New Payment Methods like Venmo are Emerging
Strategies & Tips

New Methods of Payment

Cash payment is falling out of favor with an increasing shift to electronic “cashless” transfers. Cashless transfers, or payment rails, are networks that move money from one party to another party. While one might most commonly think of a credit card as a modern-day example of a payment rail, they have existed since the 8thcentury when Hawala was used as a method of transferring money in the Muslim world.

Not having to pay cash, especially with family and friends, promises to make life easier for millions of people, but the commercial impact of these new payment rails is unknown. Payment rails have not historically been dependent on electronics, but Venmo and Zelle both seek to change that.


Venmo is a payment service owned by PayPal. Venmo account holders can transfer funds to others via a mobile phone app provided both the sender and receiver live in the United States. Like traditional wire transfers payments, these transactions can take one to three business days to become final. There is an instant transfer feature on Venmo allowing users to deposit funds within 30 minutes. A 1% fee is charged for this service.

Users create an account via a mobile app or website and provide basic bank account information. Payments can be made via phone number, Venmo username, or email address. Users need a balance in Venmo to transfer funds although they can link their bank accounts, debit cards, or credit cards to their account. They can also secure credit through a Venmo branded Mastercard. Paying with a bank account or debit card is free, but payments using a credit card are charged a 3% fee.

Venmo includes a social networking aspect. It was created so that friends could split bills for movies, dinner, or rent. When a user makes a transaction, the transaction details (stripped of the payment amount) are shared on the user’s news feed by default. There is a public Venmo feed, a friend only feed, and a personal feed. Venmo encourages social interaction on the application through comments using jokes, emojis, and likes.

Before October 2015, Venmo prohibited merchants from accepting Venmo payments.  Research into mobile payment trends among restaurants in New York City revealed a grey market where some Chinese takeouts and food trucks used personal Venmo QR codes to accept payments from customers. Receiving QR payment this way was found to be similar to methods used in Chinese mobile applications such as WeChat and Alipay.


Zelle is a competitor to Venmo offered by a consortium of over one hundred banks including Bank of America, Capital One, Citibank, JPMorgan Chase, and Wells Fargo. The service enables individuals to transfer money directly from their bank accounts to another registered user’s bank account. To register, users must have a MasterCard or Visa debit card connected to a U.S. bank account.  Only the recipient’s email address or mobile number is needed to send money.

There are some differences between the two payment systems. Payments made using Zelle cannot be canceled while payments from Venmo can be canceled. Payments from Zelle are usually processed faster and without a fee, but Zelle lacks the social media aspect of Venmo.  While Venmo is more popular, based on public awareness, opinion polling, and number of transfers, Zelle processes a greater dollar volume.


Venmo and Zelle are both unique forms of payment which are growing in popularity. While they are the first popular payment rails to take advantage of a mobile platform, given the near ubiquity of cell phones, they are unlikely to be the last.



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