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Zelle vs. Venmo

Casual online payment systems are pretty common these days. They're a great way to split a restaurant bill, pay your rent, and maybe loan money to- and receive payback from- a trusted friend.

But as we (should) all know by now, mixing money and the internet can be risky. People have been scammed out of money on Zelle, Venmo, PayPal, via gift cards, and countless other methods. The bad guys know a lot of ways to separate you from your money.

So I'm going to go over the most popular two payments methods and help you understand some key and important differences between the two.

Ye Olden Days

As is my wont, a bit of history first.


PayPal is one of the oldest purely online payment systems dating back to Dec 1998. It was envisioned as an easy way for regular people to send relatively small amounts of money to each other via email. eBay, the online auction giant, was fairly young at the time. Payments on eBay were usually settled with personal checks or money orders. But when PayPal came on the scene, it quickly gained traction as a safer way to pay.

Safer because you didn't have to share any sensitive financial info with the other party. And, later on, with a buyer and seller protection program. As you probably know, your checking account number, a pretty darned sensitive bit of information, is printed on every check you write. Up till then, you probably only wrote checks to pay monthly bills (wow, remember that?), maybe at a store before credit/debit cards completely took over, and maybe to a friend to settle a debt.

But as transactions started gearing up online and we were dealing with people we didn't know and likely quite far away, that became cause for concern. With PayPal, you needn't give anyone else your bank account info. eBayers loved it so much that eBay bought PayPal in 2002 for 1.5 billion. eBay later sold PayPal but that's not important here.

PayPal worked well enough but its trajectory since being bought by eBay was more toward a buyer-seller relationship -- buying stuff on eBay and eventually from other retailers as well. Today, PayPal is a payment option on many retailer websites spanning small to huge.

But PayPal also wanted to become the lingua franca of the untapped casual payment segment so it created Venmo. That's right. Venmo is owned by PayPal. And boy did it take off.

Modern Times

Venmo has its issues. For one, it's owned by PayPal, which by now has gained a pretty bad reputation among eBay sellers and other small online sellers. It's beyond the scope of this article to go into all that, but suffice to say, many small online sellers with PayPal history aren't too eager to embrace Venmo in any way, shape, or form. If you want to go down that particular rabbit hole, just google paypal sucks and you'll get an eye-full.

Another issue (that might have been been fixed by now, I dunno) was that any payment you made on Venmo, by default, was publicly viewable on your Venmo profile. Say what?!? The morons in charge at Venmo thought it would be a great idea to publicly share with anyone your purchase history on Venmo as if Venmo was a financial Facebook or something. If this is the mindset of Venmo then I want nothing to do with them.

Third, you have to give Venmo your banking info.

Meanwhile, the US banking segment wasn't too thrilled that PayPal/Venmo was eating their lunch -- moving all that money around. But there was no alternative. Wiring money is expensive, tedious, slow, and requires knowing the recipient's account info. Using a credit/debit card required the recipient to have a "merchant account" established to accept those card payments. Regular people don't usually have merchant accounts.

Venmo solved all that. So the banking industry got cracking on their own solution and came up with Zelle. Today, Zelle moves more money than Venmo but lots of people still aren't aware of it. Or if they are, they may not understand some important differences, which I'm going to go into next.

Key Differences

Venmo is a 3rd party payment facilitator. To use Venmo, you must create an account and tie it to your banking checking account. When someone pays you via Venmo, that money goes to Venmo first, then is deposited into your bank checking account. That can take 1-3 days. Instant transfers are available but at a cost.

Zelle, unlike Venmo, is a 1st party payment product, baked right into the banking system. If your bank offers Zelle, then it's likely already in your online banking app. Most banks and credit unions offer Zelle now, and more are coming onboard, so there's a good chance you have it available. Since it's already baked in, then you don't have to create any new account or share your sensitive banking info with a 3rd party, like Venmo. At most, you'll just need to enroll. See your banking app for details.

I don't know about you, but I'd prefer to share my banking info as little as absolutely possible.

Fraud Protection

Paying with Zelle or Venmo is tantamount to paying with cash. There is generally no fraud protection. PayPal offers some fraud protection when you're buying from an approved seller that accepts PayPal but even then, those protections aren't available for casual peer-to-peer type transactions.

So when you read or hear that Zelle, for example, is rife with fraud because people are being scammed, understand that Zelle itself hasn't been compromised. Rather, a skilled scammer is using con-man tactics to trick you into sending them money using Zelle or Venmo. I'm not victim blaming here because a lot of scams are difficult to identify and are expertly crafted to scooch right past your defenses.

Could Zelle and Venmo do more to reduce the likelihood of you being conned into send money to a scammer? Probably. But the more security they implement along these lines -- trying to prevent you from doing something, ahem, ill-advised -- the more difficult using these services become.

So, how to stay safe and not fall victim to Zelle, Venmo, and other payment systems fraud?

Common types of fraud using any instant payment service and things to do to stay safe.

  • Me-to-Me Fraud: One of the more common frauds is the "me-to-me" scam. It's a complex fraud with a number of steps so I won't go into all the gory details here (you can google it if you want). But the first step to this fraud is (usually) getting a phone call purportedly from your bank (but it's not!) warning you that a fraud might be taking place on your account and to please help them. The caller will then ask you to use Zelle (usually) to send money to yourself. Stop right there and hang up!


  • Do not issue payment to people you do not personally know and trust. That means not using Zelle (or Venmo) to purchase event tickets on Craigslist, Facebook, or wherever. Ticket purchases, even in person where the seller hands them to you, are rife with fraud. Most tickets to concerts and sporting events are scanned at the entrance gate. Even perfect looking fakes will not validate and you will not be granted admission. For that matter, I would not pay anyone, even in person, using Zelle or Venmo, unless I know and trust that person. In person fraud is also a thing. Just don't do it. Use it only with people you know and trust, period.

  • Add two-factor authentication to your bank account. Yes, it's that important.

  • Use a unique and fairly long (15 characters or more) password for your bank account. Never reuse previous passwords! Use the password saving feature in your browser.

  • Add a password or PIN to your phone if you don't have one. Shockingly, I still run into clients that have no lock on their phone.

If you follow these steps then you are exceeding unlikely to fall prey to Zelle or Venmo scammers.

My preference?

In my opinion, Zelle is the better choice because...

  • Payment is very nearly immediate

  • There's no cost to sender or receiver

  • It's (probably) already in your banking app, so nothing new to download

  • Don't have to sign-up. Enroll using your existing banking app, but no full-sized sign-up.

  • Don't have to disclose banking info to anyone.

  • Is run completely by the banks who are under more regulatory control than 3rd party systems like Venmo and PayPal.

So there you are. The internet is full of info on the wide variety of payment scams -- just Google it.

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