Programming, Thoughts


Something really, really, really needs to be addressed here, and it's the current state of everyone's favorite instant money app: Venmo.

Hell, I use Venmo for rent, splitting checks, and paying for just about anything. It's quick, easy, and all emoji jokes aside, it gets money to your bank in a day's time. That's amazing, considering that PayPal, the software-boom parent of Braintree, takes three days time to transfer money from PayPal to your bank.

Last year in 2014, Venmo processed $2.4 billion of payments. $2.4 billion dollars. It doesn't stop there though, as Venmo has already processed $1.6 billion in transactions in the 2nd quarter alone. At this current rate, Venmo will process anywhere between $5 - $10 billion dollars in 2015.

The money-making scheme behind Venmo is actually quite genius: all of the cash-moneys sitting inside your Venmo account is actually gathering interest for the company. But this is also the whole reason why Venmo is unsafe. When you transfer your Venmo credits to any of your friends on Venmo, that money is only getting moved around on the application layer. That money is not being moved from your account to your friend's. Let me repeat that, even if you receive the notification, the email, and the verbal confirmation that the money was transferred, there's absolutely no guarantee that money will reach your bank account when you cash out.

This article does a tremendous job of explaining the intricacies of Venmo:

if I Venmo you $20 for Chipotle, the “+ $20.00” notification you get isn’t actually reflecting a transfer from me to you. Rather, in most cases, Venmo is floating you the money until it can come out of my account. The actual mechanics of the transaction are much more complicated; the point is that Venmo is just the top layer with which you interact. “The current systems that [the United States has] in place for consumers don’t allow for real-time payments or instant payments, but instead just create this illusion that the funds are good and immediately available,”

It's completely plausible for someone to deposit to Venmo from a fraudulent or maxed out credit card. Those "funds" can then be moved around from account to account until a user decides to cash out on his/her Venmo funds. One day later, the funds from that cash-out transaction will come back with an error: "payment that you requested to be transferred to your bank came back for insufficient funds".

This is how a Venmo scam works. You trade your virtual credits for real-life goods or services, only to realize that you never received your money. The biggest difference between Venmo and PayPal is that PayPal has securities to prevent merchants from scamming you; however, Venmo's user agreement has something completely different:

“Business, commercial, or merchant transactions may not be conducted using personal accounts.”

This means that if you sold your Craigslist item for illicit Venmo funds, Venmo will not refund you the price of the item if the transaction doesn't go through because you violated their terms of service.

Wow. Talk about shady business practices. Venmo wants you to use their application for virtually all transactions, but they conveniently forgot to mention that they won't reimburse your loss.

Be careful out there. Venmo isn't magic.