Social Payment Apps Are Making Waves: Both Good And Bad

The other morning I asked my friend Amanda Mae Meyncke, a writer here in Los Angeles, to explain an app to me. I used my debt card to pay for our order of coffee and toast, and then got her to pay me back with this app she uses: Venmo. It’s what’s known as a peer-to-peer finance app, which is Silicon Valley’s way of saying that it lets people pay each other without handling cash or swiping cards. People like to use it to split bills. To get started she opened up the app. “There you are, Noah Nelson,” said Amanda Mae, “it says we’re friends.” It’s not just me that’s in there. It’s all her friends who use it… and there’s this Twitter-like feed showing what people are giving each other money for. It took me a couple of minutes for me to sign up, using Facebook, and link it to my bank account. The money showed up instantly in Venmo, but took a bit longer to get to my bank. Amanda Mae got started using the app because of friends she’d go out to eat with, but she then started using it for more critical transactions. “My Landlord,” said Amanda Mae, “who’s a girl about my age she just bought her first condo and I finally got her into the idea of Venmo. I sent her an email about it and she was like “that sounds awesome” Best of all: no pesky checks. “I know exactly when the money is leaving my bank account. I don’t have to wait for her to go cash the check.” Venmo handled $906 Million dollars in transactions in the fourth quarter of 2014. While Venmo is growing in popularity, the company's reputation took a hit earlier this year when two high profile fraud cases hit the news. The company was criticized for what was seen as a slow response to security flaws. “I’m not too worried about that sort of thing,” said Amanda Mae, “because even if fraud does occur it seems that the company will help you out with it and they’ll figure it out, and your money’s insured through the bank, so I’m just not too worried about that.” Venmo made changes this past month to make it harder to hack into accounts, and that response seems to have quieted the critics for now.  It doesn’t hurt that Venmo doesn’t charge users anything, unless you use a credit card, then you’re in for 3% on every transaction. But while we’ve been talking about Venmo it’s not the only player here… “We can use Venmo, but actually I prefer Cash.” Those words belong to Lisa Aultman, another friend who I was splitting the bill—this time Korean BBQ—with. She didn’t mean money, she meant Square Cash, one of Venmo’s competitors. I’d used it once, but then deleted it. And that’s a whole other problem: there are so many of these apps—Venmo, Cash, Google Wallet, even Facebook’s getting in on the action. When it comes time to split the bill trade negotiations break out. As for that Korean BBQ? We just ended up paying in cash: not the app, the green stuff.