PayPal’s Mobile Payments Service Venmo Hikes Fees, Draws Ire

Bad news recently arrived for Venmo users, as it announced that starting November 6, it would add a one percent fee for Venmo account holders that were transferring money using debit cards, with a 30 minute transaction figure. Given that Venmo previously charged 0.25 percent for such a move, many questioned why the sudden quadrupling was necessary, and often questioned vociferously.

The move has also prompted opportunity from other industry figures to decry Venmo’s move possibly in favor of advancing their own platform. Enter Circle from Goldman Sachs, which allows for free transactions in US dollars, British pounds sterling, and euros across 29 countries. It also boasts several different platform features, including the ability to send money through group chats with up to 20 people engaged therein.

About the only downside is that Circle doesn’t handle bitcoin-based transactions on its Pay app, despite the fact that Circle has been actively involved in the cryptocurrency market for some time as evidenced by both Circle Invest and its Poloniex investment.

Circle took to Twitter to declare “With @circlepay we deliver free and instant cross-currency (USD, GBP and EUR) P2P payments. There’s no reason it should be any other way!”

I don’t want to say that Venmo handed Circle a win here, but it sure looks like Venmo handed Circle a win here. Worse yet, Venmo has just slit its own throat in the ever-tightening race with Zelle, which makes a point of noting that it charges no fees to send or receive money. While Zelle encourages users to “confirm…with (their) bank or credit union” to make sure there are no additional fees from the bank’s end, Zelle doesn’t actually charge any. Given that Zelle is by some measures out in front right now, it probably wasn’t a great time for Venmo to voluntarily hobble itself by tacking on fees that the competitors won’t.

Still, it’s a likely bet that Venmo is looking to turn profit, and can’t do that with market share it’s not deriving any fees from. While this likely won’t cause a mass exodus away from Venmo, it might discourage some new users from getting in on the action. That’s not good news for Venmo, unless it’s planning to use these fees to prompt savings or new features elsewhere.