How Does Venmo Work?

You must have come across various digital payment platforms in the current generation and age of digitization. It is an increasingly apparent chance that you know or have heard about Venmo. Venmo is an American mobile payment app. You can use the app to send and receive money directly from your end to the receiver. Now, this may seem and appear very simple to you. However, it is not. There goes an entire web of technical knowledge and payment structure that is making it possible. So how does Venmo work? In this article, I will try to cover what is Venmo and how it works. I will try to explain the technical stuff in a simple and lucid manner along with examples. So, read on to understand the history and workings of Venmo.

TABLE OF CONTENTS

1. What is Venmo?
2. Who Can Use Venmo?
3. How Does Venmo Work?
4. How to Set Up a Venmo Account
5. What is Venmo MasterCard?
6. Public Transactions In Venmo And Criticisms

1. What Is Venmo?

Venmo is an American mobile payment app. Venmo was founded by Andrew Kortina and Iqram Magdon-Ismail, who met as freshman roommates at the University of Pennsylvania. You can use this app to send and receive money through its application. It is available only in the United States. As of now, there are no plans to promote and launch its services in other countries. In order to use this application, both the sender and receiver should reside in the United States only.

If we look at the history of this application, the application was intended for personal use only. The initial features included payments to settle bills, rent payments, movie tickets, and so on with your friends and family. Interestingly, you could send and receive money through text messages in the early Venmo stages. Eventually, it was developed into a full-fledged mobile application. Venmo was launched in the year 2009 and was later acquired by PayPal in the year 2016. It was after this acquisition that Venmo spread its wings and started implementing more features.

As of writing this article, there are roughly 70 million active users on Venmo. In the year 2021, the application processed $230 billion in transactions and generated a revenue of $850 million.

2. Who Can Use Venmo?

As Venmo is an American mobile payment app, it comes with some prerequisites. There are mainly three conditions to using Venmo for your payments.

• You must be located in the US
• You must have a US cell phone with the enabled feature to send text messages with shortcodes of the US.
• You must be at least 18 years old.

The above three conditions are enough for you to start with Venmo for your payments. Moreover, if you want to transfer your money from the Venmo account to your bank account, it is possible too. The bank account must be a US bank account. You will have the option to link your bank account with your Venmo account.

3. How Does Venmo Work?

The working of Venmo is simple for users and complicated for developers. You are lucky to be a user and enjoy this service. I will show you the steps of how Venmo works and how you can set up your account for yourself.

Venmo works by linking your bank account to your Venmo account. I will explain how to set up a Venmo account further in the article. There is an optional feature to link your debit card or your credit card as well.

All the transactions you do would be processed through the bank accounts, or the debit and credit cards linked. The amount of money in your Venmo account is referred to as the Venmo balance.

All the transactions you do are free of charge. However, any transaction done through a credit card will attract a three percent standard fee. This is how Venmo basically earns from its users. So, if you are linking only your bank account or a debit card, then this app is quite useful for your usage.

You can use Venmo with your contacts and with certain registered merchants as well.

4. How To Set Up A Venmo Account

Setting up a Venmo account is simple and not that complicated. It follows the same processes as many other payment applications. Here are the steps you can follow to set up your Venmo account.

i. Download the application from the app store or the play store depending on your device.

ii. Start creating your account by using your email address or your Facebook account.

iii. Create a password and verify your account using the same email address or a Facebook account you used while registering.

iv. Now you can start linking your bank account. You can use your email address and the password that you use for online banking. The other option is to manually set up the account number of your bank and follow the steps.

v. When you manually set up your bank account, Venmo will send a micro-transfer to your account which is less than $1.

vi. Before signing and setting up the bank account, make sure you have at least $2 in your bank account to avoid overdraft fees.

vii. Post all the above steps, you can link your debit card or a credit card too.

viii. Start adding friends on Venmo by searching for them or you can grant your contacts access to Venmo. It will automatically insert all your contacts currently available on the application.

5. What Is Venmo MasterCard?

Along with the normal process of setting up your account and using the application, there are other payment features under Venmo too. Venmo provides its own MasterCard.

It is a physical debit card that Venmo provides you. It works on the MasterCard network. You can use this debit card to gain ATM access and overdraft protection. Wherever MasterCard is accepted, you can use this card as well.

This Venmo MasterCard also offers a unique reload function. For example, you are purchasing something. However, what if your Venmo balance goes too low for the purchase? In this case, it can take $10 payments from the linked bank account and pay increment-wise. You can be subject to fees or charges only if you overdraft your account.

6. Public Transactions In Venmo And Criticisms

In Venmo, be the default, the transactions are public. Now, what it actually means?

Every peer-to-peer transaction in Venmo is published by the platform publicly. This may concern many users on their end. The data includes everything except the amount made in the purchase.

Venmo has three social feeds. The public feed, the friends feed, and the private feed.

Even if you do not use the application, if you open the public feed, you can see the public posts. The public posts would mention which user paid for which commodity.

If your posts are shared with your contacts, they will appear in a friends feed. Moreover, if a transaction is private, it will be shared only with the other peer involved in the transaction. All this can be controlled in your privacy settings. Most of the users may prefer to keep all their transactions private or at most within their contacts.

The criticism faced by Venmo was all due to the public sharing of transactional data. Many researchers have also concluded that the analysis of public transaction posts can reveal a lot about the lifestyle of the person. This may impose more harm than good. In 2018, the company settled with the Federal Trade Commission about several privacy and security violations related to this and other features and made changes to the corresponding settings.