- “Virtual parking lot” lets funds sit, allowing taxpayers to smear lines on assets
- Social media aspect publicizes transactions and prevents privacy
- E-commerce lifeline: Venmo leads the way for new virtual economy
No one could have predicted the 2020 COVID-19 outbreak. In 2009, the year popular mobile payment service Venmo was born, no one could have predicted that, a decade later, this little app would become both the biggest protagonist and antagonist of a global pandemic.
A Virtual Villain?
For starters, Venmo is something of a hybrid between mobile banking and social media. With features that allow for direct payments and transfers to one’s bank account, it’s something beyond the typical social media platform. But with a privacy policy lower than “bank-grade security” and the ability to follow your friends’ transactions, Venmo is hardly a direct bridge between bank accounts either.
As one Dallas-based law firm said, “Venmo is a bridge with a parking lot in the middle of it.” This parking lot acts as a virtual piggy bank where transferred funds sit until wired to a bank account. In a world where contactless payment is becoming increasingly necessary, more businesses, including CVS, are welcoming peer-to-peer payment apps (P2P) at their registers. While businesses are required to report such assets to the IRS, many hold them in the “virtual parking lot,” leading to confusion over their taxable income.
Another obvious concern of using Venmo is the lack of privacy and the consequent vulnerability it fosters to cybercriminal activity. What differentiates Venmo from other mobile payment apps is the ability to follow users and view their transactions. Users who do not manually update the privacy settings have their transactions publicized on a public timeline, which dangles bait right at the noses of internet stalkers and hackers.
A Pandemic Protagonist?
While Venmo presents its issues with cybersecurity and misrepresentation of assets, it has been almost singlehandedly carrying many businesses through the pandemic-driven overhaul to a primarily virtual economy. Venmo’s parent company, PayPal, has posted back-to-back successful quarters this year with revenue at an all-time high of $5.3 billion.
The e-commerce lifeline has not only helped virtual businesses thrive but has become the go-to contactless payment for many businesses operating in-person as well. While other contactless payment services provide a similar “touch-free” option, installation for such systems can be pricey and are ultimately not as convenient as Venmo’s QR code scanning technology. Venmo’s clear lead in the drive for contactless payment has encouraged more payment businesses to follow in its footsteps.
Ultimately, Venmo is both a pro and a con in itself. The best way to cash in on this cash flow is to be smart about what you share, who you share with, and how you share it.
What do you think? Share your thoughts with us at 516-541-6549 or email, and be sure to check out our DSJ COVID-19 Information Center to stay current and to speak with a member of our Coronavirus Response Team (CRT).
Sincerely,
Devin McQuillan
Associate, Creative Solutions
Contact:
516-541-6549 | Email