Peer-to-peer payment app Venmo has long told users not to use the service to pay strangers for goods or services. That appears to be changing. The service has quietly added a feature it’s calling the “Venmo Purchase Program.” For a hefty, optional 3% non-refundable fee, which can be added on a per-transaction basis, Venmo says it will step in if users don’t get the item they purchased or it’s “a lot different” than the seller described.
Don’t confuse Venmo’s purchase program with the credit-card style transaction dispute process, which is free to cardholders. Instead, it operates more like one-time insurance, such as the option travelers get purchase when they buy plane tickets. Venmo says it will investigate buyer/seller disagreements if informed within 30 days of a payment and it will “work directly with the seller to get your money back for eligible items.” Venmo’s decision after a dispute is final. The 3% fee is non-refundable, even if a buyer loses a dispute.
When I tested the option on Sunday, it was offered for all transactions $50 and above. A blog post explaining the feature was last updated two days ago on Venmo’s site.
“Examples of items that may be covered: You bought dress shoes, but ended up getting sneakers; you bought an authentic handbag, but got a knock-off; you paid for a massage, but the masseuse didn’t show up,” Venmo says there.
Earliest mention of the feature seems to be in late March, but Venmo hasn’t done much to publicize it. There’s only a handful of references to the option online so far. Venmo didn’t immediately respond to a request for additional information it.
Venmo’s warning against using its service for purchases is still posted elsewhere on the site. Venmo’s help page, also updated two days ago, still includes this warning, which now includes qualifiers suggesting the purchase protection program is only offered under certain circumstances.
“Unless directly given the option by Venmo, DO NOT USE VENMO TO TRANSACT WITH PEOPLE YOU DON’T PERSONALLY KNOW, ESPECIALLY IF THE TRANSACTION INVOLVES THE PURCHASE OR SALE OF A GOOD OR SERVICE (for example, concert tickets, electronic equipment, sneakers, a watch, or other merchandise). These transactions are potentially high risk, are not allowed under Venmo’s User Agreement, and Venmo does not have a protection program for such transactions unless directly offered,” it reads. “So … If you send a Venmo payment to someone for a good or service, you could lose your money without ever getting what you paid for.”
The new feature comes as rival Zelle, operated by the nation’s largest banks, continues to grab market share. Zelle says it processed $187 billion in transactions during 2019, more than $50 billion in the last quarter of 2019. Venmo processes about half that volume, and is not profitable.
But Zelle continues to be dogged by complaints about fraud; my email inbox is still full of consumers hit by fraud who didn’t even realize they had Zelle accounts. Fraud protection services might be a competitive advantage for Venmo.
Venmo’s new service comes with plenty of fine print. Only certain kinds of transactions are covered. Refunds won’t include shipping, and consumers may be required to mail unsatisfactory items during the process. Venmo’s decisions can be appealed, but the firm also makes decisions on appeals.
“Only Venmo can determine if you are entitled to a refund of the purchase price. Our decision is considered final, but you can appeal this decision if you have new or compelling information that wasn’t available during our decision-making process or if you believe we made an error during the process. The service fee is non-refundable,” the service policy says.
A long list of exluded items include: “Real estate, including residential property; financial products or investments of any kind; and “when you buy or invest in a business.”
The full policy can be viewed here.