an annual PCI compliance fee.

There are no fees for making transfers on Venmo.

Why Can’t You Use Venmo As A Payment Processor? 

This might make using Venmo as a means of taking money from customers seem very appealing- but that standard version of Venmo that you use to swap cash with your buddies for rounds at the bar and splitting checks- that is NOT a payment processor. It is not allowed.

It Breaks Venmo’s TOS

Venmo explicitly state on their site it should not be used for business payments.

There is no fee for standard Venmo because it’s just meant as a method of sending and receiving money between peers. They are, understandably, very not cool about it being used in ways that might get them in trouble with financial institutions.

Standard Venmo Isn’t Suited To Your Business Needs

In all honesty, if you’re thinking of doing business in this way, you’re kind of setting yourself up.

Once again: Venmo is built for private payments: poxy amounts of money sent between close ones.

Personal accounts are not designed for the necessities of commerce transactions in a small business, and therefore you lose many of the benefits of using a dedicated payment processor etc.

Using Venmo means no records tax season, and many seemingly unaccountable transactions flooding your bank account.

There are no monthly statements for keeping track of your finances. There’s no way to collect or track tips- which might be a massive part of your income.

Suddenly you’re juggling a lot of risk and responsibility that you don’t need- all from doing something you’re not allowed to be doing in the first place. One mistake and you could hit your business badly, or land yourself in hot water with the IRS.

Lack Of Privacy

In this day and age it’s so much harder to keep data private, which is why secure payment options are so successful and can charge the big bucks.

If you’re having customers pay you through the Venmo app and aren’t using it privately, then everyone in their network just saw their transaction.

You may still be thinking “So what?”, but there are plenty of reasons people may regret their purchase- like when they realize everyone on their network has seen them buy a hot dog from you at 9:30 in the morning. 

Lack Of Customer Protection

Venmo is designed for two friends or two family members who know each other to make safe payments. A lot of the guarantees of this service are based on that basic principle of trust.

A customer is a stranger who you’re trusting to send you money. Plus, why should they trust you? You are after all, a supposedly reputable business who just asked for their Venmo instead of a standard payment option.

What Is Venmo For Business?

Likely due to demand, Venmo has actually since expanded into payment processing for businesses, with a separate service. Introducing Venmo For Business:

 

• • Contactless payment through QR codes.

• • Low rate for card-not-present transactions.

• • Business profile’ similar to Venmo’s personal transaction feed.

• • Link between business account and personal accounts

Cons

Auto-Reports To The IRS

Thanks to an influx of shady undeclared transactions, the IRS is now involved. The government agency is now directly on the backs of cash apps “to ensure those using third-party payment networks are paying their fair share of taxes.”.

As of now, all transactions exceeding $600 are automatically reported to the IRS. Merchants and standard Venmo users will be sent a 1099-K form for any transactions made of that amount. This loss of convenience and financial pressure will directly hit the little man.

Venmo Charges A Fee

Processing payments are now introduced, at a current rate of 1.9% + $0.10 per transaction. That fee is nonrefundable, even if you are refunding a client.

Not Tipping-Friendly

Venmo’s interface has no gratuity options, meaning that customers will have to put in the work to give you a fair tip. If you rely on tips as a major part of your income, this could be a massive hit.

Before you make a decision on payment processing, it is best to round out your knowledge on the subject. You can do that in our payment processing resource center.