Category Archives: FinTech

Is Venmo Safe To Use As A Seller?

Mobile payments have become increasingly popular for online transactions. One such app that’s gained immense traction worldwide is Venmo. But is Venmo safe to use as a seller? And is it really an ideal payment solution for your business? Given its controversial history, merchants often wonder whether adding Venmo as an acceptable payment method is worth it.

What is Venmo?

Venmo is a peer-to-peer (P2P) payment solution that works on Android and iOS devices and is used by millions to process mobile transactions with simple clicks. Designed primarily to simplify online transactions, Venmo was initially used as the easiest way to transfer money between relatives and friends. In 2021, it introduced commercial features, enabling merchants to accept payments through Venmo. As a result, many merchants added Venmo to their payment methods. This, however, led to an increased security risk for the merchant.

Cyber threats have become a common problem in nearly every digital payment landscape and Venmo is not an exception. Its history doesn’t help either. Fortunately, the company comes with many safety features that a merchant should know to ensure safe transactions. Let’s take a look at its safety features, the possibility of scams that can occur, and some tips for avoiding the scam.

How Does It Work?

Venmo, as mentioned above, is a P2P platform that facilitates money transfers for personal and commercial use. You can download this mobile payment application from Google PlayStore or Apple AppStore, link your credit/debit card or your bank account and start sending/receiving money immediately. Note that for this payment method to work, it’s important that both the recipient and the vendor have a Venmo account.

For the recipient, Venmo works just like other money-exchanging mobile apps. You need to link your bank account. Once you have received the money, it will be held in your Venmo account temporarily. The transaction is reviewed by the team and is then transferred to your linked bank account. You can find the Pay or Request option within the app. Click on it to initiate the transaction. You need to type the name of the recipient, email ID, or phone number to transfer the amount.

The recipient can choose the standard method for transferring Venmo balance to their bank accounts. But that may take anywhere between 1 and 3 business days. Or, they can consider Instant Transfer, which transfers the amount within 30 minutes but incurs a 1.9% fee. The feature is for merchants that need immediate payment transfers to their banks. Remember, the fee can be as high as 25%, depending on the size of your transaction. Moreover, you will be charged an additional flat fee of 0.10% on each transaction.

Setting up Venmo is a straightforward process for those with a PayPal for Business account. It doesn’t incur an additional fee for setup. Buyers can choose PayPal checkout for the payment and then pay through their Venmo account.

Is Venmo Safe To Use As A Seller?

Before integrating Venmo payments into their eCommerce stores, merchants want to know how safe this mobile payment app is. By safety, they mean the security of their confidential information and the entire transaction process. It also covers the chargeback process. Fortunately, the company has introduced Venmo Purchase Protection, which provides merchants with protection against financial losses due to friendly fraud.

It offers financial protection of up to $2,500. However, it doesn’t apply to the payments processed through credit cards. Additionally, the buyer protection program covers tangible goods and not digital products. There are a few things that determine your eligibility for the buyer’s protection. For example:

You must process the transfer within its Android/iOS app
You must buy the goods and services from a verified vendor
The buyer should pay either through their linked bank accounts or debit cards. The balance available in the Venmo account can also be used.

Apart from these, the buyer should try to contact the seller to fix the issue. Know that Venmo has standard and business accounts for different users. For those processing normal transactions, the standard account will suffice. However, it’s advisable to upgrade to a business account if you are considering exchanging money for goods and services rendered. Not only is it secure, but a business account is mandatory for merchants using Venmo on their eCommerce sites.

Common Venmo Scams

Venmo is susceptible to cyber threats, especially for those using its standard account. That said, those with Business accounts are not 100% safe either.

The biggest issue with the app is that the payment is transferred to a Venmo account almost instantly and shows up on your available balance right away. But, it’s left unverified for a few days, making it hard to detect whether the payment has been made by a fraudster using stolen credit card details.

Venmo scams like Mistake Money Transfers, look authentic and harmless but can result in a financial loss for the victim. In this scam, a fraudster transfers money to your account from a stolen credit card and then requests you to refund them. They quickly update their Venmo account with their bank details before you initiate the refund.

When the real cardholder sees an unauthorized transaction from their card, they will issue a chargeback and the amount will be deducted from your account. To avoid such scams, it’s best to not respond to such suspicious messages from random users.

