A Quick Guide to Understanding Venmo Fees for SMEs

Writing checks is fast becoming a thing of the past. When people need to pay their bills or make purchases, on or offline, they use their credit or debit cards, or payment processing accounts, like PayPal. And the use of fully online banks is a growing phenomenon, too. When it comes to business payment processing, newer payment methods have emerged too – Stripe, Square and more lately Venmo.

What is Venmo?

Source: Venmo Blog

Venmo was launched in 2009 and later acquired by Braintree, a PayPal subsidiary. However, even though Venmo is owned by PayPal, it operates very much separately from its parent company as a separate mobile payment app. Approximately 40 million people use now this platform to send cash.

In general, Venmo is a popular P2P payment app that lets you send money to your friends and family in a few taps. Here’s how it works:

  • Users install the app on their phones
  • They then link their bank cards or accounts to that app
  • Payments can be made to anyone else who has the app
  • Venmo can also be used to make purchases through authorized merchants.

One of the more unique characteristics of Venmo is that it combines payment processing with the elements of a social media platform. When someone makes a payment, that transaction is posted on the Venmo’s social feed with an accompanying note or emoji. However, the amount is left off.

When first registered, a user can make transactions up to $299.00. Upon verification of identity, via submitting required personal information, users can conduct transactions up to $2,999.99/week.

In terms of fees, they are free for those who use their existing Venmo account balances, debit cards, or bank accounts. There is a 3% fee if a major credit card is used.

While customers pay nothing for using Venmo, businesses get charged 2.9% of the transaction plus $0.30.

Why is Venmo so Convenient

Here’s a simple example. You are at a restaurant with two friends and are splitting the bill. The three of you only have large bills, which of course will be a hassle for the waitress. If you all have Venmo, though, you can pay the entire bill and each of your friends can text their payments to you – no fee and immediate receipt. Problem solved.

Merchant Use of Venmo

Recently, Venmo has allowed a limited number of merchants to accept Venmo payments. To become authorized, businesses must comply with the following requirements:

  • The business must be located in the U.S.
  • The purchase is not made in person at a brick and mortar facility
  • The app is not used to facilitate peer-to-peer transactions
  • The business uses one of the approved SDK’s (software development kit)

However, it should be noted that U.S. businesses that have PayPal Business and Braintree accounts can accept payments via Venmo by using their PayPal or Braintree business accounts.

Should you accept Venmo payments as a business? It depends. In this post, we’ll cover the

the requirements to become a Venmo integrated business, your options for incorporating Venmo as a payment option, and the fees you can expect to pay for each transaction.

How to Accept Venmo For Businesses

It would be nice if Venmo had a clear and centralized source for documentation on its offerings for business. Unfortunately, it doesn’t. Information is a bit stretched between Venmo’s page as well as Braintree’s.

In addition to this, while PayPal provides clear details on the types of businesses they prohibit, Venmo is not as forthcoming. What is known is that Venmo is not intended for transactions outside of the United States. Further, as stated above, it cannot be used to facilitate transactions between individuals and/or individuals and non-authorized businesses.

Instead, Venmo states:‘Venmo can be used to purchase items directly from participating approved apps and online stores.’

If you do decide that you want to add Venmo, you won’t be able to add it to your app or website natively. You will have to go through PayPal or Braintree for payment processing instead. Remember that there are limitations as mentioned above.

Here’s an example of prohibited use of Venmo:

You are in direct sales of products such as Avon or Mary Kay. You wouldn’t be able to accept payments through Venmo, then deliver products. Likewise, you couldn’t use eBay or Etsy to sell products to people you don’t know, then take payments via Venmo.

If you do own a small or medium-sized business and want to use Venmo, you will have to go through the appropriate channels to add that payment option to your app or website.

How You Can Accept Venmo for Business

While Venmo has intentions of expanding its merchant services, it is not known when that will happen. Currently, though, merchants can integrate Venmo through their Braintree or PayPal accounts.

Using Braintree to Accept Payments

Braintree focuses on mobile and online payments for businesses. It is owned by PayPal but operates as a separate company. The main difference is that Braintree provides a standard merchant account, while PayPal operates more as a third-party payment processor. This is not to say that PayPal does not offer accounts – it does. And it even offers individual and business credit cards.

To establish a Braintree account, which can then be integrated with Venmo, you will need a developer who can integrate Venmo into your app, via specific software development kits, so that both Android and iOS devices can use it. Once this has been accomplished, your customers can use Venmo to make payments through Braintree.

Braintree fees and pricing for Venmo transactions are the same – 2.9% plus $0.30 per transaction. The only difference a merchant will on the record of transactions be the different logos attached to Brainberry and Venmo.

Using PayPal to Accept Venmo

You can use PayPal checkout to accept Venmo payments if you don’t want to use Braintree. This is especially a good option if you want to add Venmo as a payment option in your e-commerce store, or if you want to accept PayPal to supplement your current credit card processor.

Just remember that PayPal is a third-party payment processor. They have their mechanisms in place to flag and deal with suspected fraud. This includes freezing accounts or placing holds on funds.

Unlike Braintree, you will not need a developer to integrate Venmo via PayPal. If your customer opts to make payments through Venmo, they will be presented with an option to pay with their Venmo account after clicking your PayPal payment button.

Also, note that Venmo is only available on mobile devices. So, shoppers paying via the desktop version of your website won’t have this option. Finally, you won’t be able to offer Venmo as a stand-alone payment option. To do this, you will have to reconsider using Braintree.

PayPal fees for Venmo transactions are standard – the same as for Braintree – except for micropayment options if the transaction is less than $10.

Remember that Venmo is owned by PayPal, so PayPal’s seller protection policy applies to these transactions as well. Buyers will be covered by Venmo’s own protection policy. This is similar to PayPal’s for the most part, but there are some key differences. The best place to find out more about this is in Venmo’s own terms and conditions for merchants.

Venmo Business Alternatives

There are other options for payment platforms – specifically Bento, Square Cash, and Stripe.

  1. Bento Pay: Bento began as a financial management platform for small businesses and nonprofits, and recently launched a new payment software offering. Bento Pay offers PayPal-like payment experience, letting users send payments to others using their email address only.
  2. Square Cash: This is an app that allows P2P money transfers. Customers can use it to pay for purchases. Cash App takes U.S.-issued major credit cards and charges a 2.75 fee to the merchant. To accept payments, a business has to link a debit card or bank account to its account. Customers can pay either online or through the mobile app. Another great feature is that customers can set up recurring payments through Square Cash – rent car payments, subscriptions, etc.
  3. Stripe: Here is a payment platform for online businesses. It is very much like Braintree. Businesses set up their accounts with Stripe and begin to accept payments from customers through the platform. Also like Braintree and PayPal, Stripe has a standard fee of 2.9% and $0.30 per transaction. There is a simple account registration process.

Is Venmo Right For Your Business?

There’s no denying that Venmo is popular and easy-to-use. They have a pretty big customer base to woo. On the other hand, there are limitations to Venmo as a business service as we described in this post. Those limitations should rightly cause some business owners to reconsider. For example, if you don’t have a significant customer base that uses mobile devices, Venmo isn’t worth the hassle. Venmo fees are comparable to what other popular payment services charge, so you won’t be saving much by switching to this option. So in the end of the day, it’s your call to decide whether you need to go that extra mile for your customers or not.

Photo by Jonas Leupe

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