How does Venmo operate from a technical perspective?
Payments
Asked by Question Bot05/Jul/20171 answer
1 Answer
F
Faisal Khan
Answered 05/Jul/2017
Venmo is no different from any other e-money (stored-value) wallet like PayPal (See this answer for a more thorough understanding of how a wallet/PayPal works: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ ๐๐ฅ๐๐๐ฌ๐ ๐๐๐ฅ๐ฅ PayPal ๐๐จ๐ฅ๐ฅ ๐
๐ซ๐๐ ๐๐ฎ๐ฉ๐ฉ๐จ๐ซ๐ญ ๐๐ฎ๐ฆ๐๐๐ซ โ+โถโบโฝโบโปโโนโผโบโบโทโบโบโบ โ?)
At the heart of Venmo there are three components:
1. Payout (Charge) - where you register your Debit/Credit Card
2. Wallet (where money is held)
3. PayIn (Receive) - where you register your Bank account so deposits can be made to your account.
You load (well not load per se) and pay money using your checking or debit cards, and if a credit card is used to charge, the appropriate MDR would be applicable. This also means, Venmo technically is in the acquiring business, as it is processing your CC charge.
Money in transit (not deposited into an account) is where the wallet comes in. The balances are reflected in the wallet and basically Venmo is holding on to that money in its escrow account.
Payout, are ACH transfers from Wallet balances to your bank account. Pretty simple there.
Debit card charges or loads qualify Venmo for interchange from the issuing bank.
Technically, Venmo works like a virtual bank bank branch and is the custodian of funds between the load and the deposit layer. The payments across Venmo users are just localized ledger adjustments, and everything itself is an IOU for bank settlement (PayIn/Receive).
What Venmo has done is essentially wrapped the accounting layer very well. The user experience is uber-smooth to make money transfer between contact (for example no searching through emails as with PayPal), splitting bills and sending small text messages with payments, much easier.
At the heart of Venmo there are three components:
1. Payout (Charge) - where you register your Debit/Credit Card
2. Wallet (where money is held)
3. PayIn (Receive) - where you register your Bank account so deposits can be made to your account.
You load (well not load per se) and pay money using your checking or debit cards, and if a credit card is used to charge, the appropriate MDR would be applicable. This also means, Venmo technically is in the acquiring business, as it is processing your CC charge.
Money in transit (not deposited into an account) is where the wallet comes in. The balances are reflected in the wallet and basically Venmo is holding on to that money in its escrow account.
Payout, are ACH transfers from Wallet balances to your bank account. Pretty simple there.
Debit card charges or loads qualify Venmo for interchange from the issuing bank.
Technically, Venmo works like a virtual bank bank branch and is the custodian of funds between the load and the deposit layer. The payments across Venmo users are just localized ledger adjustments, and everything itself is an IOU for bank settlement (PayIn/Receive).
What Venmo has done is essentially wrapped the accounting layer very well. The user experience is uber-smooth to make money transfer between contact (for example no searching through emails as with PayPal), splitting bills and sending small text messages with payments, much easier.