You’re out to eat with friends, and finally the massive check arrives at your table. Do you split it evenly? Should each person note what they want charged on their credit card? Or does one person foot the tab and get paid back by the rest? The latter is often the simplest case, and Venmo is one option for doing that. But what is Venmo? And how does Venmo work?
In the field of peer-to-peer mobile payments, Venmo may be considered king. The Venmo app makes it straightforward—and fun—to make payments to friends, and get paid back, too. If you’ve never used the app or want to learn more about its history and how it compares with other mobile payment apps, here are all the answers to the question “how does Venmo work?”
What is Venmo?
Before we answer “how does Venmo work,” we should probably talk about what it is. Venmo is a popular peer-to-peer payments app available on iOS and Android. It lets you quickly and easily send money to friends and contacts with just a tap.
However, the Venmo app is also well known for its public (or semi-public) feed of transactions, which resembles a social media feed in some ways. You can like and comment on these transactions, and people often simply use emoji to describe the “reason” (real or fictional) for their payment.
Venmo is owned by PayPal. While it was founded back in 2009, Braintree acquired the company in 2012, and that company was then acquired by PayPal in late 2013. The name “Venmo” is an amalgamation of two words: “vendere,” which means “to sell” in Latin, and “mo” which is short for the word mobile.
Venmo used to allow for payments on the web in addition to its mobile apps, but the company announced it would be phasing out that option in June 2018.
How does Venmo work?
Venmo works by linking with your bank account and (optionally) a credit or debit card. Transactions made with either your bank account, debit card, or with your Venmo balance are free, while a standard three percent fee is added to credit card transactions.
You don’t need to add any money to your Venmo account, but if a friend pays you, you will need to request to withdraw those funds; that money is then typically deposited into your account the next business day. You can use Venmo with contacts, as well as with select businesses. Venmo uses encryption to keep transactions and app data secure.
You can also keep money sent to you on the app within Venmo, to use for another transaction in the future—perhaps having money ready to go the next time you’re splitting a check at dinner.
How to use Venmo
Now that we’ve answered “how does Venmo work,” we can move along to using it. To get started on Venmo, download the app from the App Store or Google Play. After creating an account with your email address or Facebook account, creating a password, and verifying your email address, you’ll link and verify a bank account. The app does this one of two ways: The first is by you inputting the username and password that you use for online banking. The second is by manually inputting the account number and routing number. When you choose this method, Venmo will send a less than $1 micro-transfer to your bank account along with a simultaneous micro-withdrawal. You should see this within three business days of signing up, and you should make sure you have at least $2 in your account before signing up to avoid overdraft fees. From there, you can also choose to link a credit or debit card.
After that, you can add friends on Venmo, either searching by name or username, or by granting the app access to your contacts. Alternatively, if you link Venmo to your Facebook account, it can search through your Facebook friends to see who you know on the app. In person, you can also add friends via QR code. To do this, open the Venmo code scanner and point it at the QR code pulled up on their phone’s screen. Once scanned, the app will take you to their profile page, where you can add them as a friend.
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How Venmo works
Once you’ve entered your payment information and added friends, you’re ready to go. To make a payment to someone, tap the circular icon in the bottom right of the app. Then, select which friend you want to make a payment with, input the amount, and tap whether you’re requesting money from them or paying them to complete the transaction.
One thing to note: Directly above the Pay button is a button that shows who can see the reason for this transaction in the app’s feed: Public, Friends, or Private. In the latter case, the transaction is completely hidden from the app’s timeline. Otherwise, the description of your transaction, minus the exact dollar amount, will be shared with friends or the public to see.
There are some useful options within the Venmo app’s settings. In the Privacy section, you can select a default privacy option for transactions in the app (whether you want them public, shown to friends only, or completely private). In this menu, you can also edit the visibility of your past transactions. If you made a number of public transactions in the past, you can head here and switch them to Friends or Private, instead. It’s a good idea not to make your transactions completely public because it could prove to be a privacy concern at some point.
You can also make the app a little more secure. In the PIN Code & Fingerprint section, you can choose to protect access to the app with a PIN, or on top of that, with your fingerprint. In the case that someone gains access to your handset, this ensures that they won’t be able to open the app and send payments to whomever they’d like, at your expense.
In the Friends & Social section, you can opt to let the app automatically add contacts or Facebook friends to be added to your Venmo friends list if they also use the app. And like most apps, you can also head to the Notifications section to adjust what kind of push, text, and email-based alerts you get about the app’s activities. It’s a good idea to keep at least some of these alerts switched on in case your app gets hacked or there’s some other kind of fraudulent activity—which can happen.
