If you’re wondering why earlier this year Venmo briefly froze instant transactions and nixed its website payments, you can apparently look no further than good old-fashioned fraud. A Wall Street Journal report cites internal documents indicating the PayPal-owned service pulled some of its features when it lost $55 million in the first quarter of 2018 — a chunk of which came amid a “spike in fraudulent activity.”
According to the WSJ, Venmo’s transaction loss rate — which includes fraudulent charges — shot up from 0.25 per cent in January to 0.4 per cent in March. As a result, Venmo decided to hit pause on instant bank transfers, cut web payments, and booted “tens of thousands” of users its algorithms found to be sketchy. The result? Lots of angry users who were actually trying to use the service — particularly with instant transfers.
“I’m pissed that it’s come to this and that we have to hurt our customers to try and get our loss numbers under control,” wrote Benjamin Mills, a Venmo product executive, in a March 22 email obtained by the WSJ.
Okay literally this is something you should have let your users know, I just had money I NEEDED to get my medication ASAP venmod to me
— Vero (unhinged edition) (@challahdread) March 22, 2018
While Venmo did reinstate instant bank transfers, it changed the fee from a flat 25 cents to 1 per cent of the total amount. On the other hand, it seems like website payments may be permanently dead. In another May email, a Venmo executive reportedly told staffers that the web service accounted for just 2 per cent of overall payment volume but 15 per cent of total net losses.
According to the WSJ, Venmo executives said in an internal presentation earlier this year that fraud was “on the rise across the board.”
In a statement to Gizmodo, a spokesperson said “Venmo loss levels are lower than the overall average for PayPal and compare favourably to the industry.” The spokesperson added, “When introducing new features, it is not unusual to see short periods of elevated losses.”
If you’re still concerned, at least you can take comfort in the fact that Venmo typically reimburses users for any moolah lost to fraud.