Although today’s point of sale (POS) systems have made it easy for all types and sizes of businesses to accept credit cards, there might be times when you or your customer prefer to go a different route. Third-party iOS and Android payment applications like Venmo and Zelle seem, at least on the surface, to be perfect avenues for quick and easy purchases that can happen even when a shopper doesn’t have their wallet on hand. Dig a little deeper, however, and you will discover why these apps may not be such a good idea after all.
Venmo and Zelle in a nutshell.
Known as peer-to-peer (P2P) solutions, these apps are installed onto an Apple or Android device and are then connected to the user’s credit card or bank account. Once this happens, payments can be either requested from (or sent to), anyone else on the network, including people who are not even on the user’s direct contact list. These apps provide a fast and free way to exchange funds between individuals.
Using Venmo and Zelle for business payments: The real truth.
Considering that everyone has a mobile phone and most people carry it with them at all times, what could possibly be wrong with using a handheld device to submit a payment to you for goods or services? It’s not that the phone itself is the problem; the sticking point lies in the nature of the applications themselves. Take the following factors into consideration.
- In terms of Venmo, you are technically prohibited from using its free personal payments platform for business purposes. Although Venmo does have a separate business app, they currently charge a non-refundable 1.9% plus $0.10 fee per transaction. Furthermore, Venmo for Business cannot integrate with most other popular business tools and has no ability to accept gratuities.
- For Zelle, both you and your customer must be affiliated with a bank or credit union that offers the service. Additionally, you will need to be enrolled through your business account’s mobile banking app.
- Peer-to-peer Zelle and Venmo are not built for business use. Therefore, even if you decide to risk violating the apps’ policies and accept customer payments through the P2P app, you will soon discover that you will not have access to important merchant reporting tools that allow you to keep track of tax information and easily create monthly reports. As the extra work piles up, you may begin to make costly mistakes that your business cannot afford.
- Especially with Venmo, there are privacy issues. Unless customers know to set their transaction with you as private, notifications about it will be sent to their entire Venmo contact network.
- Concerns about customer protection. Once a Venmo or Zelle payment is sent, it is difficult if not impossible to get it back. A customer who manually enters your contact details may, for instance, inadvertently mistype and end up sending their payment to someone else entirely. Particularly with Venmo, there is no way to get that money back. Although the mistake was made by the shopper and not you, it is sure to leave a very bad taste in their mouth that will likely tarnish your relationship.
- Potential big problems with the IRS. No one wants Uncle Sam to come and take a deep interest in their business’s books. Avoiding an audit at all costs seems to be a great idea for almost everyone. Unfortunately, the IRS has recognized that businesses are receiving large payments they are not paying their fair share of taxes on. To address this, the feds will be taxing all transactions over $600 and will be sending all P2P app users a 1099-K form each year that outlines every transaction that was made.
Have we convinced you yet that using Venmo and Zelle for business transactions isn’t as smooth and easy a way to accept credit cards as you may have thought? If your answer is yes, you may be wondering if there is another option that will allow your customers to use their mobile devices to make fast and easy payments.
In short, you can. Your merchant account provider or payment services representative can help you update your current point of sale system to accept contactless payments. This technology allows buyers to simply place their device near your contactless reader to initiate and authorize a transaction.
Security remains high because all details are properly encrypted and tokenized, from the time they are stored in the customer’s digital wallet on their phone, until they are transmitted to the various players in the payment process. When all is said and done, your guest can cash out safely and quickly at a low per-transaction cost that you can afford. Best of all, your contactless POS solution should integrate with your other tools to allow you to take advantage of the array of reporting, inventory, customer relationships, and sales forecasting features that can streamline your entire operations.
Apps like Venmo and Zelle are perfect if you are splitting the cost of a pizza among friends. However, the stakes are much higher when you are providing services to your valued customer base. Leave the P2Ps to their intended purpose, and you and your customers will likely be happier in the long run.
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