Another common type of scam that’s frequently reported by Venmo users is impersonation. A fraudster can impersonate your friend or colleague and request you to transfer money. They can also trick the user into transferring money to receive the cash prize they have won in some contest. Employee scam is also quite common. You get a phone call from someone claiming to be from the Venmo team. They will request your personal information to save your account or help you in other ways.

Unfortunately, the scam rates on Venmo and other such mobile apps are 3-4 times higher than that on credit cards. That’s why it’s advisable that you transfer the money only to those you know or do it after carefully evaluating their Venmo profile.

Safety Tips for People Using Venmo

Many businesses are relying on mobile payment apps like Venmo to offer convenience to their customers. And while that is a great strategy to bring more customers to your store, these P2P apps are associated with an increased risk of cyber threats. Knowing the common scams will help you follow the right ways to prevent financial loss due to Venmo scams. Here are some safety tips for Venmo users.

Use a Strong Password

It’s a no-brainer. When a hacker tries to get access to your accounts, they’d do it by hacking your password. Brute-force attacks are on the rise these days. Someone can use bots to use a combination of passwords and usernames to access your Venmo account.

The first step to ensure protection against such scams is by using a strong password, which is at least 8 characters and a combination of uppercase and lowercase letters, with numbers and special characters. Never use Social Security Number, name, phone number, address, and other personal details as passwords. They are easy to crack.

Send Money to Verified Users Only

You might think you are safe because you have a business account on Venmo. The company does offer additional security features to merchants, but they are still at risk of fraudulent activities. Before sending money, check whether the account is verified. Also, ask the seller to validate their identity before processing the transaction.

Use Two-Factor Authentication for Higher Security

Two-factor authentication requires the user to type the code sent to their registered mobile number or email to get access to their Venmo account. It increases the security of your payment app, as no one except the registered user can access their accounts. With the 2FA enabled, you don’t have to worry about compromised passwords, as the hacker won’t get your Venmo account until they cross the second layer of authentication.

Use Credit Cards

Linking debit cards to your Venmo is comparatively unsafer than credit cards. The latter is not linked to your bank accounts, thus offering a greater level of security. Even if fraud occurs, you will have time to issue a chargeback request and reverse the transaction if it was processed through your credit card.

Set Email Alerts

Another protection for your Venmo account is email and text alerts. Setting up text alerts would allow you to receive notifications for every transaction, including the payment sent and received. You also get a notification for login activity. Getting these alerts will help you identify fraudulent transactions and take action immediately.

Conclusion

Merchants should weigh the pros and cons of the payment methods before integrating them with their eCommerce sites. Finding the right balance between your convenience and security is crucial to ensuring safety for transactions. Venmo does offer security features for merchants concerned about transaction security, but you must be aware of the common transaction scams on Venmo to avoid becoming the victim of such fraud.

What is Buy Now Pay Later?

Have you ever bought something expensive and paid for it in installments instead of paying a lump sum? That is called “Buy Now Pay Later”. It’s a marketing scheme, in which retailers allow their customers to buy the product and pay for it over time.

It’s a perfect way to break up your spending and pay for your stuff gradually, which is much better for your cash flow than paying hundreds of dollars in cash for a single-item purchase. While it’s a smart and cost-effective way to pay for your purchases, it is still a form of debt that comes with risk. We’ve explained the BNPL scheme in detail below. Let’s see what it is and how it works.

What Is Buy Now, Pay Later?

It’s an installment loan where the payment for your purchases is divided into equal installments that are to be paid over a specific period. The first amount is paid at the checkout, which is equal to the remaining installments.

The rest of them are deducted from your credit/debit card or bank account automatically at predetermined intervals until the amount for your purchase is paid in full. Most of these plans are interest-free, but depending on the card company and the type of purchase, some of them might include a fee and an interest.

Affirm, PayPal, Sezzle, Afterpay, and Zip are a few popular companies that support the buy now pay later scheme. These installment loans are super convenient and flexible for the customer. It’s highly rewarding for the seller at the same time.

Buying a luxurious item without having to pay the full amount at checkout is quite appealing to shoppers. And with more and more stores adopting this growing trend, shoppers can buy different things and pay for them when it seems convenient.

