Venmo

• 1. Introduction

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  Venmo is a mobile payment service that in 2021 processed US$230 billion in transactions and generated US$850 million in revenue. What began as a simple way to send a friend money for a dinner bill has grown into something closer to a public ledger. Strangers can watch who is paying whom, using an app that started with two people and no banking background. How did that happen? Why has the company repeatedly clashed with regulators and privacy researchers over how it handles its users' data? And how did a service once run by its own founders end up owned by one of the world's largest payment companies? Those threads start years before the app had a name.

• 2. A Yogurt Shop Problem

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  Andrew Kortina and Iqram Magdon-Ismail met as freshman roommates at the University of Pennsylvania. According to Kortina, the pair "realized how horrible traditional point of sale software was" while helping start a friend's yogurt shop. At a local jazz show, they conceived the idea of instantly buying an MP3 of the performance by text message. The idea became fixed when Magdon-Ismail forgot his wallet on a trip to visit Kortina. Settling that debt was a considerable inconvenience compared to a simple mobile phone transaction.

  Shortly after, Kortina and Magdon-Ismail began building a way to send money by phone. Their first prototype worked through text messages before they moved it into a standalone smartphone app. Per Kortina, the name Venmo combines the Latin word vendere, meaning "to sell," with "Mo," short for mobile. They wanted something snappy and easy to spell.

  In May 2010, the company hired the Philadelphia law firm Morgan Lewis. Their job was making sure the young startup stayed compliant in every state, since text-message payments were technically illegal at the time. Through that firm, Venmo partnered with Philadelphia entrepreneur Peter Groverman, then a Villanova law student. Together they used the new technology to raise money for rebuilding an orphanage in Haiti after the earthquake there. The first $300,000 processed through the technology went toward rebuilding The New Life Children's Home in La Plaine, Port-au-Prince. That project served as the proof of concept that helped Venmo raise its first institutional funding, $1.2 million in seed money led by RRE Ventures.

• 3. Changing Hands

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  In 2012, Braintree acquired Venmo for $26.2 million. In December 2013, PayPal acquired Braintree for $800 million, bringing Venmo under the ownership of one of the world's largest payment companies. That set the stage for Venmo to expand beyond payments between friends and into transactions with businesses.

• 4. Opening To Merchants

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  Before October 2015, Venmo did not allow any payments from a consumer to a business at all. On the 27th of January 2016, PayPal announced that Venmo would begin working with select merchants willing to accept it as payment. Munchery and Gametime were its first launch partners. From there, the rule broadened further: any merchant that accepts PayPal can also accept Venmo.

  As of May 2018, Venmo's official merchant product still did not permit selling goods or services in person. Research that same month into mobile payment habits among small restaurants in New York City found a workaround anyway. Some Chinese takeout spots and food trucks were using personal Venmo QR codes to take payment from customers. That grey-market use closely resembled how the Chinese apps WeChat and Alipay were used inside those same establishments.

• 5. Into Cryptocurrency

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  In October 2020, PayPal announced that Venmo, alongside PayPal itself, would let users buy and use cryptocurrencies including bitcoin, Bitcoin Cash, Ethereum, and Litecoin. The feature was slated for select foreign markets starting in the first half of 2021.

  On the 20th of April 2021, Venmo confirmed it was rolling out the ability to buy, hold, and sell those cryptocurrencies inside the app. At launch, only a limited group of users had access, with full availability across the userbase estimated for May 2021.

• 6. How Payments Work

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  Opening a Venmo account requires a valid email address and a US mobile phone number, along with basic bank details. Other users can then find that account to send or request money, searching by phone number, Venmo username, or email. Every account carries a Venmo balance, funded by linking a bank account, debit card, or credit card. Paying from a bank account or debit card is free. Credit card payments carry a 3% fee, and some card issuers may add a cash advance charge on top.

  New accounts are capped at $299.99 in total transactions until the user's identity is verified. After verification, that user can send up to $2,999.99 in any seven-day period. Transfers have not been instantaneous since 2008, and can still be canceled after being sent. They typically take one to three business days to finalize, similar to a traditional wire transfer. In January 2018, PayPal introduced an instant transfer option on Venmo. It deposits funds to a linked debit card, usually within 30 minutes, for a fee of 1% or $10, whichever is less. The standard multi-day bank transfer remains free.

