Venmo is an easy way to send and receive payments and is increasing in popularity among the younger generation of shoppers. So naturally small businesses want to integrate the platform into their transaction options to increase the number of potential customers they could get. But there’s a lot of unknown about Venmo and whether it’s a good idea to use for small business.
What is Venmo?
Venmo is a Person to Person (P2P) payment app that allows you to pay and request money from your friends. It’s become most popular among college students and young working professionals due to the ease of use and social aspect of the app. Venmo is designed for situations where you may need to pay or get paid between friends without it being awkward. For example, if you go out to dinner with friends and the waiter forgets to split the bill, one person pays and the rest of the group just Venmo’s them for their portion of the dinner. Or if you go to buy something and realize you’ve forgotten your wallet, your friend pays for it and you just Venmo them the amount. The Venmo feed resembles a social media feed, showing transactions (not the monetary amount) between friends and strangers and user-created descriptions.
Pros
Social exposure – Since Venmo is set up like a social media app, with a feed to show users what their friends are buying, it can be used to influence others the way a social media feed would. You can use Venmo to get additional exposure with just a few people making a purchase from your business and their friends seeing that. While there hasn’t been any research done on how Venmo helps to increase sales, we know the power of word-of-mouth and peer-to-peer influencing, which makes Venmo a much more attractive payment app over other payment methods.
Popular with Millennials – Many millennials use apps for everything and most already have Venmo on their phone. Venmo is easily integrated with users since their card information is already connected, meaning they won’t need to pull out a credit card in order to complete a purchase. So, if your business offers Venmo as an option, it could increase purchases simply because of the ease of use and availability.
Quick transactions – Purchases through Venmo are instant; the money shows up in your Venmo account as soon as the buyer sends over the payment, unlike other methods that take a couple of business days to show up. In a world of technology and apps, being quicker by even a second can be the difference between a purchase or not.
Cons
No buyer or seller protections – Venmo was created to be a service for “payments between friends and people who trust each other”, not for business transactions. Venmo payments can be reversed by the company after they hit your account. If the person who paid you files a claim or uses a stolen credit card, eventually Venmo will cancel the payment and take the money back. If you’ve already exchanged an item for that money, you lose out on the cost of that merchandise and the money that was paid for that item that you likely already logged as an asset. On the other hand, buyers aren’t protected by Venmo either. If they accidentally send their payment to the wrong person, they have to rely on that person to send the money back to them to fix the error. This can create a bad customer experience if they’re trying to purchase something from your business and run into these frustrating issues.
Payment isn’t immediate – While Venmo may make it look like you automatically have the money in your account, it actually takes a few days for that money to deposit into your bank account. That only happens if you initiate a bank transfer, otherwise the money just sits in your Venmo balance as a sort of reserve that you can use to pay others through Venmo. If you want the money to appear in your bank account immediately, you’ll have to pay a fee of 3%.
Difficult to reconcile – The most frustrating thing about Venmo for a small business is that it’s difficult to reconcile those transactions. If your Venmo account has a balance, that balance can be used to make payments to other vendors without the money ever entering your checking account. This makes it hard to track transactions and tell which payment method was used. Additionally, Venmo allows you to download a monthly statement, but the formatting is messy and takes a while to clean up in order to be able to use it for bookkeeping purposes.
Overall, Venmo is a great app to use between friends and family but isn’t ideal for a small business. To learn more about the best payment methods to use for your business and how to keep track of your transactions, contact Infinity Bookkeepers. We offer many services to help you understand where your money is coming from and manage your transactions.