Fact checked! This material is written by an expert.

10 min read 01.07.2021 39

Venmo vs Paypal

Paypal is the parent company of Venmo and one of the early leaders of the digital payments space. However, Do they provide the same services? What is the difference between them? And which payment system is right for you? This askwallet article will answer all these questions.

Ibrahim Busari
Ibrahim Busari
Ibrahim is a fintech writer at AskWallet

Fact checked! This material is written by an expert.

10 min read 01.07.2021 39

Introduction

There are many conveniences that the fintech industry has brought with its innovations. Gone are the days when you had to walk to an ATM to take cash to pay your friend back for the coffee they got you. EMI's like Venmo and Paypal have put the control of our funds right in our hands with a tap of a button on your mobile device. 

The fintech space is enjoying new innovation on almost every level, and most of them are seeing tremendous success. With this success comes a lot of competition, and the fintech industry is overcrowded with companies. All these companies are fighting for consumers' attention, while this is good for consumers. It can be overwhelming to choose between them. I mean, the choices are endless from Google Pay, Apple pay, Venmo, Paypal or CashApp. Users might feel anxious making the right decision. 

In the fintech industry, Paypal's name reigns supreme as one of the pioneers and formidable players in the space. The company was founded back in 1998. Paypal Acquired Venmo in 2013 when it acquired Braintree for a whopping $800 million.

Ever since the acquisition, Paypal and Venmo have been at the top of the fintech industry and constantly innovating to stay there. Before we jump into the difference between these two giants in the fintech industry, let us take a closer look at what they are? And how do they work? 

What is Venmo?

Venmo is a mobile-based payment system allowing its users to send and receive money from family and friends and make in-app purchases. The payment service was created by college roommates Andrew Kortina and Iqram Magdon-Ismail in 2009. However, since its inception, Venmo has undergone a lot of changes, and one of the major ones is that Paypal now owns it. 

The company has been said to have had over 52 million active users in early 2020 and is still growing exponentially. The only downside is that Venmo is only available in the United States of America. 

One of the features commonly associated with Venmo is the ability to split bills and make increment payments between friends and family. It doesn't matter if you are out for a family or friend dinner or paying for a shared apartment or a couple of friends taking a trip to Disneyland. You can pay, reimburse your friends instantaneously. 

All you need to do is the recipient's mobile phone number. From there, processing the payment is as easy as sending a message to a friend on iMessage. 

How does Venmo work?

Purchases and Transfers

As stated earlier, one of the conveniences of Venmo is the ability to reimburse anyone quickly with just their phone number. Users can send money and request money from one another, providing they have a Venmo account. However, making purchases with Venmo is very limited. The mobile payment service wasn't created for buying and selling goods from strangers or in-store payments. However, Venmo is accepted by some online merchants. 

Mobile App

The payment service provides a mobile app where all its transactions take place. It has a sleek and modern design and can be found in both the Google Play Store and Apple Stores. However, users can also use Venmo's website to check transactions. But unfortunately, you can't make or request payments on the website. 

Keep in mind that the app is only available to users in the United States of America, and it requires both sender and recipients to be in the US.

Features of Venmo

Venmo payment messages

The most significant way Venmo differentiates itself from other competitors in the payment service industry is that it's very social media like. Users sending money can include messages, emojis and the recipient will receive it on their news feed. 

This feature might seem insignificant, but it's a genius one. People already spend so much time on social media sites and apps. So, many people are familiar with the layouts and how they work. So, instead of a boring bank app, users got a new social media where they can send and request money. 

Despite its social media approach, user personal and financial details are kept secure, and you have nothing to worry about. 

How to receive a Venmo payment

Like many things on the internet, you will have to register and set up an account. If, for some reason, you had money sent to you, but you don't have an account set up. Venmo will send you a registration link that will give you access to your funds as soon as the account is set up. 

Venmo is not only a payment service but also serves as a digital wallet where users can save their funds. If you don't want your money saved there, you can quickly transfer it into your bank account. 

Note: You can only register for Venmo with a US registered phone number to have an account set up. 

What is Paypal?

Paypal is a digital Payment service founded 23 years ago and ever since has been dominating the fintech space. The payment service is available in over 200 countries and is still expanding. Paypal is a jack of all trades; it can be used for peer 2 peer transfers, business or shopping online. Also, you could link your bank card to Paypal and make in-store purchases as well as withdraw cash from ATMs. The payment service has support for more than 25 currencies which is excellent for businesses hoping to receive payments from abroad. 

Paypal is a giant in the industry and has acquired its fair share of competitors in the market. Some of the other companies owned by the conglomerate include Venmo, Xoom and Braintree. 

Paypal for business has really been where the company has gotten most of its success, and it's still going strong. With Paypal business, business owners can receive payments from their customers via the payment service. This is especially great for small businesses who cannot afford to set up card payment services on their website. Paypal business still allows them to receive payments from consumers and potential customers from around the world. 

