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ComplianceMerchant

Is Venmo Safe For Small Businesses? How to Know If You Should Use It

By October 15, 2020 November 20th, 2020 No Comments

Once upon a time, Venmo could not legally be used for business transactions. In its terms of service, it states, “Business, commercial, or merchant transactions may not be conducted using personal accounts.” Things have since changed.  Venmo will allow limited business use with explicit permission after completing the application process. 

Is Venmo Safe? 

Pre-2015 scammers were using Venmo to defraud people out of thousands of dollars. If it was considered a “business transaction”, the user had no recourse. The security page of Venmo’s website currently states:

“Venmo is designed for payments between friends and people who trust each other. Avoid payments to people you don’t know, especially if it involves a sale for goods and services (like event tickets and Craigslist items). These payments are potentially high risk, and you could lose your money without getting what you paid for. Venmo does not offer buyer or seller protection. Business usage of Venmo requires an application and explicit authorization.”

Venmo and its users have experienced:

  • Payments reversed without authorization
  • Frozen accounts
  • Money withdrawn from their banking account. 

Venmo’s terms now allow for business transactions BUT, there is no protection for buyers and sellers which is alarming. Unfortunately, that is par for the course when you use a service provider as opposed to a true merchant account. 

Venmo + Small Businesses: How to Make a Decision

If you complete the application process and if you are approved, here’s what you need to know before you make a decision with such potential repercussions. 

  • PayPal itself is PCI Compliant, the disclaimer on their website states that they are NOT responsible for PCI in YOUR store.
  • PayPal is not responsible for PCI compliance if you store, transmit, or process payment card information. Its PCI compliance can be validated at http://www.visa.com/cisp
  • It’s not a matter of IF, but WHEN. 67% of Business owners have no security in place. Fraud was already on the daily rise, now with COVID, the huge shift to a more cloud-based and online presence has just added fuel to the fire
  • Venmo has a prohibited list, like everyone else in the industry. By using its payment service for prohibited items, you are going against the terms and conditions. The prohibited list is long, but you can view the complete list here

 

* (FYI there are 49 categories that are not allowed). If they won’t acknowledge PCI for those they allow to use their services, what do you think they will do for those who went against their rules? It’s a scary thought. 

  • Next in line is the Fraud Maintenance Tools — an optional fraudulent transaction management tool made by Braintree Payment Services. If you want to activate or inactivate the Fraud Maintenance Tools, it is your responsibility to determine which settings you need and which filters to apply. If you were to select the wrong one, you lose out on volume since they decline payments on your behalf. Let’s hope you know what you’re doing. 

“It is your sole responsibility to provide any necessary notices and disclosures, obtain any required consents, on the use of the Fraud Maintenance Tools to your Customers on your website or mobile application”. 

“You acknowledge and agree that PayPal does not represent or warrant that the Fraud Maintenance Tools are error free or that they will identify all fraudulent transaction activity. In addition, PayPal shall not be liable whether a Transaction is accepted or rejected using the Fraud Maintenance Tools. You are responsible for your optional use of the Fraud Maintenance Tools, including any filters or settings you enable.*

*Edited/Shortened for length. 

I Don’t Have Explicit Permission, What Can Happen? 

If BrainTree/PayPal/Venmo believe you may have engaged in any violation of their terms and conditions, they could (with or without notice to you) take whatever actions that go against the agreement. This could include:

  1. Blocking the settlement or completion of one or more payments;
  2. Suspending, restricting or terminating your access to and use of the Payment Services
  3. Terminating our business relationship with you, including termination without liability to Braintree of any payment service agreement between you and Braintree.
  4. Taking legal action against you
  5. Contacting and disclosing information related to such violations to (i) persons who have purchased goods or services from you, (ii) any banks or Card Networks involved with your business or transactions, (iii) law enforcement or regulatory agencies, and (iv) other third parties that may have been impacted by such violations
  6. Assessing against you any fees, penalties, assessments, or expenses (including reasonable attorneys’ fees) that we may incur as a result of such violations, which you agree to pay promptly upon notice.

What Are My Other Options? 

If anything above concerns you, we can skip all of that to help you process with Platinum Payments. Have the peace of mind that all of your PCI issues are handled, you have liability protection, plus everything else in our Platinum Core

Our Payment Professionals can help you navigate the process and make everything seamless, all while providing you with white-glove treatment. 

Let’s get started today with a free audit. 

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