Venmo vs Paypal: Which Service Is Best?
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.
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. EMIs 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 innovations 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 about 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, and 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.
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, users' 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.
Why you shouldn't use Venmo?
If you are looking to make business payments, PayPal is the better option. Venmo was designed for peer-to-peer payments or sending and receiving money among friends and relatives. Its personal accounts are not intended to be a small business digital payment alternative. That implies no tax records and unofficial paperwork in your bank account. There are no monthly reports. PayPal also has more benefits, such as protection from fraud and additional payment options, like money orders and checks. You can also send money through the web or with a text message, which will be quicker than using a card.
Do you lose money using Venmo?
Venmo does impose fees in some circumstances, however, depending on how you use the service, you may easily avoid these fees. Venmo charges a three percent fee to send money from your credit card, but there are no costs if you transfer the money from your Venmo account or bank balance. Venmo also offers a very helpful feature for people who tend to forget about their transactions. If you do not withdraw your funds for 60 days, Venmo will automatically withdraw them and charge you $0.25 per transaction as a withdrawal fee.
What are the cons of Venmo?
- You need to have a bank account or debit card in order to use Venmo.
- There are fees associated with using Venmo.
- You can only send money to people who also have a Venmo account.
- It may take a few days for transactions to go through.
- There is no customer service phone number to call if you have an issue.
- You may be prompted to provide additional information when sending or receiving money.
- The service is available in the U.S only
- Available only on mobile devices
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 a PayPal business, business owners can receive payments from their customers via the payment service. This is especially great for small businesses that cannot afford to set up card payment services on their website. PayPal's 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 accounts 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 businesses.
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's 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 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.
How do I avoid PayPal fees?
When you send or receive money through PayPal, the company charges a small fee. in order to avoid these fees follow some of the tips below:
- Change How You Withdraw Your Money From PayPal:
If you withdraw your money from PayPal via bank account transfer or cash withdrawal there will be no charge on your transaction whatsoever. Also, you can avoid fees if you order a PayPal cash card.
- Transfer Money Directly Into Your Bank Account:
If you want to keep your funds in an account that doesn't have any type of service charge then transferring the funds into your bank account will help alleviate any issues with those types of charges for transactions.
- Request Payment as “Family or Friend”:
If you are sending money to someone and do not want them to pay the transaction fee, ask them to request payment as family or friend. The person receiving the payment does not need a PayPal account in order to accept this form of payment.
- Use a PayPal Alternative:
One alternative to PayPal is Square which has much lower rates than PayPal and transfers faster than other options. Other options include: Neteller, Skrill, Monzo, and others
- Select Send As Gift Option:
Another way to avoid paying transaction fees is by selecting the option to send as a gift. There will still be a nominal fee applied but it's worth it for avoiding the high costs that come with using PayPal.
- Avoid International Transfers:
Another way to reduce your risk of having to pay any kind of processing fee would be to avoid international transfers altogether.
What are the disadvantages of using PayPal?
- PayPal charges fees for some transactions, which can cut into your profits.
- PayPal also has a history of freezing accounts and holding funds for 180 days or more, which can be a huge headache if you're trying to run a business.
- The company is also known for being unresponsive to customer service issues, which can be frustrating when you're trying to get help with a problem.
- High costs for chargebacks.
- PayPal has been known to hold onto funds for security reasons, which can delay payments to your vendors or customers.
- Additional fees than a standard merchant account (for credit card processing).
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 toward different users.
PayPal and Venmo are both digital payment platforms that allow users to send and receive money online. Both platforms are popular choices for online transactions, but there are some key differences between the two. PayPal is a more established platform with a longer history, while Venmo is newer and often seen as more hip or cool. PayPal also offers a wider range of services beyond just peer-to-peer payments, while Venmo is focused primarily on P2P payments. In terms of fees, PayPal charges users a small percentage of the transaction amount for most transactions, while Venmo does not charge any fees for basic transactions. But when it comes to international transfers, PayPal has an edge.
Another important consideration is how each platform handles security - which is an area where PayPal excels and one where Venmo needs improvement. PayPal uses 2FA authentication (Two Factor Authentication) which provides increased protection against fraud attempts by adding another layer of security in addition to passwords.
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 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 learned 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 users' 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.
Unlike Venmo, it is more targeted toward 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 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-to-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 can facilitate such a high transfer limit because it's geared towards not only daily transactions but transfers abroad and business transactions.
Venmo has captivated its audience with its social media aesthetic and its social quality. 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 toward 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.
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 user 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 a more lucrative reward and cashback scheme.
Both Payment services we are taking a look at today and 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 physical stores. 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 to who they are sending money.
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.
Is it cheaper to use Venmo or PayPal?
In terms of fees, PayPal and Venmo are comparable. There are no fees for receiving money from friends and relatives. If you use your PayPal debit card or Venmo card to withdraw funds from an ATM, it will cost $2.50 unless you use the free in-network cash machines; there is no additional fee if you use either service. There is also no cost to transfer money via either service, which is a wonderful advantage if you don't want to go through the hassle of withdrawing first!
The main difference between these two services is that Venmo charges a fixed fee of 3 per cent on credit card transactions, whereas PayPal charges 0.3 cents per transaction + 2.9 per cent (r both debit and credit card transactions).
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 business credit or debit cards 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 but 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.
In the fintech space, the winner is the consumer because of the range of choices they have to choose. Gone are the days when 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.
There are no monthly fees or charges to open a Venmo account. A basic Venmo transaction from a user's bank account, debit card, or Venmo cash balance is, as previously stated, free of charge. Venmo imposes a 3% fee if a credit card is used to pay.
A user can make minor changes to their in-app transactions to avoid some Venmo fees. Users can avoid the 3% charge by withdrawing funds from their Venmo balance, bank account, or debit card instead of using their credit card to send money.
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