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There are a lot of cash-sharing services out there that are specifically designed to be used between friends and family, as a way to split the bill without ever exchanging paper money.
The most popular payment apps include Venmo, Google Wallet, Snapcash, and a handful of bank P2P services. These are a little different from ecommerce apps like PayPal, which are typically used for more goods-and-services types of transactions that take place between a seller and a buyer, rather than among friends. In reality, many of these payment apps can do both, but for our purposes, we’ll focus on the former.
Venmo, a subsidiary of PayPal, has emerged as the most popular payment app – by a long shot – with reportedly $20 billion transferred between users in 2016. It’s been called the “social media” of money exchange.
That said, as a person who has tried Venmo as well as other payment apps, I’m here to make the case for Facebook Payments. Hear me out:
First, a knock against Venmo.
When you use Venmo, you’re not actually sending money from your bank or credit card to your friend. In a normal Venmo transaction, the money is removed from your bank but remains in their Venmo account until they manually move it over into their bank or onto a credit card.
This means for those who forget to move the money over, it’s as if that person never received the money at all. You have to manually remember to transfer your Venmo funds to your bank.
This is especially problematic for people like me, who only use the app occasionally, and might not check their Venmo balance for weeks at a time. For example, when I opened my Venmo app in preparation for writing this story, I found that I had $68.18 sitting in my account, built up from various outings with friends.
I’ll admit the experience of finding unexpected money was nice, but not having any kind of direction or reminder from Venmo to transfer my money, and having it just sit there for weeks, is far from ideal.
Meanwhile, Facebook Payments allows for instant and direct money transfers with no middle man.
Facebook Payments were introduced in 2015 as part of the “Messenger” app, and rely on the convenience factor – assuming most people already have the Messenger app downloaded – to quickly split a bill or pay back a friend.
Using the payments feature in Facebook Messenger does not use an online wallet or vault like Venmo does; all of the money you transfer goes directly to the recipient’s bank account or card that they’ve attached to their Facebook account.
There are no extra steps or fees to have the money placed directly in the recipient’s possession, just as if you had physically handed them cash.
While both Venmo and Facebook Messenger are technically “free” to use, Venmo charges fees for some of its most basic functions.
Because Venmo doesn’t sell ad space, it relies on fees to make revenue.
There’s a 3% fee on credit card transactions, similar to PayPal’s 2.9% general transaction fee, and Venmo charges $0.25 just to instantly transfer the money from the app to your bank account.
Alternatively, Facebook has no need to make money off of its cash-exchange feature, so it doesn’t have any fees.
Facebook has all sorts of ways to make money, from selling anonymized user data to selling highly targeted ad space, so it doesn’t need to charge any fees for its cash services or bank transfers. The motivation for providing the feature is simply to drive user engagement with Facebook Messenger, according to TechCrunch.
Admittedly, one of the ways it avoids fees is by not accepting credit cards altogether.
“Wait, but what if I don’t trust Facebook with my bank or credit card information?”
- REUTERS/Dado Ruvic
Apps like Venmo and Facebook Messenger both employ bank-level security tools, including multiple layers of identity verification and encryption, to protect your payment information.
It is tempting to assume money-focussed apps like Venmo and PayPal have better security policies and technology in place, but in reality, since Venmo is a known source of personal and financial information, your Venmo account might be a more likely target by someone looking to drain your bank account or max out your credit card as opposed to your Facebook account.
To be clear, Venmo has faced its fair share of privacy issues, and there have been reports of users having difficulties with customer services when there have been issues with their accounts. That said, Facebook’s security technology isn’t exactly iron-clad either. In general, you should be safe with either platform, but you might be more likely to check Facebook Messenger for other reasons not related to payments, in case there are any issues with your account.
Correction: An earlier version of this story stated Venmo had suffered “multiple data breaches” in the past, which is incorrect. Venmo was the target of a years-long FTC investigation that ended in February 2018, where the FTC said Venmo failed to inform customers when their login information had been changed, which led to unauthorized users being able to “hack” accounts and withdraw funds, but this is not the same thing as a data breach. We apologize for the error.
Obviously, this is not a deciding factor, but I would be remiss if I failed to mention: Whenever you make a transfer through Facebook Payments, the app makes it rain money.
Yes, it drops a single dollar bill for every dollar that you transferred. So if you receive $20 from a friend, 20 animated bills will fall when you open the message.
The best part, though, is that as the cartoon bills flap and sway in the cyber wind, so you can catch them with your finger and swipe up to throw them back up to the top of the screen and watch them fall again.
The cute in-app animation probably shouldn’t be the main reason you switch from Venmo, but it can definitely be one of the reasons.
If you’re interested in trying payments on Facebook Messenger, you can set it up by opening a private conversation, and clicking the dollar sign button above the keyboard. After entering your payment info one time, you’ll be able to send or request money from friends with just your pin number.
Recently, Facebook has introduced a few neat additions to the basic cash transfers, including “Group Payments” so your squad can all pitch in right there in the group chat.
A full list of Facebook Messenger Payments capabilities and policies are available through Facebook’s Help Centre.