Venmo PayPal friends paying each other virtually.

Venmo Vs. PayPal: What’s The Difference?

Scott Steinberg4-minute read
October 03, 2020

Venmo and PayPal rank among today’s most popular digital payment services and, like many cutting-edge financial technology (fintech) services, have quickly become a staple of modern-day life. Millions of individual and business users employ one or both of these solutions to send, receive, or transfer money on-demand via myriad high-tech devices such as smartphones, tablets and personal computers.

PayPal is over 20 years old and was originally built to power online shopping and eCommerce, e.g. purchases made via the web or popular internet retailers. Venmo was founded roughly a decade ago and was created to make it simpler for mobile device owners to send each other money right from their handsets. Both make sense to keep on your radar. However, each boasts its own specific features and upsides to consider when picking the one that makes the most sense for you.

Is Venmo Owned By Paypal?

Venmo was purchased by PayPal in 2013. However, Venmo serves a smaller-scale audience than PayPal, as it’s only available to users in the United States at this time, and PayPal is available in over 200 countries. Venmo is also built to be more of a mobile-first application, having been designed for small-scale transfers of money between everyday end-users, e.g. friends splitting the check at dinner.

Key Differences Between Venmo And PayPal

Both Venmo and PayPal serve as digital wallets – online services that connect to bank accounts, credit cards and similar financial instruments, and allow you to receive funds or make purchases electronically. Each allow you to securely store passwords and account information for myriad real-world payment methods.

Regardless of whether you choose to use Venmo or PayPal, both services make it easy to send money between accounts and users. PayPal is primarily intended to act as a payment solution for online purchases, while Venmo largely aims to offer end-users a fast, simple, social way to quickly send money between two individual account holders. Payments and transfers made using either of these services (made online or via dedicated smartphone apps) draw upon funds from a connected account that the user has selected.

Business Vs. Personal Use

Venmo is primarily promoted for individual use, such as splitting a bar tab with friends or utility bill with roommates, letting you quick pay (or pay back) other everyday users. Although PayPal can also be used for individual purposes such as these, it’s primarily marketed as a means to make purchases online, or process business transactions. PayPal is therefore a natural fit for online retailers or merchants, especially given its far-reaching buyer and fraud protection services. Venmo is a likelier candidate if you’re simply looking to transfer funds (especially relatively small amounts) between two people. 

Security And Protection

Both services have comprehensive security measures in place to protect personal, bank and credit card information that incorporate common measures such as password protection and data encryption into their defenses. However, while Venmo requires account registration, it doesn’t offer similar levels of buyer or seller protection as PayPal, making it extra important you double-check and make sure that you’re sending money to the right user and account.

In all cases, it pays to monitor your bank and credit card accounts, including registering to receive alerts about new transactions. If you suspect fraudulent activity, it’s important to report it to both payment services and your bank or credit provider immediately.

Transaction Fees

While Venmo and PayPal are free to sign up for and utilize, charges apply for various transactions. For example, PayPal charges 2.9% of any transaction plus 30 cents/transaction for credit card and debit card purchases. Likewise, Venmo charges 3% for the use of credit cards, although bank transfers are free. Venmo also applies small charges for different types of withdrawals, e.g. instant electronic or ATM.

Transaction Size Restrictions

Given the service’s frequent employment for business use and transactions with online merchants, verified PayPal users are limited to transactions under $10,000. Unverified users are limited to $500 in transfers or withdrawals.

Venmo users, who typically employ the service to send money amongst friends (although a limited number of businesses now accept it), are subject to a $299.99 total limit on payments and purchases every week. This cap on transactions is raised to $4,999.99 per transaction (monies able to be sent to another user) and $6,999.99 total weekly transactions once the Venmo user has verified their identity by providing their social security number and other details. Likewise, the Venmo limit per transaction is raised to $2,999.99 per transaction for authorized merchants.

Speed Of Money Transfer

Venmo and PayPal’s speeds are relatively comparable. Both can process instant transfers for an additional fee, although standard transfers made via a card or bank account are typically available in minutes, or the next business day. PayPal may require up to two business days to process some transactions.

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Can Direct Transfers Be Completed Between Venmo And Paypal?

Venmo and PayPal are two distinct payment platforms and cannot directly transfer funds to one another. Nonetheless, you can get around these hurdles simply by transferring money to another shared location, such as a bank account that is connected to both services, and then depositing it into the other service from there. For example: You might withdraw funds from PayPal to your checking account, then transfer them from this account to Venmo.

Which Is Better For You?

The type of transaction you intend to make can often help you determine which solution to use here. PayPal is often a preferred choice for businesses, online vendors and anyone looking to make purchases on the Internet. Venmo is typically a top pick for everyday end-users simply looking to split a check or bill.

If you’re a small business owner looking for an easy and secure way to complete transactions, PayPal may be your best bet. Similarly, if you’re an individual user simply looking to pay back a friend, Venmo may prove the better option instead.

The Bottom Line

Both Venmo and PayPal represent top picks for those seeking a safe and convenient digital payment solution. But both offer unique pros and cons and are geared toward different types of users and transactions. What’s more, a variety of added features – e.g. Venmo’s social network-like ability for users to share what they’re spending money on, from clothes to sushi rolls – also give both services their own sense of personality. A little research, and time spent trying out both options, can help you decide which service is right for you.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. He’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD.