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Grow Your Business Finances

Venmo for Business? SMB Owners Sound Off

Credit: Zilu8/Shutterstock

Venmo, the digital wallet, is traditionally known for paying your friends. If you're at a bar or restaurant or out shopping, Venmo makes it easy to split a check with a friend, or even pay your roommate your rent. But Venmo is aiming to break into the business world as well, and some businesses have already begun utilizing the service.

PayPal, Venmo's parent company, announced in early October that Venmo is now an acceptable payment method on nearly every mobile site where PayPal is accepted. This has taken the form of a joint button that allows customers to pay with either PayPal or Venmo. By extending Venmo to online and mobile purchasing, PayPal said it wants to create a virtual wallet for its users.

"Offering a way to pay at millions of retailers is a major step in the evolution of Venmo," said Bill Ready, chief operating officer of PayPal. "Our vision for Venmo is to not only be the go-to app for payments between friends, but also a ubiquitous digital wallet that helps consumers spend wherever and however they want to pay, regardless of device."

Already, more than 2 million merchants in the U.S. accept Venmo as a checkout option. The company's plan is versatility, and a new payment tool could mean better operation for your business. From companies that pay freelancers to online retail giants, Venmo is being used as a familiar platform to transfer money.

Venmo is a mobile banking app where customers can link a credit or debit card and send money to friends or businesses. Once a payment is completed, it appears on an overall feed and a customer's individual feed. This allows customers to easily keep track of their payments – in the same format as mobile banking apps – as well as to like and comment on friends' payments. This type of system, from instant payment to building a social presence, offers many different features for businesses.

There is a fee per transaction for merchants – 2.9 percent and 30 cents per transaction. This is on par with normal online transaction fees, according to Andrew Chwalik, a videographer who uses Venmo.

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Because it is easily integrated online, Venmo is a great option for online retailers. Using Venmo means opening a new way to drive sales. It provides a familiar, easy-to-use payment method that younger customers will understand and use.

"We decided [to use] Venmo about a month ago, after a few customers asked and told us they were more comfortable using Venmo versus using their card to swipe," said Rekha Panda, founder of RAEKA Beauty. "Venmo is easy, fun and safe. Clients feel protected and comfortable not having to share their credit card/debit card data with online stores."

It's also a good option to conduct limited sales at a storefront where an expensive POS system isn't necessary. Tyler Browne, owner of California-based e-cigarette store To the Cloud Vapor Store, says that while Venmo only accounts for about 1 percent of his store's sales, it's a vital tool for in-store purchases.

"We are primarily an e-commerce store, but our SEO gives us many local customers who will pop up at our office," Browne said. "Rather than turn them away or install a pricey POS for a small amount of transitions a month, we just use Venmo."

The biggest draw for both customers and businesses is how quickly a user can transfer money to their bank. The business version provides instant transfer, so it allows businesses to receive money or issue payments on the same day.

Sarah Zurell, executive vice president of Los Angeles-based peer-to-peer parking business Pavemint, said that a lot of Pavemint's clients use Venmo because it is quick, easy and familiar.

"Venmo has allowed Pavemint to provide our Hosts (those renting parking spaces) a payout option that many of them use already," Zurell said in an email. "Venmo is also faster than paying Hosts via their bank accounts."

Venmo's speed is also advantageous for business owners who need to pay freelancers after their project is complete. Zack Bates, CEO of Private Club Marketing, said his business has an established network of freelance photographers and videographers around the nation who collaborate on projects to promote private members' clubs. He said most of these freelancers are millennials who want to be paid as soon as possible, so he transitioned from using PayPal to Venmo.

"Venmo offers an instant solution for us to accommodate their requests and get projects turned around fast," Bates said. "We work on projects all over North America, [and] it makes it so much easier for us to get vendors paid for … To not have to mail checks and cut checks and deal with reordering or ordering those through our banks, it allows us to access a much bigger network of freelancers."

Venmo's comment and like features give businesses the opportunity to interact with customers on another level. This allows a business to break down barriers, encourage customers to reach out with questions and interact with the business through a social media-style platform.

"The social media features on Venmo are great," Panda said. "When we can engage our clients and interact, they feel more comfortable reaching out to us with questions and are more likely to purchase again."

Venmo's social features can be a big draw for some businesses. Josh Criscoe, head of communications for Venmo, said that Venmo has millions of users who can view the feed. "Accepting Venmo payments allows a merchant to welcome Venmo's millions of highly engaged users who love sharing their purchase activity on Venmo's social feed, a powerful recommendation engine to other Venmo users," he said.

Venmo is a subsidiary of PayPal, so it has some backing from a major company when it comes to security. Browne said that while some users have been wary of linking their bank account to an app, most millennial users have no problem using it.

"The ones who use Venmo are younger customers who show up at our door and already have Venmo installed. They love it as we do," he said. "We tell older customers about it and they are very skeptical. None of them download it and do not want their bank account hooked up to an app."

Despite apprehension from some customers, Venmo may still be a safe and secure option for all customers and businesses alike. Criscoe said that Venmo uses an encryption system to protect users.

"As a service of PayPal Inc., Venmo has the benefit of nearly 20 years of experience in payments security and fraud prevention," Criscoe said in an email. "Personal and financial data is encrypted and protected on our secure servers to guard against unauthorized transactions."

It depends on who your clientele is. If you run a boutique creative agency with a vast network of millennial freelancers, Venmo may offer a solid service to your business. It could also be a great option for online retailers looking to connect with younger audiences and drive sales using a familiar app.

Venmo is just another tool you can add to your business, especially if you already accept PayPal. For some businesses, however, Venmo may not make sense if the customers are overly apprehensive. Either way, adding the tool to your business's arsenal will allow you to provide more options to customers for payment. As more users download and use Venmo for peer-to-peer payments, the business potential for this kind of service will grow. It may not be the main way you conduct business, but it's a good avenue to open if you have the right clientele.

Matt D'Angelo

Matt D’Angelo is a Tech Staff Writer based in New York City. After graduating from James Madison University with a degree in Journalism, Matt gained experience as a copy editor and writer for newspapers and various online publications. Matt joined the staff in 2017 and covers technology for Business.com and Business News Daily.