In case you haven’t already heard, Venmo made some pretty big changes to their fees recently, and it’s bad news for small businesses. As a peer-to-peer payment app, Venmo was never built for small businesses to begin with. Even before all these new fees they introduced, it was a pain in the behind to use—Venmo had the ability to freeze your funds for up to 180 days (or suspend your account altogether!) if it suspected that you were using the platform for business transactions without being previously authorized to do so. And even if you were authorized to operate on Venmo as a business, you had to pay fees (1.9% of each transaction and $0.10 on top of that), which inevitably adds up.
Now, with the recently introduced changes, small business owners are left to scramble and either bite the bullet and pay those fees or urge their customers to make payments with another platform with less than a month to make the switch. Here’s everything you need to know about Venmo’s new changes, what they mean for small businesses, and what you need to do to protect yourself going forward.
1. What changed?
Venmo introduced new fees for sellers of goods and services, starting July 20th. Using their new tagging feature, customers can tag their transactions for “goods and services,” resulting in an automatic 1.9% + $0.10 fee for the seller on those transactions. This can be costly—these fees could add up to hundreds a month. On top of that, Venmo has increased their instant transfer fees from 1% to 1.5%, which is bad news for small businesses who need their money quickly and predictably. And as if that wasn’t enough, as a part of their Purchase Protection Program, if you accept the business transaction through your personal profile, Venmo still has the right to reverse the payment. You’d have to keep extensive documentation of each transaction in order to even try to dispute this—what a nightmare for reconciliation!
2. What this means for you
There are a few questions you need to ask yourself as these changes take place. First, who’s going to pay the fees? Do you cover the increased cost by raising your prices? Do you absorb the extra fees? There aren’t really any good answers to these questions. By increasing your prices, you risk alienating your customers, and by absorbing the cost, you risk impacting your bottom line. In addition, the transfer fee impacts the small businesses that need the money the most. For those who need money immediately to pay their employees and bills on time, this can cause additional financial strain. (One way to increase revenue predictability is by implementing a subscription payment model. Read more about that here.)
Additionally, it’s incredibly difficult to keep documentation on Venmo. Actually, it’s pretty close to impossible. Records get lost after a couple of days, especially if you regularly conduct transactions on the app. You’d have to keep a separate spreadsheet, which is a hassle. Venmo used to be a convenient way for your customers to pay you quickly, but with these new changes, it could very well be negatively impacting your small business. Is it worth it anymore?
3. How to protect your business going forward
You deserve three things from your payment platform: transparent, standardized pricing, a customizable Customer Relationship Manager (CRM), and protection for your transactions.
- Transparent, Standardized Pricing + Transaction Fees
Running a small business is hard enough without having to deal with the bait-and-switch we’re seeing with Venmo. With its sudden fee increases, Venmo has proven itself to be a volatile platform for people to conduct business on.
A good payment platform gives you the security of knowing exactly what you’re going to be paying each month—no guessing games. A good payment platform would also give you the ability to avoid additional fees by offering a free transaction option, like through ACH.
- Customizable Customer Relationship Manager (CRM)
Every small business has different needs, but every single one needs to keep track of their customers and their needs, as well as their transaction history, in an organized and searchable way. You need to be able to keep track of who’s paid and who hasn’t, as well as your customer’s specific needs. Ideally, this would be integrated into your payment platform so you don’t need to waste time piecing together different tools to get the information you need.
- Protection for Small Businesses
You shouldn’t have to worry about chasing down payments or having your customer relationships turn sour because of a payment misunderstanding. You definitely shouldn’t have to worry about having to pull your hair out and dig up documents to justify to your payment platform that you deserve to get paid for a service that you already provided.
The great news is that this platform already exists. Finli was built for small businesses and with their best interests in mind. You’ll never have to worry about sudden price increases or unexpected fees. (Here’s exactly what you’ll pay, depending on the size of your business.) Through Finli’s CRM, you can keep track of all of your customers and their transactions, along with any other information you’d like to file away. You’ll never have to choose between getting paid on time or maintaining your customer relationships. With Finli, you can have it all! Schedule a demo today.