Buy Now, Pay Later: How Does It Work?

First thing first, you need to confirm with the store owner whether they accept the buy now, pay later payment method. If yes, you will be asked to break your payment into several installments. Instead of paying the full balance immediately, you can clear your dues over time. You will find details regarding the scheme on the checkout screen.

Mostly, it requires your details, like your name, address, preferred payment method, Social Security number, mobile number, date of birth, and other details. The company will conduct a soft credit check to determine your credit score.

Based on the information and your chosen payment option, the company will either accept or decline your request. The selection criteria for this payment scheme may vary by provider, but it usually requires your details. Your credit score may or may not impact your eligibility for this installment loan. Even people with low or no credit history get approved for “buy now, pay later”.

The payment duration also varies from one provider to another, but a majority of them follow the pay-in-four method, where your payments are divided into four equal installments and each installment is paid every two weeks, thus clearing your dues in two months. For instance, if you purchase an item worth $200 through the buy now pay later scheme, your payment will be divided into four installments of $50 each. Your first installment is due immediately, meaning you have to pay $50 at checkout and the rest of them in a period of six weeks.

These payments are interest-free, but if it’s a larger amount, the company may extend your duration to a year or longer and charge interest. The fee for delayed or rescheduled payments can be between $1 and $15. Or, it can be capped at 20-30 percent of the item’s value.

What sets the buy now pay later scheme apart from traditional credit card payments is the APR. if you pay through a credit card, you will incur interest, which is around 3.5% and higher. Even if you have subscribed to a credit card with 0% APR, you will pay interest at some point. That’s one of the many benefits of buying things using the Buy Now Pay Later system.

BNPL requires an autopay system, in which the payment is deducted on the due date automatically from your cards, bank accounts, and other payment methods. Before we proceed, note that not all purchases are approved for the BNPL scheme.

Impact of Buy Now Pay Later on Your Credit Score

Buy Now Pay Later companies perform a soft credit check to ensure that the customer requesting payment through this system is in good financial standing and is credible. Although your credit score doesn’t have much to do with your eligibility for BNPL, some companies may set a desired score below which the installment request is rejected.

The soft credit score check won’t affect your credit score, but they might conduct a hard inquiry, which can deduct a few points from your credit report temporarily. BNPL loans are reported at credit bureaus and they do affect your credit score. Paying the installments on time and in full won’t affect your credit score, but rescheduling the payments can incur late payment fees and may knock some points off your score.

Pros and Cons of Buy Now Pay Later

Pros

You can split up a huge amount into four installments, which can be paid over two-three weeks. This relieves your burden of paying a lump sum for an expensive item.
It’s easy to apply for the BNPL payment method. Since the scheme doesn’t involve a hard pull, people who do not have a good credit profile will also be eligible for this installment loan.
No hard inquiry is conducted, so you don’t have to worry about the points getting reduced from your credit score.
It’s super simple. Whether you are shopping online or at the store, BNPL is a fairly straightforward procedure. You just need to give details as requested and you are good to go!
No interest. Unlike credit cards and business loans, the BNPL payment plan does not involve interest or fees. You can buy whatever you like and pay for it gradually.
Good for your Cash Flow. Paying the amount in installments is certainly much better than paying a lump sum, especially when it doesn’t carry any interest.
Easily available. Buy Now Pay Later has become a common trend and is accepted by a vast majority of retailers. It’s no longer confined to the luxurious stores that sell expensive stuff.

Cons

It can be expensive. While BNPL systems are interest-free, they can charge a sky-high fee if you delay the payment or may incur interest after a few weeks. It’s important to go over the terms of your installment loan before signing up for it.
A fixed fee. Some BNPL schemes might add a specific fee to your monthly installments, which can make the product more expensive than if you paid the full amount right away.
Results in overspending. Oftentimes, the high price of a product keeps people from spending too much on an item. But with the buy now pay later scheme, people are tempted to buy a lot of expensive stuff. It doesn’t deduct the payment but gives you more time to clear the amount. At the end of the day, you are overspending on things you would have otherwise avoided.

Alternatives to BNPL

As you can see, the buy now pay later is an excellent payment option for businesses, but it carries some risk. Some companies may consider your credit score or credit history before granting you this installment loan, while others may have a fixed fee or an interest that can make the product more expensive than if you paid the full amount during checkout. In addition to that, BNPL may not work for all purchases. If this method doesn’t seem suitable, here’s what else you can try.

