How Does Venmo Make Money?

In this growing digital era, cashless transactions are becoming more popular. With the market opening up for other forms of banks and money payments, Venmo is becoming one of the leading forms of mobile payment services in the US. As of writing, the digital wallet app has over 40 million active users – outnumbering most of the major banks in the country.

The concept of a digital wallet is simple: instead of having physical cash, your money is in a secure app you can use to send money to other people, physical stores that accept digital wallets, and online businesses. It’s like a wallet, debit card, and money transfer service all in the convenience of your mobile devices.

Venmo, like most digital wallets, is free-to-use and can be downloaded from Google Play or the App Store. Whenever you use Venmo as a payment method, you don’t have to pay a transaction fee or service fee. So, for those trying to brainstorm the next great mobile app or those just genuinely curious, you might be wondering how Venmo earns money.

Well, here’s how they do it.

How Does Venmo Work?

Venmo is a free-to-use app, which means you don’t have to pay anything before installing it into your smartphone. Simply search for it on Google Play (for Android users) or the App Store (Apple) and download the app. Once it’s downloaded, sign up for an account.

Once it’s on your phone, you can send and receive money from both private individuals and businesses. Take note that not all businesses may be equipped to accept Venmo or any other digital wallet, while you cannot send money to other people who do not have a Venmo account.

Aside from making online purchases and purchases from physical stores, Venmo can be used for day to day purchases. For example, if you want to split a restaurant bill without the hassle of separate checks and computing for change, one person can simply foot the bill, and then everyone can send them their exact share via Venmo. Or if you want to give someone a money gift, sending it via Venmo is the faster and more convenient option.

To send and receive money into your digital wallet, your Venmo needs to be connected to your source of income (i.e. bank account, debit card, credit card). Take note that if you connect your account to your credit card, there is a three percent transaction fee from Venmo. This is one of the ways Venmo earns money, but we’ll get to that in a bit.

Is Venmo Safe?

In terms of handling your money, Venmo is just as safe as your everyday bank account apps. The app is encrypted to protect your account information and your money. It is also monitored to detect unusual transactions.

App Vulnerabilities

In case your phone is stolen, your Venmo may be safe because of the PIN code required to access the app, the multi-factor authentication, and the other added layers of security. You can also access your account through a computer and have the app on your phone signed out.

Unfortunately, Venmo’s security has its limitations just like other banks and financial services like PayPal. For instance, hackers and phishers may fool you into giving your Venmo details through convincing Venmo Customer Service emails and calls.

Venmo & Buyers

Venmo does not offer buyer protection and is just a way to transfer money. So, if you’re a buyer and you did not like the product or service you received, there’s no way for you to ask Venmo to get your money back.

Venmo & Stalking

Unlike other digital wallets, Venmo may be considered a form of social media because of its user experience. You’ll be able to see people in your network and contacts that have Venmo and their activity – and they’ll be able to see yours.

If you don’t set your transactions to private, all your Venmo transactions are there for others to see. They won’t see how much you spend, but they’ll see who you spent it on. It won’t explicitly say what you spent on, but the messages or emojis you write can be a dead giveaway.

For example, if you’re excluding one member of your friend group from a night out, that person will be able to see you and the rest of the friend group pitching in for the bill. Or, for a more serious example, a spouse can see their spouse sending money to a former flame.

This can be changed to private, but the fact that this is the default setting on Venmo may put a person’s privacy at risk.

How Does Venmo Make Money?


For the most part, Venmo is free to use and download. And for most users, they never have to pay any money to use their app. But Venmo profits through buyers and sellers.

Venmo Fees for Credit Cards

For regular users using their bank account or debit cards to connect to Venmo, all your transactions are free. But if you are using a credit card, there will be a 3 percent additional fee based on the total value of the transaction.

So, if you’re transferring $20 to a friend and your Venmo is connected to your credit card, your card will be charged $20.6 – that additional 60 cents will go to Venmo. It may not seem like a lot, but when you consider that there are 40 million users and a fraction of them use their credit cards and have bigger transactions, those transaction fees will start to add up to a profit for Venmo.

Business Transactions

Venmo’s main source of income is from its 2.9 percent charges for businesses using Venmo. It cuts out of the business’ profits, but given that it is slowly becoming a preferred mode of payment for many individuals, having Venmo as an option in stores is becoming very valuable.

Is Venmo Profitable?

As of writing, Venmo is partnering with multiple ridesharing and food delivery apps to help provide fast, convenient, and contactless payments. This is particularly useful considering the current pandemic.

In fact, apps like Venmo and Cashapp are set to boom within 2020 due to contactless payments providing a layer of health safety for those looking to avoid touching other people and items that could change hands frequently.

While it seems like Venmo is the future of shopping in the new normal, it still has a lot of ground to cover. Just like how not all businesses accept credit cards, not all businesses accept Venmo as a mode of payment.

And while 44 million active users seem like a lot, it’s only 13 percent of the US population. If you want to send money (or as younger people say it, “I’ll Venmo you!”) to another person, that person needs to have a Venmo account. And unless they’re comfortable linking their bank account to Venmo (which, given the number of hacking cases in the US, not many are comfortable with), the money they received can only be used with businesses that use Venmo or with other people who have it.

Should I Use Venmo?

Ideally, you should switch to a contactless payment method like digital wallets given the rise of digital trends, as well as the benefits going contactless has in the new normal. However, take note that not all physical stores accept Venmo, so it may be useful to have some cash in your pocket when you go out.

You can use Venmo in stores that accept PayPal and other digital wallets. Stores like Walmart, Target, Lululemon, and Forever 21 accept Venmo, so you can expect most major stores to accept this mode of payment. These are also accepted in tech-heavy areas and places frequented by younger people. However, for more rural and remote areas, expect that Venmo and digital wallets have not yet been introduced.


Despite millions of its users using Venmo absolutely free, it does not mean Venmo does not earn money. Venmo earns money through credit card transactions as well as the fees businesses pay to have it as a mode of payment for their store. So, for those curious, you may actually be helping Venmo earn whenever you use the app for purchases.

It’s a lucrative app, based on its popularity and usage. But for those looking to create similar apps, entering the digital wallet market may already be too late given the current boom and how apps like Venmo and Cashapp are already at the forefront for digital wallets in the US. Unless you can innovate on the concept of digital wallets, it can be difficult to break into the business and get enough users to make it profitable.

Either way, Venmo – and its profitable operations – are definitely here to stay.

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