  Venmo also began issuing its own physical debit card in 2018, running on the MasterCard network. The card allows up to $400 in daily ATM withdrawals, though machines outside the MoneyPass network add at least a $2.50 fee. A reload feature can automatically pull $10 increments from a linked checking account whenever the Venmo balance runs low. That can trigger overdraft fees if the checking account itself lacks funds. Purchases made with the card show up in the user's Venmo transaction history, and the card itself can be canceled from within the app. Those same transactions, card purchases included, feed directly into the social feed that made Venmo different from an ordinary payment app.

• 7. The Public Feed

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  Venmo was built so friends could quickly split costs for things like movies, dinner, rent, or tickets. Every payment can be shared onto a news feed, minus the dollar amount itself. The app runs three separate feeds: a public "world wide" feed, a "friends only" feed, and a private personal feed. By default, every transaction lands on the public feed, visible to anyone who opens the app, even people who have never used Venmo themselves. A user can switch a transaction to private, but most people never change the default setting.

  In its early years, Venmo required new users to sign up through Facebook. That shortcut let people find their real-world friends and gave Venmo free marketing in the process. Users without Facebook friends in common could still search by username or phone number. Comments on the feed lean social rather than transactional: jokes, emojis, and likes, layered over profiles built from pictures, usernames, and transaction history.

  On the 14th of November 2023, Venmo added a feature called Venmo Groups. It lets people track shared expenses and manage bills together within the app, aimed at the same niche as apps like Splitwise. Venmo itself offers no protection for either the buyer or the seller in a transaction. That gap became central to questions researchers and regulators would later raise.

• 8. Under Scrutiny

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  Venmo has described its own security as "bank-grade." Journalists, security researchers, the California Department of Business Oversight, and the Federal Trade Commission have all challenged that claim. In February 2018, the FTC settled with Venmo after an investigation into the company. It found false claims about that "bank-grade" security and failures to comply with the Gramm-Leach-Bliley Safeguards Rule and Privacy Rule. The settlement requires Venmo to undergo third-party audits every two years for the following ten years. The FTC also said Venmo "misled consumers about the extent to which they could control the privacy of their transactions." It further found the company misrepresented how available users' funds were for withdrawal.

  On the 17th of July 2018, The Guardian published a security researcher's finding about Venmo's default settings. That researcher said the app publishes every transaction, names included, out onto the open web. The Better Business Bureau has separately noted that some scammers exploit Venmo's cancellation window, appearing to pay for something while ultimately avoiding payment. In November 2018, The Wall Street Journal reported that Venmo lost $40 million operationally in the first quarter of that year, nearly 40% above budget. The paper attributed the loss to what it called a wave of payments fraud.

  A 2018 study analyzed more than 200 million public Venmo transactions. It concluded the app "reveals a massive amount of private details about users' lives by default." A second researcher, working in 2019 with seven million transactions, found only minor improvements to limiting mass scraping, leaving users still exposed to various cyberattacks. That same year, Mozilla and the Electronic Frontier Foundation published an open letter about Venmo's privacy settings. It urged the company to make transactions private by default and to add privacy controls for users' friend lists.

  A University of Washington research group observed in 2017 that Venmo's feed differs from other social networks because activity is driven by financial transactions themselves. A user could send a trivial amount, like a cent, purely to generate a post. In their study, though, only one participant reported ever doing that. In May 2021, BuzzFeed News said it located the Venmo account of President Joe Biden in under 10 minutes. The outlet warned that the app "leaves everyone... in the world exposed." In 2022, University of Southern California researchers Rajat Tandon and Jelena Mirkovic analyzed 389 million public transaction notes. They found that 2 in 5 Venmo users publicly reveal sensitive information.

  The Consumer Financial Protection Bureau began scrutinizing Venmo in 2021 over how the company pursued customers who owed money on transactions. PayPal disclosed in a February regulatory filing that it had received a civil investigative demand tied to Venmo's unauthorized funds transfers and collections practices. Customer service emails from 2019 show Venmo warning users about possible collection agency involvement over debts. Amounts ranged from $3,000 down to as little as $7, sometimes even when the customer had been scammed. That practice continued through the COVID-19 pandemic. Separately, customers have complained about an automated security system that freezes or deletes accounts with little or no explanation. Venmo currently offers no official process to appeal one of those decisions.