- Venmo isn't just for peer-to-peer payments; small businesses can accept it too.
- If you already accept PayPal, you can accept Venmo payments at no extra charge.
- There are lots of digital wallets out there – you should get to know all the major players.
Venmo makes it easy to split a check with a friend, or even pay back your roommate for your share of the rent. But Venmo isn't just a peer-to-peer payment app; it's breaking into the B2C world as well. In fact, 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. A joint button allows customers to pay with either PayPal or Venmo. By extending Venmo to online and mobile purchases, PayPal said it wants to create a virtual wallet for its users.
If your small business already processes payments online and accepts credit, you might want to learn a little more about Venmo and what it brings to the table compared to other digital wallets. It's not right for every business, but it might be right for yours.
What is Venmo, and how does it work?
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 complete, it appears on an overall feed and a customer's individual feed, unless the customer has locked their settings down. This allows customers to easily keep track of their payments – in the same format as mobile banking apps – and even to like and comment on friends' payments.
Your customers' purchases will be visible to their friend networks, making potential ambassadors for your brand. Credit: Venmo.com
The free marketing aspect of a feed that showcases customers' purchases and payments is appealing to many small business owners. Unless their settings are private, every time a client pays you on Venmo, all their followers and friends will know that they like and support your business. Research has shown time and time again that word of mouth is the best way to land new clients, and Venmo offers a digital version of that.
Between the instant payment aspect and the help with building a social presence, Venmo offers many features for businesses. As with all payment processors, though, there is a fee for merchants – 2.9% and 30 cents per transaction.
Venmo's best business features
There are plenty of reasons small business owners are jumping on the Venmo train. We interviewed a few entrepreneurs and checked out Venmo's business features ourselves. Here's the best of what Venmo offers.
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 utilize.
"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 [or] debit card data with online stores."
It's also a good option for conducting limited sales at a storefront where an expensive POS system isn't necessary. Tyler Browne, owner of California-based To the Cloud Vapor Store, said that while Venmo only accounts for about 1% 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," he 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 users can transfer money to their bank. The business version of Venmo provides instant transfer, allowing businesses to receive money or issue payments on the same day.
Sarah Zurell, co-founder and executive vice president of peer-to-peer parking business Pavemint, said that a lot of her company'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 told Business News Daily 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."
Connection to customers
Venmo's comment and like features give businesses the opportunity to interact with customers on another level. You can break down barriers, encourage customers to reach out with questions and interact with your business through a social-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 businesses. Josh Criscoe, head of communications for Venmo, said it 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."
Venmo is a subsidiary of PayPal, so it has security backing from a major company. While some users are wary of linking their bank accounts to an app, Browne said most of his millennial customers 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 seems to be a safe and secure option for customers and businesses. Criscoe said that it 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," he said in an email. "Personal and financial data is encrypted and protected on our secure servers to guard against unauthorized transactions."
How to set up Venmo
Ready to start accepting Venmo payments at your business? Here's how to set up Venmo, with plenty of additional resources.
How to accept Venmo if you already accept PayPal
Venmo is owned by PayPal, so if you already accept PayPal, you have the built-in option to accept Venmo payments on your business's mobile website (it is mobile only right now). When you accept Venmo via PayPal, there will not be a Venmo button on your website. Instead, your customers will select "PayPal Checkout" and will see the option to "pay with PayPal or pay with Venmo." Customers can then choose to pay through their Venmo accounts, and if they do, they will receive a Venmo branded receipt.
There is no additional fee if you accept Venmo payments through PayPal or any additional implementation to set it up. You'll receive the same level of protection for payments you accept via Venmo as for those you accept directly via PayPal.
How to set up Venmo from scratch
Venmo, like a lot of other SaaS products, is part of a gigantic ecosystem of interconnected products and brands. Because of that, Venmo's instructions on how to set it up are pretty confusing.
Basically, if you want to accept Venmo payments as a business, you first need to get Braintree, which is also a PayPal brand, and start implementation through that service. Think of Braintree as the engine and Venmo as the sleek, modern-looking chassis of the car: Braintree is the one actually processing the transaction, so you can't accept Venmo without Braintree.
Because of this web of products, before you even log in to Venmo, you will be directed to check the Braintree compatibility list, which explains customer requirements for the app, merchant requirements, processing fees and testing options (including a Braintree sandbox, which allows you to test your Venmo integration before you go live). Once you're set up, you can access Braintree and Venmo through a control panel. As with most other SaaS products, you can create different accounts to access that panel, allowing various members of your business to monitor and manage customer transactions.
Venmo for business: FAQs
Now you know how to set up Venmo, but you might still wonder whether it's right for your business. This FAQs guide can help answer your questions.
Is Venmo free for business?
No. If you already pay for PayPal, Venmo transactions are included in your current rate, but Venmo is not free. All digital transaction services charge a fee for processing payments; Venmo is no different.
What are some alternatives to Venmo?
Venmo has around 40 million active users, but it isn't the only digital payment option out there. In fact, most people still think of it as a peer-to-peer payment platform, and that's still its primary use. Digital wallets are numerous and multiplying, and these are three of the biggest names in the cashless world:
Apple Pay: By far the giant in the industry, Apple Pay has a staggering 383 million users worldwide. If you keep your eyes open, you'll probably notice that Apple Pay is accepted at many of your favorite haunts.
Google Pay: Formerly Android Pay, Google Pay boasts 25 million active users and is accepted in many brick-and-mortar stores as well as online ones.
- Zelle: The biggest direct competition to Venmo thanks to its subscription size and peer-to-peer payment model, Zelle currently has about 27 million users, and some analysts believe it will ultimately overtake Venmo, as was a popular theory in 2018.
Is Venmo good for business?
Before you sign up for a PayPal or Venmo account (or any payment transaction service), you should weigh the costs and benefits. The cost of accepting digital transactions through digital wallet-type apps is usually within the same range as the cost of credit card transactions, but it also costs money in terms of time and human resources (for implementation and ongoing management).
Most business owners take the view that, unless they are losing money by not accepting a payment format, it's not worth the trouble, and that line of thinking is sound. However, you shouldn't make assumptions. Do some research on your current customer base to find out if they want to pay with digital wallets or if they'd prefer to use cash, debit and credit. If you don't yet offer credit card processing and want recommendations on small business products to help you accept plastic, check out our credit card processing guide.
Additional reporting by Sammi Caramela and Matt D'Angelo. Some source interviews were conducted for a previous version of this article.