Which Mobile Payment App Is Best: PayPal or Venmo? - PCMag.com

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You won't find many comparison articles on PCMag pitting two products from the same company with near-identical purposes against each other. But while PayPal and Venmo—both owned by PayPal Holdings, Inc.—may have many commonalities, they are distinctly different beasts. A darling of millennials, Venmo makes paying friends a social, gamified experience, while the more-staid PayPal has eased online commerce for over a decade. Of course, they aren't your only options, with Apple, Google, Samsung, Square, and Zelle joining the payment fray, each with their own unique set of characteristics. You can read more about them in our roundup of the best mobile payment apps. Here, however, we'll take a deep dive into how PayPal compares with Venmo.

Setup and Fees

To set up either payment system, you obviously need to install the Android app or iOS app, create an account, and connect a bank account. Both require entering your mobile telephone number. Both let you sign up on the web, as you can with Google Pay, but Square Cash can only be set up in its mobile app. You need to add and verify a bank account with both—a credit card isn't enough, though you can add one of those, too, for either.

The fee structures for Venmo and PayPal are identical. Neither app charges you for the privilege of paying individuals from your account balance or a linked bank account, but if the payor uses a credit card as the source of funds, there's a 2.9 percent charge. Selling with PayPal incurs that same fee. Transferring money to your bank account is free, unless you want expedited Instant Transfer, which adds a 1 percent fee with a minimum of 25 cents and a maximum of $10. For comparison, Zelle has no fees, and the money goes straight into your bank account. Zelle doesn't work with credit cards, however.

Paying Your Friends

While Venmo's raison d'être is ostensibly to simplify paying your friends, both apps make it extremely easy to either pay or request funds from your pals and acquaintances. Only PayPal lets you do so from a web browser—Venmo has discontinued this capability. Sending money to an individual is free on both services unless you use a credit card account to fund the transaction. Venmo's innovation is adding a social aspect. By default, anyone using the app can see who you've paid (though not the amount). If you like financial voyeurism or want to show off your fun transactions, Venmo is your choice. You can, however, deactivate this financial exhibitionism, if you prefer.

Both services let you split payments, so if you and a bunch of friends are ever allowed to go out for a meal or drinks again, divvying up the charges is simplified. PayPal offers Pools that lets a group of people contribute to a goal like raising money for a coworker's wedding or new child. Of course, Venmo's special feature is showing the world or just your contacts whom you've paid. PayPal lets you pay in more than 200 countries around the globe, while Venmo is limited to the US. Venmo offers a debit card with rewards; PayPal does too, but also offers credit cards and prepaid cards.

Paying Apps, Websites, and Stores

PayPal is ubiquitous when it comes to paying websites and apps. Venmo is trying to make inroads into those spaces, just as PayPal is trying to make inroads in on-location payments with its recent merchant QR code initiative. I have yet to see a store with one of these (who's even been in a brick-and-mortar store of late?), but only time will tell if this contact-free payment method takes off.

If you are at a sales point that accepts NFC mobile payments, you can use your PayPal Key credit card details as a source for Google Pay NFC payments (but not for Apple Pay). I don't really see any advantage of this to simply using Apple Pay or Google Pay to fund the purchase—both also offer rewards and other special offers.

Security and Protection

Any mobile payment app can open you up to risks, especially when you're sharing financial details with multiple companies and people. If your email is out in the world—and it likely is—and the payment service uses that as your ID, anyone with your email address could send you a request for money. After not using Venmo for over a year, when I revisited my account, I found dozens of requests for funds. What's even more insidious is when a stranger sends money to you. Why? Because if you cash in this money, you open yourself up to legal issues if the money came from a stolen credit card or was part of a money-laundering scheme. These peer-to-peer payment services are fertile ground for such scams, which, as a result, are widespread.

What's more, if you use a service like Venmo—which is designed for payments among acquaintances—to purchase goods or services, you don’t get any of the protections afforded by using a credit card. Think of it as handing someone actual cash—once you do this, your money is gone. Credit cards, on the other hand, cover you, with zero liability for illegitimate transactions. This is one big differentiator between Venmo and PayPal: The latter is designed for commerce, not just person-to-person money exchange, so it offers more protection. Venmo's user agreement comes right out and states, "Venmo does not offer a buyer or seller protection program for transactions conducted using the Venmo app or Venmo.com." Couldn't be clearer.

PayPal's policy is quite different; it does offer protection to buyers. It states: "If you don't receive the item that you ordered, or it shows up significantly different from its description, you may qualify for Purchase Protection, and we'll reimburse you for the full purchase price plus any original shipping costs, subject to terms and limitations." While that sounds nice, you'll find plenty of complaints about it on sites like TrustPilot.

Privacy

Venmo is less private than PayPal in a couple of important ways. Venmo's privacy policy clearly states that it does not share or sell your data to third parties for their marketing purposes. That's very subtly worded, not ruling out sharing your data to third parties for Venmo's own marketing. The policy does admit to using your data for Venmo's own marketing but states you can limit that sharing. I didn't see any setting for this, however, aside from the overall setting for the public/friend/private transaction visibility options.

PayPal's privacy policy states clearly, "We do not sell your personal data." They only share it within their own companies or as necessary to provide the service. Unlike Zelle, for example, PayPal doesn't give your info to third-party marketing outfits. It's actually one of the better privacy policies among the mobile payment plays.

Which Mobile Payment App Is Right for You?

If all your friends and acquaintances whom you need to pay insist on using Venmo, or if you think it's fun to see others' monetary transactions and have them see yours, by all means head for Venmo—as long as you use it wisely. That means not paying or accepting money from anyone you don't know personally. It also means understanding that there are no protections for transactions. When you pay someone, it's the equivalent of handing over cash, so don't expect to get it back easily.

PayPal is the perfect solution for those who pay lots of websites, and it offers buyer protection not found in Venmo. It also doesn't by default show the world whom you pay, as Venmo does. Despite its reputation as a service for paying websites for goods and services, it also offers person-to-person payments, just like Venmo.