Should You Use Venmo as a Payment Method for Your Small Business?
by Fundid on May 24, 2023 8:55:17 AM
Starting and running a small business is never easy. With so many tasks to manage, it can be challenging to stay on top of everything and keep up with the demands of your customers. One of the most significant hurdles of running a small business is figuring out the best way to accept payments from your customers.
While there are plenty of payment methods available, many small business owners are wondering if using Venmo is a viable option. In this guide, we'll explore the pros and cons of using Venmo as a payment method for your small business.
What is Venmo and How Does a Business Profile Work?
Venmo is a mobile payment app that makes it easy for people to transfer money to each other quickly and securely. With a Venmo business profile, you can accept payments from your customers easily online or in person. Signing up for Venmo is free, and it only takes a few minutes to set up an account.
Once you have linked your bank account or credit card, you can start making payments right away. In addition, Venmo also offers a social aspect, where you can add comments and emojis to your payments, making it fun to use!
With a business profile, you’ll pay no setup fee and a low seller transaction fee for each payment process, but there are no monthly fees. Plus, you can turn on tipping in your business profile settings to help increase income. Your customers can add a tip, and you could add to your bottom line!
Pros of Using Venmo to Accept Customer Payments
Venmo is an easy-to-use, cashless payment method that is becoming increasingly popular among consumers. By using Venmo, small business owners can enjoy faster payments without the need for expensive payment processing equipment.
Additionally, using Venmo can help attract younger customers who prefer using digital payment methods over traditional ones. Venmo can bring additional brand awareness to your business since users can see, like, and comment on transactions. Plus, Venmo is highly secure and offers buyers protection against fraud, chargebacks, and failed payments.
They also can provide you with a QR-kit so you can easily accept payments in person. This will allow buyers to scan a QR code that is linked directly to the business's Venmo account.
Lastly, Venmo Purchase Protection is available on eligible Debit Card and business profile transactions, in-app purchases, or QR code payments. If an issue arises with a purchase, Venmo will investigate, work with the seller to resolve it, or reimburse the cost of the item plus original shipping costs. This help ensure your customers feel protected conducting transactions through Venmo.
Cons of Using Venmo to Accept Customer Payments
While Venmo is an attractive option for small business owners, it does have some drawbacks to consider. One of the biggest concerns when using Venmo is the lack of buyer protection. Unlike a credit card, which offers fraud protection, Venmo does not have the same level of protection.
However, when a business receives payments through Venmo, it is important to transfer that money into the connected bank account, as Venmo balances are not FDIC insured. Should Venmo lose your money or the company goes under, any remaining balance in the account is not protected and may not be returned to you.
Lastly, there are fees associated with using Venmo as a payment method for your small business. These fees are common in any processing system that accepts credit cards. With a business profile, you can enjoy additional benefits, tax reporting, secured payments, and dispute services. The seller transaction fee is a standard rate of 1.9% + $0.10 of the payment at the time of this article being published.
Alternative Payment Methods to Consider for Your Small Business
If the drawbacks of using Venmo outweigh the benefits, there are alternative payment methods to consider. For example, you can use credit card processors like Square, which allows you to accept credit card payments and even track inventory.
Traditional payment methods like cash and checks are becoming less common as many purchases are made online. However, if you have a storefront and in-person transactions, allowing customers to use this payment method is worth considering.
What Types of Businesses Should Use Venmo as a Payment Method?
With so many options out there, it's important to consider what works best for both you and your customers. One thing to keep in mind is the ease of use – you want a payment method that is easy to set up and simple to use for both you and your customers. If your business falls into one of these categories, you might want to consider offering Venmo as a payment method:
1. Businesses that cater to millennials
Venmo is a popular payment app among millennials, so businesses that cater to this demographic should consider using it as a payment method. Venmo allows users to send and receive money with just a few taps on their smartphones, making it a convenient option for millennial consumers.
2. Businesses that sell digital products
If your business sells digital products, such as e-books or online courses, Venmo is a great payment option to offer. This is because customers can easily and quickly pay for your products using the app without having to enter their credit card information.
3. Businesses that do a lot of transactions
Businesses that do a lot of transactions can benefit from using Venmo as it can help to speed up the process. Customers can simply scan a QR code or barcode to make a payment, which is much faster than traditional methods such as cash or check, and they won't have to wait in line to swipe their credit card.
4. Businesses with younger customers
As mentioned above, Venmo is popular among millennials, so businesses with younger customers should definitely consider using it as a payment option. Venmo’s popularity among younger consumers is likely due to its convenience and ease of use.
5. Businesses that want to be seen as modern and tech-savvy
If your business wants to be seen as modern and tech-savvy, then offering Venmo as a payment option is a great way to do so. This is because Venmo is an innovative and convenient payment method that is quickly gaining popularity.
6. Businesses that want to offer their customers more options
Offering Venmo as a payment option can also be seen as a way of giving your customers more choices. By providing your customers with more payment options, you can increase your chances of making more sales!
How to use Venmo Wisely for Your Small Business
If you decide to use Venmo as a payment method for your small business, it's essential to take the necessary precautions to protect yourself and your customers. Firstly, set up a separate business account and only use it for transactions related to your business.
Additionally, make sure to keep track of all transactions, as this will help you to reconcile your accounts and stay on top of your finances. Finally, consider using a third-party application, such as QuickBooks, to link your Venmo account to your business.
Consider All Payment Methods for Your Small Business
Venmo can be a viable payment method for small business owners, but it's essential to weigh the pros and cons carefully before making a decision. By considering alternative payment methods and taking the necessary precautions when using Venmo, you can ensure a smooth and secure payment process for both yourself and your customers. Ultimately, every business is unique, so it's important to choose the payment method that best fits your needs and goals.