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Personal Finance

How to Avoid Venmo Scams

Updated Feb 15, 2019   |   5-min read

In the eight years since its founding, Venmo has become a powerhouse brand in the peer-to-peer payments space. It has reached Google-like status as its own verb – “Hey, can I Venmo your money?” That’s because Venmo’s reputation and its customer base has been built on the slickness of the safe, fast, and easy transfer of money between friends and family. However, it’s that bedrock reputation that has also led some of its users to fall prey to scammers exploiting the flaws in both the Venmo payments process and human nature. So, is Venmo safe for users?

Venmo’s Staggering Growth Invites Fraudsters

Venmo was founded in 2009 by a pair of college students who grew tired with the hassles of paying friends and family, so they created an app to do it digitally. It was first acquired by Braintree, an online payments platform, which was later acquired by payments giant PayPal in 2013. Operating as a separate business unit of PayPal, Venmo went on to process $2.4 billion in payments in 2014. That grew to nearly $17 billion in 2016, and in the first quarter of 2017, Venmo processed nearly $7 billion in payments.

Venmo’s growth has been staggering to say the least. But with such growth, especially in the area of electronic payments, comes the opportunity for fraud, and Venmo has attracted its fair share of fraudsters. The victims of these scams have lost hundreds of thousands of dollars with no recourse. That means Venmo users lose while the scammers get away scot-free. Here’s how the typical Venmo scam works:

The Anatomy of a Venmo Scam

You have tickets to a sold out concert to sell, so you post an ad on Craigslist. You are asking $2,000 for two stage section seats which quickly attracts a buyer. The buyer wants them badly and is willing to get you payment right away by using Venmo. You are a Venmo user, so you know how quick and safe it is to receive money that way. The buyer asks if he can transfer $1,000 today and the remaining balance the next day. Understanding the send and receive limits of Venmo, you agree to the terms of the transaction.

Within a few minutes, you receive an alert from Venmo that you have received money. You cash out to have the money transferred to your bank account. The next day, you check your bank account and it shows a deposit of $1,000. Then you receive another alert that another $1,000 has been received, so you think that everything is settled. You then email the concert tickets to the buyer to complete the transaction. However, everything is not settled.

You check your bank account that night, and there is no second deposit. You check again the next day and the day after that, and it’s still not there. You contact Venmo customer service, but you can’t get a hold of a live person. You send a request for help by email and Twitter. When you finally get an email response, you are told by Venmo that the second $1,000 transfer was reversed by the sender, so there was no money to deposit into your account.

You didn’t know it, and you couldn’t possibly have known it, but you were fleeced by a Venmo scammer. What the scammer knew that you didn’t is there are serious flaws in the Venmo money transfer process. As a loyal Venmo user, you might assume that when Venmo sends you an alert, the money has been received. However, it hasn’t. What Venmo scammers know is there are several layers to the Venmo payments process that allows for payments to be reversed after they have been sent.

What Scammers Know that You Don’t Know

You would have never thought that possible because whenever you send a payment, Venmo warns you it cannot be cancelled. But Venmo scammers know that payments can be reversed if they dispute it. So the scammer makes you think everything is okay once the first payment is made. Then he or she capitalizes on your complacency and the flaw in the process with the second payment. If you think you can go to the concert to find your scammer, don’t bother. They probably turned right around and sold the tickets for a thousand-dollar profit.

Don’t Look to Venmo for Help

Thus far, Venmo has taken the position that its users are responsible for losses that occur through “business” transactions. It states in its terms of use that Venmo is only to be used for “payments between friends and people who trust each other.” Venmo goes on to state that there is “no buyer or seller protection.”

You are the First and Last Line of Defense When it Comes to Venmo Scams

The only real defense against Venmo scammers is to use the payment app for the purpose it was designed – as a P2P payment service between friends and family. Although Venmo does offer a merchant’s version that allows for business transactions, you have to be approved for its use. At any rate, your suspicion and cynicism might be the first and last line of defense against venmo scammers.