Our take
One of the most widely used financial technologies on the market today, Venmo satiates the modern thirst for fast-paced, on-the-go banking options. Venmo's evolution is a fascinating one.
The app started as a humble experiment in peer-to-peer payment smartphone applications, enabling the transfer of funds between family and friends. Today, it has become so much more, including a payroll facilitator, retail payment option, and more.
What you may not know about Venmo, however, is that you can now use the app to purchase Bitcoin. This virtual wallet allows you to conduct many diverse transactions online from your smartphone or other mobile device.
Adapting to fund cryptocurrency has been an inevitable yet convenient development for the app. That said, we wouldn't characterize it as a widely used method for transacting in Bitcoin and other cryptos. But you can use it to take your first tentative steps in the crypto world. Keep reading to find out how.
What Is Venmo?
Venmo has become so popular in recent years that it's not uncommon to hear references to the app in everyday conversation. It's taken on the status of a verb, "I'll Venmo you for that."
Created by Iqram Magnon-Ismail and Andrew Kortina, the two were college roommates at the University of Pennsylvania. What inspired them to launch Venmo? While attempting to help a friend start a frozen yogurt store, they realized just how poorly point-of-sales software performed.
Later, while attending a local jazz concert, they had the epiphany of an app that allowed for the instant purchase of MP3s of the performance. They foresaw these transactions occurring via text messages.
After designing a prototype of their system, which facilitated the sending of cash via text, they decided to go the route of a smartphone app. By 2010, Magnon-Ismail and Kortina raised $1.2 million in seed money through a financing round. Within two years, Braintree, a FinTech payments company, acquired Venmo.
You may be surprised to learn that Venmo has such a storied history. After all, it didn't receive much in the way of fanfare when it first started. That's because little was done to advertise the app until 2015, two years after PayPal paid $800 million for it.
PayPal was the first to create the slogan, 'Pay with Venmo." This slogan killed two birds with one stone by promoting the site and offering customers a new way to pay retailers instead of credit cards or cash.
What made this campaign so successful? For one, it dovetailed with a perfect storm of economic forces conspiring to render cash obsolete. Since people are now less-inclined to visit ATMs or write checks, a natural demand for Venmo has helped its popularity.
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Benefits of Using Venmo
Venmo doesn't charge users for sending or receiving payments. And it doesn't charge any monthly or annual fees.
So, how does the company make money? It generates revenue through two services, Venmo API and Venmo Touch. These services allow users to pay with Venmo in other applications at a 2.9 percent fee rate to businesses.
What's in it for businesses? They can acquire new customers by accepting Venmo and taking on these nominal fees. Venmo also receives a three percent fee on credit card transactions.
In partnership with MasterCard, Venmo also offers a debit card. Users of the debit card can make purchases anywhere MasterCard gets accepted. ATM withdrawals prove free anywhere MoneyPass gets taken.
Venmo and the Social Network
Venmo is similar to other peer-to-peer networking platforms like Facebook, Instagram, and WhatsApp because it relies on social networks. Like these social platforms, Venmo has also enjoyed exponential growth in recent years.
It proves especially popular with Millennials who use it for everything from splitting drinking tabs to paying rent. Users can also use Venmo to pay balances even when their account doesn't have sufficient funds.
How does this work? The app connects with other assets such as credit cards, debit cards, or savings accounts.
Better still, you can use it to make payments to individuals who aren't on Venmo. That said, the recipient must sign up to access their funds.
Venmo also features a "Nearby Payment" option that allows you to pay people outside of your social network. But these individuals must live within close proximity.
Finally, the "Trust" option lets users auto-pay for expenses that prove recurring. These include budget items such as your monthly share of rent.
Limitations of Venmo
Currently, Venmo is only available in the United States. So, don't expect to use it on any of your upcoming international travels. It relies on a social network of known friends and people in close geographic proximity to deliver digital payments.
What's another limitation you need to know about with the app? It's only available for personal use when linked to a credit card or bank account. So, even those businesses that pay a fee to accept it can't directly use it.
The company also places a cap on user transactions of $4,999.99 per week. This limit is applied on a rolling basis. The same goes for receiving funds.
In other words, if you need to send a large sum of money, look elsewhere. Or break up large transactions into smaller sums paid over several weeks.
Finally, critics have raised concerns with Venmo's current security protocols. They remain skeptical about the mobile app's ability to protect people's finances. That said, the company has disputed these criticisms numerous times by emphasizing security settings.
How to Set Up a Venmo Account
Venmo is all about ease-of-use, and this focus is evident even in the signup process. You'll need little more than a couple of minutes to create an account.
To start the process, go to Venmo's website and sign up using your Facebook profile and password or email address. Once you've submitted this information, you'll receive an authorization code from Venmo via the email provided.
Install the app on your phone or mobile device, and then sign in to your account. It will automatically connect you with your email address or Facebook friends and contacts. Click on the "Payment Methods" tab, and add your banking information.
