[GOTCHA] P2P Payment Systems
Recently, I paid a contractor via the Square Cash peer-to-peer online money transfer service. We’d done this many times before and payments had appeared in his bank account instantly after I sent them. But this time, something went wrong. Let's take a look at some of the built-in 'gotchas' in Square, Paypal, and other popular P2P payment services...
"You've (Almost) Got Money!"
Both of us saw his money request marked as “paid” in the Square Cash app. I could see the money had been withdrawn from my checking account. But the money was not in his bank account even after several hours had passed. We were both baffled.
It turned out that my friend had recently changed his Square “Cash Out” preferences so that deposits to his Square Cash account were automatically transferred to his bank account overnight instead of instantly. He did this to save the 1% fee charged on instant transfers. But he had forgotten doing so. The money appeared in his bank account first thing the following morning.
That “memory fault” could have cost my friend a lot of money in NSF fees, if he had planned on my payment credit arriving in time to cover outstanding debits arriving on the same day.
Why does Square complicate its simple money-transfer service with this totally unnecessary option? Profit, of course; if Square deposited all payments instantly, it would have nothing for which to charge you that one percent fee. On the other hand, charging everyone a fee to receive money all the time generates harsh feelings, as Paypal well knows.
If fact, Paypal has boldly copied Square’s fee/no-fee paradigm virtually byte-for-byte in its Paypal.me service, along with the admirably simple parts of Square’s Cash app. Introduced in September, 2015, six months after Square Cash debuted, Paypal.me enables you to request money by simply sending an easily remembered URL, e.g., https://Paypal.me/BobRankin/5. When recipients click that link (which includes both the recipient and the dollar amount) a wizard guides them through a choice of options for the payment. That’s where things get complicated.
No fee is charged to sender or recipient on payments designated as being between “friends & family.” No fee is charged to the sender of money if the source of funds is a bank account or Paypal account. Funds charged against one’s credit or debit card incur a fee of 2.9% plus $0.30 per transaction.
If the recipient is a Paypal business account, it will be considered as “goods and services" and they will be charged a fee of 2.9% plus $0.30 per transaction, regardless of the sender’s source of funds.
If you are not confused yet, Paypal has the solution: Venmo! I am confused about why anyone would use Venmo. Just look at some of its “features:”
Money transfers are not instantaneous and can be canceled for a couple of days after they are “paid.” Scammers have turned this feature to their profit by paying for goods and canceling payment after the goods have been received or shipped. And Venmo does not offer buyer or seller protection, a strong selling point of Paypal and Paypal.me.
But that's not the most surprising thing about Venmo. By default, Venmo makes all of your transactions visible to anyone on the Internet, in two ways. The first is the real-time scrolling list of transactions on the Venmo home page, which anyone can see. The second is your Venmo profile page, which shows your last five transactions. The transaction amount is obscured, but still I do not want it generally known that I have paid or been paid by anyone. It’s just not public information. You can opt out, but many people don’t even know about this stupidity.
Despite these alarming shortcomings, Venmo handled some $12 billion worth of transactions in just the first three months of 2018. That’s what really confused me, until I remembered reading that Venmo is most popular among millenials, who do not seem to have the same privacy concerns as older users.
These are just two of the most popular peer-to-peer payment systems. They are unnecessarily complicated and full of “gotchas” for the unwary. If you use a P2P payment system, or you know of other P2P payment systems and their shortcomings or virtues, please comment below.
Your thoughts on this topic are welcome. Post your comment or question below...
This article was posted by Bob Rankin on 27 Aug 2018
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Article information: AskBobRankin -- [GOTCHA] P2P Payment Systems (Posted: 27 Aug 2018)
Copyright © 2005 - Bob Rankin - All Rights Reserved