Customers will have to sign up for an account and link a debit or credit card for personal use. Users can also link their PayPal to their bank accounts, which can be used to fund their PayPal account or make payments online.

How does Paypal Work 

On the surface level, PayPal is just another payment service allowing it to make payments online as well as peer 2 peer transactions. However, in actuality, Paypal is way more than that. Over the years, the company has added many features to make its services more useful for personal users and business.

Paypal has made most of its improvement in the business part of its feature. The company has come up with several ways to make the life of small, medium and large businesses easier. From making invoices, receiving payments with PayPal here and many more. We will look at all of Paypal features in the section below. 

Paypal has a mobile app and also a website. A transaction can be made on either the mobile app or the website. However, if you are a business owner, we advise you to use the website version to get more information. 

Features of Paypal 

Multiple Email Addresses

A PayPal account holder could link up to 8 email addresses to a single account. This is a security feature and a convenience for small businesses with multiple workers. 

Paypal Business Card 

Paypal provides its users with a MasterCard powered Debit card, allowing users to have access to their funds no matter where they are. With cashback offers up to 2% on each purchase made with the card. The card can also be used to withdraw cash from ATMs but with a daily limit of $400. 

Paypal Loans and Credit 

Paypal provides loans to small businesses as well as starting capital. Businesses can apply for a Paypal loan from $5000 to $500,000. 

Receiving a PayPal payment

If money is sent to you using Paypal, an email notification is sent to you. If at the moment of you receiving the email. You don't have a Paypal account. You can easily follow the provided easy steps to sign up for one. Once that has been taken care of, and your Paypal account is active, the money sent will be credited to your account immediately. 

Venmo vs PayPal: Are there any differences?

It is straightforward to think that Paypal and Venmo are the same things since the same people own them. However, this couldn't be farther from the truth. At the same time, they do have some things in common, i.e. their fee scheme and format. We can easily see that Venmo and Paypal are targeted towards different users. 

Let us look at some of the differences between these two payment services, so you can see for yourselves exactly what we are trying to say. 

Fees

Fees usually make or break the appeal for an online payment service. In the case of these two payment services, there are many similarities in the way their fees are structured. Both payment services do not charge a fee for downloading and making use of their mobile apps. 

Although, they both charge a 2.9% fee for transfers via credit or debit cards. However, Paypal users have to pay an extra 30 cents for transfers via credit cards. With Venmo, the transfer fees for credit cards are waived but a 25 cents fee for instant transfers via debit cards. 

None of the payment services charges a fee for transfers made via bank account or from the service account balance. However, since PayPal also has a business-focused side of its business, it has a set of merchant fees for small and large businesses making use of its services. 

If you are a merchant selling goods or services online, you will be charged a fixed fee of 2.9% + a fixed currency exchange fee. For in-store transactions, you will be charged a 2.7% fixed rate. However, these fees apply only to users in the USA and the UK. 

They will incur a fixed fee of 2.60% + the fixed currency exchange fee for sellers in Australia. As for other European countries, the fees could be anywhere from 2.90%- 3.40%. Check Paypal's merchant fees for the full breakdown for your country. 

How secure are their services?

The internet has reminded us time and time again that it's not a very safe place to have your personal and financial information. However, it is impossible to move forward in our time without the use of the internet. So, how will these two payment services calm their ever worried users of not only the safety of their funds but also of their information? 

Venmo has had its issues in the past, and the company claims to have learnt from past mistakes. What can we say about the company's new security standards? Well, Venmo has taken the necessary step to provide its user with top-level encryption and bank-grade security. These measures will keep users' funds safe as well as their personal information. The mobile payment service also lets users choose a unique PIN code when making mobile transactions. 

Since PayPal owns Venmo, they utilize the same encryption system to help protect user's funds and information. However, unlike its subsidiary, Paypal doesn't need the user's mobile details to make a transaction. Even though Paypal has made its users assured that when they send or receive money via their payment service. No personal or financial information will be provided to the recipient. 

In other words, Users have nothing to worry about. With PayPal being in the Payment service for more than two decades now, there is enough trust between the company and its users. 

For Business

Unlike Venmo, it is more targeted towards individuals when it comes to business transactions online. Paypal has been the industry's standard for many years, and as time has passed. The payment service has had time to improve its services and infrastructure with new features and possibilities. 

Paypal is definitely the choice to make if you are looking to receive payment from customers. It doesn't matter if you run a small or large scale business. Paypal has different plans curated to help its users easily navigate and get their payments. These pans come with special business fees and other services exclusive to business users. 

However, that doesn't mean PayPal is only for business. The company is also very active in p2p transactions. However, we have agreed that when it comes to peer two peer transactions in the US, Venmo has Paypal beat, but if we are to compare globally, Paypal has the upper hand. 

Venmo also has support for businesses but not on the same scale as Paypal does, and it isn't prevalent among business owners. 

Who has the Higher Transfer Limit?

Transfer limits are significant when choosing an EMI. Depending on your needs, you might want to consider an EMI with a higher transfer limit. In the case of these two payment services, Venmo has a lower transfer limit, letting its users transfer up to $3000. However, Paypal lets its customers transfer up to $10,000. 

