Venmo is an American peer-to-peer payment service, currently used by 83 million, that allows for easy and quick direct transfers of money between friends. The speed at which money can be transferred via mobile phones and the social networking element of the platform make Venmo revolutionary. The company handled $159 billion in transactions in 2020.
Venmo was acquired by PayPal in 2013, but there is a stark difference between the approach towards sustainability between the two companies. Unlike PayPal, Venmo appears to neglect the role of sustainability within the business and has serious ethical concerns. It seems unrealistic for the company to invest time and energy into becoming more sustainable until it has overcome concerns regarding security and customer privacy.
Venmo offers services where their users have a balance which is used for transactions between friends. They can link their bank accounts and credit and debit cards or apply for a Venmo MasterCard and pay through that. Payments made with a bank account or debit card are free, whereas payments via credit cards have a 3% fee per transaction. If there are insufficient funds in the account to make the transaction, the necessary funds will be automatically withdrawn from the registered bank account/card. After the user identity is verified, users can spend up to $2,999.99 in each seven-day period. There is currently no buyer or seller protection directly offered for these transactions which is very concerning as it suggests that Venmo does not consider the welfare of its users.
Venmo is unique in the sense that it includes social networking interaction. Transaction information is shared on the user’s “news feed” and to the user’s network of friends (“World-wide” and “friends only” feed options are available). Venmo encourages social interaction on the application through comments, using jokes or emojis and/or likes. In 2016, 30% of approved transactions included at least one emoji. As a result, Venmo is a pioneering spacing, doing things that have never been done before. This pioneering activity is however not reflected in their efforts to become more sustainable.
Venmo is not a bank, and the company currently has no intention of becoming one – money is held by a partner bank (this is a common set-up for fintech companies that don’t have a bank charter). There is little information available about the partner bank used, which is concerning. The money is not insured by the federal government, as it would be in a standard checking account for example, and there is no interest paid or money lent out.
Venmo earns money through merchants that accept Venmo payments, as they pay a small fee when such transactions are made. There are also business profile fees where the owner of a business profile is charged a low fee for every payment they receive that’s $1 or more. The seller transaction fee is a standard rate of 1.9%+$0.10 of the payment. Venmo chooses to invest very little money, and where they do, they hold balances in very safe investment grade securities (eg. Government treasuries) where they earn small amounts of interest. Although the money transfer process may seem easy from the perspective of the user, the process of actually getting hold of money in the Venmo balance is less so. Standard bank transfers are free and they use the Automatic Clearing House (ACH) banking process which can take up to 5 working days to reach the account, making the process inefficient. Instant transfers, processed through different networks, are possible but require a fee.
Venmo’s website lacks information concerning the types of software used for the production and maintenance of the app. This is a cause for concern and highlights the lack of transparency between the customer and the corporation.
Venmo, having raised $1.2 million of seed money in a financing round led by RRE Ventures in May 2010, were acquired by Braintree for $26.2 million in 2012. PayPal then acquired Braintree for $800 million in December 2013. Unlike PayPal who make information about how they operate and their efforts to drive positive change readily available, Venmo does not provide any evidence of supporting charities, improving conditions for workers, or reaching net-zero greenhouse gas (GHG) emissions. Venmo is not available to non-profits since the platform is not able to issue tax-compliant receipts and therefore not a viable option for online giving.
Venmo and its parent company PayPal have been accused of harming vulnerable communities by shutting people out without due process. For example, they continue to remove sex workers and other uses off their platforms. Some argue that public platforms like Venmo and PayPal should offer their services to all users without discrimitation since, by removing workers relying on that income, sex workers for example ,who are already vunerable to financial censorship and lack of accountability by technology platforms, can be pushed deeper into the shadows and exposed to more abuse that goes unnacounted for.
Venmo is lacking suitable security infrastructure and has been accused of fraudulent activity. In February 2018, the FTC settled with Venmo, after an investigation uncovered false representations about "bank grade" security and failures to comply with the Gramm-Leach-Bliley Safeguards Rule and Privacy Rule. Under the settlement, they now undergo third party audits every two years. The FTC also complained that Venmo "misled consumers about the extent to which they could control the privacy of their transactions" and misrepresented the availability of funds for withdrawal. In November 2018, The Wall Street Journal reported that Venmo had suffered $40 million in operating losses in the first quarter of 2018 (nearly 40% more than it had budgeted for) due to "a wave of payments fraud". In 2019, Mozilla and the Electronic Frontier Foundation wrote an open letter "to express our deep concern about Venmo's disregard for the importance of user privacy, and to call on Venmo to make two critical changes to its privacy settings: make transactions private by default, and give users privacy settings for their friend lists." Venmo are very unlikely to be in a suitable position to invest time, energy and money into becoming more sustainable until they overcome all of the issues that they are encountering regarding security and improper behaviour.