Credit Card with 0% APR: You can apply for a new credit card, which has 0% introductory APR. This might last from 15 months to 21 months, depending on the credit card company you choose. In addition, these cards offer a welcome bonus, which can get you cashback and other rewards.
Personal Loans: If you want more time to pay for your purchases, small personal loans could be an ideal choice. Of course, a loan comes with an interest rate, but if you are buying something ridiculously expensive and need considerable time to clear the payment, a personal loan is your best bet.

Bottom Line

Buy Now Pay Later is surely a smart way of paying for an expensive purchase over a longer period. Not only helps you maintain your cash flow, but it allows you to buy things you’d have otherwise not bought. But just like credit cards and loans, buy now pay later comes with its share of drawbacks you must be aware of. It makes sense for people that can pay the installments on time. Check with the BNPL company to learn more about the payment scheme, total installments, the duration over which you can pay, and other terms.

What Is MRR and How to Calculate It?

Most business owners know what a gross margin is. It’s the percentage of revenue that your company doesn’t have to pay out in expenses before it actually makes a profit. However, you might not be aware that there is another important indicator closely related to gross margin called MRR or Monthly Recurring Revenue . In this article I will define MRR and show you how to calculate it.

MRR vs Gross Margin

Let’s start by comparing MRR and gross margin. While both of them are closely related, there is a key difference between these two indicators: the way they’re calculated. The gross margin simply represents the percentage of revenue that your company doesn’t have to pay out in expenses, while MRR measures the amount of revenue that is recurring each month.

The reason why MRR is so important is because it can give you a better idea of your company’s long-term stability. A high gross margin might look good on paper, but if most of your sales are one-time transactions, then your company is less likely to be profitable in the long run.

MRR Calculation – The Basic Formula

The calculation for MRR is quite simple. It combines three factors: your monthly recurring revenue, the average unit economics of each customer (or client) and how many clients you’re actively servicing (also known as your churn rate). If you’re not sure how to calculate any of these factors, don’t worry, I’ll go over them in more detail later in this article.

For now, let’s use a hypothetical example to see how MRR is calculated. Say your company sells a software product that costs $100 per month. You have 100 customers and each of them pays you $100 per month. Do some simple math and you’ll get your MRR – 100 x 100 = 10,000 .

However, this figure is a bit misleading because it doesn’t take into account that 20 clients have canceled their subscriptions in the last month (i.e., your churn rate is actually 20%). Therefore, if we factor this in, we get 100 x 100 – 20 = 8080 .

Calculating MRR Using the Average Client Economics Formula

The average client economics formula is a more accurate way of calculating your company’s MRR. It takes into account the fact that not every customer is equal and some bring in much more profit than others.

If you’re not sure how to calculate your average client economics, the table below should help.

Number of customers x Average revenue per customer = Average Client Economics

Let’s take another look at our previous example. This time we will use the more accurate formula for calculating MRR: 100 x $100 = 10000 . But this figure is misleading because ten of your customers generate twice as much revenue (i.e., they have an average client economics of $200). So, if we factor in this information, we get 100 x $100 – 10 = 9000 .

Calculating MRR Using the Churn Rate Formula

The last way to calculate MRR is by using your churn rate. This is the percentage of your customers who cancel their subscriptions each month.

If we go back to our previous example, and say that your churn rate is actually 20%, then we would calculate MRR as follows: 100 x $100 – (20% of 100) = 8000 .

MRR vs Annual Revenue

Now that we know how to calculate MRR, let’s take a look at how it compares to annual revenue.

Annual revenue is simply the total amount of revenue your company generates in a year. To calculate it, you simply multiply your monthly recurring revenue by 12 (or 13 if you include January, which is typically a slow month for most businesses).

Using our previous example, if we multiply 10,000 by 12 we get 120,000 , which is the annual revenue generated by our software product.

Now let’s compare this figure to our company’s annual revenue. If we look at our hypothetical company’s balance sheet, we can see that their annual revenue is actually 150,000 .

If we divide 150,000 by 120,000 , we get the answer 1.25 which means that our software company is generating 25% more revenue per year than they are monthly recurring revenue.