Venmo: A Forgotten Wallet, a Public Money Feed and $7 Debt Collectors

Got something to say to this podcast? Send a voicemail, and you might hear yourself on the next episode!

Venmo began with two University of Pennsylvania freshman roommates, Andrew Kortina and Iqram Magdon-Ismail. After helping a friend open a yogurt shop and seeing slow point-of-sale systems up close, they hit the breaking point when Magdon-Ismail visited Kortina for a weekend without his wallet. Their first prototype ran entirely on SMS text messages, and the name joined the Latin vendere, to sell, with mo for mobile. Because moving money by text sat in a regulatory gray area in 2010, they hired the Philadelphia law firm Morgan Lewis to work through state money transmitter rules. After the Haiti earthquake they processed $300,000 in donations for the New Life Children's Home, which helped secure a $1.2 million seed round. Braintree bought the company for $26.2 million in 2012, and PayPal bought Braintree for $800 million about a year later.

By 2021 Venmo processed $230 billion in volume and earned $850 million, largely from a 1% instant transfer fee capped at $10 and a 3% fee on credit card funding. Its defining feature was a public feed that broadcast every transaction by default. The FTC's 2018 settlement found the app misled users about privacy controls and ordered third-party privacy audits every two years for a decade. Researchers scraped hundreds of millions of public transactions, Mozilla and the Electronic Frontier Foundation asked for private defaults, and in May 2021 a news organization found the sitting U.S. president's account in under 10 minutes. Fraud cost the company $40 million in operating losses in the first quarter of 2018, and a 2021 CFPB probe examined its debt collection practices.

• A University of Washington study noted a user could send a single penny just to buy the right to post publicly on the feed.
• Accounts start with a sending limit around $300 and rise to $60,000 in a rolling seven-day period after identity verification.
• New York food trucks and restaurants taped personal Venmo QR codes to registers to avoid 3% card merchant fees.
• When accounts went negative, the company seized funds from users' separate PayPal accounts and threatened collectors over balances as low as $7.
• A 2022 University of Southern California study found two in five users leaked phone numbers, passwords or addresses in payment notes.