By connecting your bank account to Venmo, you can send and receive money via the app. If you prefer, you can also link a credit or debit card. Remember that you'll be subject to a three percent fee if you opt to link a credit card.
That said, this fee gets waived for completed:
Authorized Merchant Payments
Bank account transactions
Debit card transactions
Venmo balance transactions
It makes sense to take advantage of these free avenues for utilizing Venmo if at all possible.
Choose a Broker That Accepts Venmo
Venmo is an accepted form of payment for Paypal as well as many other mobile apps. Yet, it's still seen as a risky payment method by many because of its user-friendly and simple design. This criticism is warranted, considering its oversimplified identification system for app users.
That said, rigorous security measures would defeat part of its purpose, making it far less convenient for users. For these reasons, it can feel daunting to find a Bitcoin broker that accepts payment in Venmo.
But you'll need to find a reputable marketplace or exchange that facilitates these transactions before proceeding any further.
Currently, two exchanges support Venmo transactions, Paxful and Local Bitcoin. You'll need to choose one of these brokers and then register to start transacting in cryptos.
How to Create a Paxful Account
One of the two reputable exchanges that permit Bitcoin transactions in Venmo is Paxful.
What is Paxful? A leading peer-to-peer finance platform explicitly designed for trading in Bitcoin. It connects buyers and sellers, offering more than 300 payment methods.
The community has more than 40 million users and is growing by leaps and bounds. How do you use Paxful for your Venmo Bitcoin purchases? Start by creating an account with Paxful.
Launch the Paxful website and click on the "Create Account" option in the top right-hand corner of the home page. From there, you'll need to provide your email address and a password.
Once registered, you'll automatically receive a username. If you don't like this username, you can customize one later. First, you must verify your email, though.
If you've received a Paxful code from another user, enter it by clicking on the "I have referral code" link. After completing the captcha verification and activating your email, go to the inbox and open the message from "noreply@paxful.com." You'll find the verification link inside.
After creating an account, verify your identity and phone number. This process will give you access to more trading opportunities on the platform.
How to Purchase Bitcoin with Venmo Via Paxful
From there, Paxful makes the process of buying Bitcoin a cinch. When you power these transactions with Venmo, you gain access to Bitcoin in less than sixty minutes.
How does it work? You can choose to buy from one of many offers listed by vendors for selling their Bitcoin using Venmo. Or you can create an offer to sell Bitcoin via Venmo balance.
Vendors have the option of setting rates and deciding margins at Paxful. Choose the offer that suits you best through purchasing. Or create offers with the greatest chance of conversions.
As a buyer, once you find an offer you like, click the link to purchase it. Next, select the amount and then send the money to the seller via their Venmo account. Once completed, mark the trade as paid. The seller will receive the funds, and then they'll release the Bitcoin to you.
How to Create a Local Bitcoins Account
LocalBitcoins permits people worldwide to exchange their local currency into Bitcoins. The platform also allows users to create advertisements. These advertisements detail the choice of payment method and exchange rate for buying and selling bitcoins from and to other Local Bitcoins customers.
When you apply to one of these advertisements, a trade chat gets opened, and escrow protection is automatically activated. Escrow protects both buyers and sellers by securing the Bitcoins until payment is complete and the seller releases their Bitcoins to the buyer.
Local Bitcoins also provide a web wallet that you can utilize to send and receive Bitcoin transactions. How do you create a Local Bitcoins account? Start by adding a username, email address, and password.
Once you've verified your email address, you're free to connect your account to your Venmo wallet to begin purchasing Bitcoin.
How to Purchase Bitcoin with Venmo Via Local Bitcoins
Once you've connected Venmo to your Local Bitcoins account, it's time to search for advertisements. Do this by going to the Local Bitcoins home page. There, you'll find a search function that lets you enter the amount you'd like to purchase in your local currency.
You'll also choose a location and payment method. Some users select the "All Online Offers" option when they don't yet have a payment method preference. But you won't need this since you're using your Venmo wallet. From there, you'll generate a list of local Bitcoin traders.
Choose an offer from the list of advertisements. How? By looking for a trader with a good reputation score and a high number of trades under their belt.
You'll also see a response time indicator for each trader that lets you know how rapidly they reply to questions and offers. If they do so within five minutes, you'll see green. If within 30 minutes you'll see yellow, and slower response times (more than 30 minutes) fall into the gray category.
After pressing the "Buy" button, you'll see additional information about the advertisement. This information includes the terms of trade. We suggest you read through these terms with care before submitting a trade request.
What if you disagree with the trade terms? Go back to the previous page and choose another advertisement. When you find terms and an offer you can get behind, it's time to initiate the trade.
How do you do this? By typing in the blue box how much you wish to buy. You'll then enter a message for the seller and click the "Accept Terms and Send Trade Request." This option will activate the trade.
Make sure you've got the appropriate funds in your Venmo wallet before clicking this button. What happens if you don't send funds before the payment window ends? Local Bitcoins will automatically cancel your trade.