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As with all payment apps, there are some considerations to make before deciding to download and use this app. We’ve answered “how does Venmo work,” but there are other things to consider before you dive in.
Venmo has received the most public criticism over its transaction feed. While you can set the privacy level of your transactions, many people choose to keep theirs public. If you do this, it is browsable by anyone, and indeed, some websites and organizations aggregate this information for evidence of illegal payments. (After the Super Bowl, the Outline found evidence of a whole lot of illegal betting, for example. Another site, Vicemo, shows a feed of publicly shared drug, sex, and booze-related transactions.)
Luckily, if you don’t want your transaction information shared with anyone else, you can simply keep all your activity on the app private.
Scams and hacks
Venmo is also vulnerable to the occasional spammer or hacker. In some cases, people will create fraudulent Venmo accounts with stolen credit card credentials. If, for example, a person does this and purchases an item you’ve sold, the funds could be withdrawn—meaning you’ve been scammed out of profits from your sale. One particular scheme operating under the name Andy Mai has accrued more than $125,000 in reversed transactions since 2014, between at least 10 victims who are left with no option but to turn to the police.
Another risk is simply someone hacking into your account—by perhaps obtaining your login information—and using it to steal money or request money from other people.
In December 2019, some Venmo users were being spammed with requests to pay other users if their transactions were listed in the public feed. BuzzFeed News reported that users were being sent numerous requests to pay users who appeared to have inauthentic profiles. The idea seems to be that those users would hit “pay” by accident instead of denying the request.
Similarly, police departments have warned Venmo users to ignore texts claiming to be from the app. The texts would tell users they need to log into their account and including a link that was actually a phishing page.
Venmo has also struggled with processing transactions with keywords they’ve flagged. Of note, users can struggle to send transactions with Arabic names in the subject. Also, users who have entered phrases related to Cuba have found their transactions put under review.
With that in mind, Venmo is not always the best option to use if you are purchasing or selling items on an online venue such as Craigslist or Facebook Marketplace. In fact, Venmo’s security section says:
Venmo is designed for payments between friends and people who trust each other. Avoid payments to people you don’t know, especially if it involves a sale for goods and services (like event tickets and Craigslist items). These payments are potentially high risk, and you could lose your money without getting what you paid for. Venmo does not offer buyer or seller protection.
Following reports of hacks and transaction fraud in 2016, the FTC announced a settlement with Venmo earlier this year for allegedly misleading consumers and enabling fraud with lax security practices. One such problem with the app at the time was the way it handled notifications: The app would tell users that a payment had been deposited in their account when in fact it was still under review. Scammers were able to take advantage of this discrepancy, taking the goods from a seller and paying fraudulently before a transaction was actually reversed. The FTC also found it did not live up to its claim of “bank-level security,” citing, for example, Venmo’s failure at the time to notify users when an email address or password was changed in their account or when their account was accessed from a new device.
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How does Venmo work vs PayPal vs Google Pay vs Apple Pay Cash
Venmo has a lot of competitors in the peer-to-peer payments space. Depending on your preferences and what you plan to use the app for, you may be better served by one over another.
Keep it amongst friends
If you’re purchasing a product from someone you don’t know—or don’t know very well—you should use PayPal instead of Venmo. Unlike Venmo, PayPal offers some degree of buyer protection in the case that your purchase doesn’t arrive in the promised condition, or if there’s fraudulent activity involved. Venmo does not. If you’re purchasing items online or on a mobile app, while you can use Venmo, Apple Pay, Google Pay, or PayPal may be more secure options. (Although it’s worth noting that some retailers have Venmo business accounts.)
Compared to PayPal, Apple Pay Cash, or other payment apps, Venmo definitely wins on making a traditionally boring chore—paying people—and making it fun. If you’ve got a bit of voyeur in you, scrolling through the app’s transaction feed can be a source of curiosity and entertainment. Deciding how to describe your own transactions is also enjoyable.
What payment service is easiest to use? If you’ve been conversing with a friend you owe money to over text message, using Apple Pay Cash or Google Pay (formerly Google Wallet) may technically be the simplest choice. This may certainly be the case if your recipient doesn’t use Venmo or PayPal—why make them sign up for a new app? However, if you’re both already on Venmo, or if you haven’t set up Apple Pay or Google Pay, it’s a no-brainer. And Venmo vs. PayPal—the Venmo interface makes the transaction a bit quicker than PayPal’s, if you’re in a crunch for time.
Now you know everything there is to know about how Venmo works. Happy cashing!