Venmo has a lower transfer limit because its services are geared towards making transfers of vast sums of money. Its main purpose is to help users make daily transactions like paying for food delivery and reimbursing a friend. 

On the other hand, Paypal is able to facilitate such a high transfer limit because it's geared towards not only daily transactions but transfer abroad and business transactions.

Social Aspect 

Venmo has captivated its audience with its social media aesthetic and its social quality. The mobile payment services have made receiving and sending money fun, allowing users to follow their friends or contacts like Instagram or Twitter. 

Paypal doesn't enjoy the same social factor as Venmo does, but it's forgivable as they both are targeted towards different types of users. With Venmo, users can send money and send along a message with emojis. Users can like and comment on transactions made between friends or family.

Speed of Withdrawal

There isn't a big difference in the withdrawal speed of either payment service. Paypal usually fulfils transactions in about one to two business days. In the case of Venmo, transactions typically take about a day. 

Since both Electronic money services share a lot, it is not surprising that their withdrawal speeds are very comparable. So, if this was a criterion for you in choosing a payment service, then you can't go wrong with either of these EMIs. 

Cards

Paypal has provided its user with the ability to get a prepaid debit card and even a credit for Cash withdrawals and in-store payments. Keep in mind that these different cards come with additional fees and features. Paypal's credit card comes with loads of rewards and cashback, and with the debit card, users can make free cash withdrawals at Special ATM locations. The prepaid card can be used for savings. 

However, Venmo only offers its users a linked debit card which can be applied for on the app. Any Venmo users can order the card, but some users will have to wait for a while before they can receive their debit cards. Venmo cards also provide users with rewards and cashback. 

If we were to compare the cards between both payment services, it is safe to say you have got more options using PayPal. Paypal also has the more lucrative rewards and cashback scheme. 

Special Features

Both Payment services we are taking a look at today and at the pinnacle of EMI in their respective category. However, PayPal has pretty much outgrown its initial ambitions and has become more of a full-fledged bank. This is different from just the peer2peer app that was introduced in 1998.

Paypal has invested heavily into the business aspect of its operations. The payment service now performs service as most banks do, whether issuing loans, extending credit, or issuing credit and debit cards to users. 

Paypal is also accepted by a lot of retailers online and in a physical store. However, Venmo is only accepted by a handful of retailers online and even fewer in-store. Paypal also has a link that is sharable for users to send you money at Paypal.me. Venmo has a similar feature with its social media style of sending money to users. Users of Venmo can also add a profile picture that lets the user see exactly who they are sending money to.

With all of these unique features, users really have all of the Work cut out for them. You can go wrong by using either of these payment services; You can be sure that you will be getting the best service. Both services provide support 24/7 with different ways to get support, from live chat to different phone numbers to call. So, if you do run into any problems while using any of the payment services listed above, you will get swift and friendly support from the company. 

So which one is right for you? Venmo or Paypal

Well, as we repeatedly stated in this article, it really depends on what kind of services you will be using it for. If you are looking to use payment services for personal transactions between friends and family. We think the right choice for you would be Venmo as its transfer fees for small transactions are low . It is an EMI of choice for millennials and people who would be going to restaurants with friends and family. 

The UI is made to be simple and made for the social media generation. If you are looking for a quick and easy way to send money to friends and family, then Venmo is the payment service for you. For daily transactions, receiving pocket money and a way to connect with your friends while doing. 

However, if you want to make significant money transfers or run a business through a payment service, Paypal will be more suited. Merchants and businesses around the world are already making use of this payment service and have very satisfactory experiences with it. Paypal is a jack of all trades, so you can still make online payments, purchases and it offers a wide range of products to help boost your business while using the EMI. 

As a business, you can quickly get business loans and a business credit or debit card powered by MasterCard. As a personal user, you can also apply for a Mastercard debit card as well as a line of credit from the payment service. Also, if you plan to make international transactions, Paypal is suitable for you. It is available in over 200 countries giving it an edge over Venmo that is only available to users in the US. 

If you are looking to make purchases on eBay or other merchants, online PayPal is the choice for you. It is accepted by more retailers and merchants online and in different places. 

Conclusion

In the fintech space, the winner is the consumer because of the range of choices they have to choose. Gone are the days where you had to be worried about fees when sending money to friends and family using a different bank, and you had to pay high transfer fees. With Venmo and Paypal, you can say goodbye to those overpriced fees from banks. 

The world has already moved online and the finance industry as well. Suppose you are looking for a safe, quick and affordable way to send and receive money online. Then choose either of the payment services we have provided above. 

If you are not in the US and you would like to use a service like Venmo. Please take a look at our comprehensive list of EMI's for uses from across the Globe. 

Ibrahim Busari
As a fintech writer at AskWallet, he uses his metaphorical pen to guide you through the world of EMIs. He is an Ural Federal University Alumni and has been working in the financial and iGaming industry since 2016.