Once you've made the payment via your Venmo wallet, select the "I Have Paid" button. The trader will verify receipt of your payment, and they'll release your Bitcoins from escrow. These Bitcoin funds will be available within less than an hour via your Venmo wallet.
There you have it. You've completed your first Bitcoin trade funded by your Venmo wallet and facilitated by Local Bitcoins.
Buy Cryptocurrency Using Venmo
While the above transactions sound like they have quite a few steps, if you've already got an active Venmo wallet, you'll find your experience to be even more streamlined and rapid.
Yes, you'll need to complete an extra step by using a broker such as Paxful or Local Bitcoins. But if you're already a Venmo enthusiast, this is a minor complication when it comes to paying the way you want for your Bitcoins.
Over the years, mobile apps such as Venmo have made lives easier and more convenient. Venmo takes the place of your credit card and checking accounts, relying on minimal or zero cost electronic peer-to-peer transactions.
The ability to bring this same technology to your crypto dealings is an attractive option for diehard fans of the app. As the mobile apps field continues to become more competitive, we can expect Venmo to continue upping their game and features to stay relevant.
Like cryptos, mobile payments continue to reshape how we transact. Many banks have adopted technology into their banking apps, permitting customers to send money instantly. Mobiie payments now get made onsite by scanning a barcode on an app on your phone.
Multinational retailers are now accepting payments via phone. These include everything from convenience store chains to large, international companies. But most financial institutions charge for these mobile services, deducting a small fee from each payment.
That's where Venmo has the competition beat. By allowing fee-free buying and selling, they've brought a new standard to mobile payment experiences. Now with brokers such as Paxful and Local Bitcoins, they're offering new options to the crypto community.
Mobile payments offer additional privacy and security benefits compared to physical cards. You don't have to worry about misplacing them or having them stolen. And you've got ready access to the best apps, like Venmo, whether you use an iOS or Android device.
Venmo: Risks and Considerations
As we've covered in this Venmo review, the mobile payment app continues to grow in popularity for many reasons. Chief among these are convenience and the lack of transaction fees. An increasing number of retailers and businesses now accept this payment method, further adding to its popularity.
Once upon a time Venmo handled little more than rent payments between roommates. Now, it's become the go-to way to pay at restaurants, retailers, and more. The phrase, "I'll Venmo you," has cemented the app and its functions into our very linguistic patterns.
So, it's little wonder that Venmo would eventually interface with other technologies such as cryptocurrency exchanges. But what do we ultimately think of using Venmo to purchase Bitcoins?
There are some legitimate risks associated with purchasing Bitcoins with Venmo. That's why you must go through one of the brokers listed above to buy Bitcoin this way. That means an added step, but one that could help you up your crypto learning curve in the long run.
Nevertheless, using the app to purchase coins remains a viable and convenient option if you understand these risks.
When you go the route of linking Venmo to your debit card, you also enjoy added protections, What do we mean? Venmo makes disputing transactions a cinch. It also lowers your consumer liabilities.
As a result, using Venmo for daily transactions, including buying Bitcoin, could add an extra layer of protection to your purchases. This fact proves especially true when it comes to preventing unauthorized access to your Venmo account by others.
Frequently asked questions about Venmo
We’ve compiled some answers to questions we often get. Should you have any other questions, feel free to reach out below in the comments.Can I buy Bitcoin and other cryptocurrencies with Venmo?
Is Venmo safe to use?
How do I transfer my Bitcoin and other cryptocurrencies from Venmo to another wallet?
Pros and cons of Venmo
- Backed by the one of the biggest names in Finance
- Great options for beginners who are looking for exposure to Bitcoin
- Very secure and easy to use
- Dead-simple peer-to-peer payments
- When buying cryptocurrency, you don’t have a crypto wallet allowing to store and transfer your assets
- There are other exchanges with better prices
The Takeaway: Bitcoin on Venmo
That said, we do recommend purchasing Bitcoins in smaller dollar amounts via Venmo. This strategy will help you further minimize risk exposure with crypto on Venmo.
When it's all said and done, we don't recommend rushing out to get a Venmo account so that you can use it to purchase Bitcoin. There are more efficient and convenient ways to create a crypto buying account if that's all you're after.
What's more, you'll enjoy significant limitations when it comes to using Venmo to purchase cryptos. Namely, you can only buy Bitcoin with the mobile app in its current configuration. But if you're an ardent fan of the app and already using it for multiple other transactions per day, we say give it a try.
Then, when you're ready for a deeper dive into the diverse universe of altcoins, start exploring with more sophisticated and popular broker sites such as Coinbase or the world's largest cryptocurrency exchange Binance.
Add Cryptos to Your Portfolio
The world continues to evolve at a breakneck pace, thanks to technology. This fact proves no less true in the FinTech industry.
The introduction of Venmo mobile pay has brought increased convenience and a new mode for purchasing and selling goods and services. It was only inevitable that buying and selling Bitcoin via such apps would come along.
But Venmo is far from your only option when it comes to making your first forays into the altcoin investment sphere. Ready to find out what we mean? Check out our comprehensive selection of exchange reviews.