venmo chargebacks

Venmo Chargebacks and Venmo Disputes: A Merchant’s Guide to Venmo Chargebacks and Disputes

Venmo is a digital payment platform that allows users to send and receive money from friends and associates. As third-party payment services become more common, it’s no surprise that millions of merchants want to add Venmo to their payment options. However, merchants must consider whether their businesses can handle Venmo chargebacks. If your business chooses to accept Venmo, understanding how to navigate the Venmo dispute process is critical.

In this article, you’ll learn how Venmo works, the Venmo chargeback process, and what to do to avoid Venmo disputes or reduce the chances of receiving a claim. If you are a consumer who needs to submit a claim for an unauthorized charge on your account, you can do so through the Venmo contact form, emailing [email protected], or by chatting with Venmo on their mobile app. To report unauthorized activity, or to dispute transactions on a Venmo credit card, there are resources for freezing your Venmo credit card, or you can contact Synchrony Bank at 855-878-6462.

Summary of Venmo Chargebacks

For merchants in need of a quick summary of the Venmo dispute process, here are the basics as they relate to chargebacks filed with the card issuer. Venmo users typically initiate chargebacks for a number of reasons.

Typical Venmo chargeback reasons

  • The customer does not recognize the charge
  • The customer states that they did not authorize the payment
  • An item purchased was not received
  • An item purchased arrived defective or damaged
  • The merchant made a processing error and overcharged or double charged the customer

If a user on the Venmo platform initiates a chargeback with their issuer, Venmo notifies the merchant. If the merchant disagrees with the details of the chargeback and feels that the charge is valid, the merchant must provide supporting documentation and details within 10 days. Venmo then requires 30 days to contest the chargeback with the issuing bank. After that it may take the cardholder’s issuing bank as long as 75 days to resolve the chargeback and render a final judgment.

As we will delve into here in this article, a Venmo chargeback is not the same as a Venmo dispute and does not follow the Venmo dispute process. The Venmo chargeback process is ultimately decided by the card issuer and Venmo acts as an intermediary providing transaction information and supporting documents from the merchant. For updates, you can email [email protected] – this email address is also where you can send additional supporting documents for your claim.

If a customer sends payments on Venmo, and then initiates a chargeback against that payment, the merchant may end up with a negative balance on Venmo and must add funds to cover the amount. Customer accounts will be frozen temporarily until the negative amount from the Venmo chargeback is paid back (and this negative balance can only be rectified through funding from a bank account, not a credit or debit card).

How Does Venmo Work?

Before examining the Venmo dispute process in more detail, you must first understand how Venmo for business works. Venmo is a peer-to-peer (P2P) payment platform designed to simplify interpersonal transactions. Users can send money from their Venmo account to another user by linking their accounts to their bank account, credit card, or debit card.

While ACH and debit payments are free, credit card payments incur a 3% fee. After receiving a payment, recipients can transfer funds from their Venmo account to their bank account immediately by paying a transfer fee or waiting 1 to 3 days for a free transfer.

Venmo users can also get a Venmo-branded MasterCard, which allows them to withdraw funds from their Venmo accounts without transferring the funds to their checking accounts. The card functions similarly to a regular debit card and is accepted everywhere; however, the only disadvantage is that Venmo charges a fee for cash withdrawals made with the card.

Can Merchants use Venmo?

Venmo’s standard P2P platform does not allow merchants to accept payment for goods and services. However, after starting as a consumer-only peer-to-peer payment system, they now offer Venmo Business Profiles to help merchants accept payments on the Venmo platform.

Venmo initially only allowed merchants to accept Venmo payments via integration with Braintree or PayPal, but the new Venmo business profile system is much more efficient. With the introduction of business profiles also comes the possibility of Venmo chargebacks and disputes, making it important that merchants have a good understanding of the Venmo dispute process.

What is a Venmo Chargeback?

A Venmo chargeback is a complaint a cardholder files with its issuing bank regarding a Venmo transaction. It differs from an internal Venmo dispute, typically handled directly by the payment platform. Venmo chargebacks can occur due to a variety of reasons. 

Venmo Chargebacks Compared to Venmo Disputes

The Venmo dispute process differs from the Venmo chargeback process in terms of steps to resolution. Venmo handles dispute resolution through its purchase protection program, while card issuers typically manage chargebacks. Venmo users typically file chargeback complaints with their card issuers and disputes with Venmo. Since Venmo disputes are filed directly with Venmo, they are subject to Venmo purchase protection rules and are generally handled on-platform. The merchant has a chance to respond to the Venmo dispute and provide evidence showing the charge is valid.

With a Venmo chargeback, the customer files the complaint directly with the card issuer, and this can be much more costly and difficult. Since the chargeback is filed with the card issuer, chargeback fees apply and can cause more serious problems for the merchant. Excessive chargebacks can lead to termination of the Venmo business profile or even cause the merchant to be placed on the MATCH or TMF list.

Why Do Venmo Chargebacks Happen?

One common reason for chargebacks is fraud. Even though Venmo simplifies payments between customers, the transaction still follows processes similar to a normal banking transaction with the same susceptibility to fraud. Despite technology designed to simplify peer-to-peer payments, Venmo needs to process payment transactions on banking rails with sensitive customer data that can be vulnerable to compromise.

No payment system can be completely fraud proof, as fraudsters continue to manipulate the tools at their disposal. With Venmo and other P2P platforms, this usually takes the form of a fraudster using stolen account information to make unauthorized payments from a Venmo account, or to fund another account with illicit proceeds stolen from a legitimate account. This is the most common type of fraud that merchants will encounter. Bad actors send funds from the stolen account until the money runs out. When cardholders discover the missing funds, they call on their banks to investigate, but the funds are gone, leaving merchants on the hook for the fraudulent payments.

The Fair Credit Billing Act restricts a credit card holder’s liability for fraud to $50, and most issuers offer cardholders zero fraud responsibility as a perk. That increases the chances of an issuing bank trying to recover funds by filing a chargeback.

Aside from fraud, other reasons why Venmo chargebacks happen include:

  • The customer hasn’t received an item or service they purchased. Customers may file Venmo disputes if the item they ordered is not shipped in a timely manner, or may call their card issuer resulting in a Venmo chargeback. For this reason it is important to ship purchased items quickly and to provide proof of delivery to customers. This proof of delivery is also essential for successfully having a Venmo dispute or Venmo chargeback resolved in the merchant’s favor.
  • They received a damaged item. Typically customers should contact the merchant if they receive a damaged item before filing a Venmo Dispute or initiating a Venmo chargeback. However, if the merchant is not responsive, this may lead customers to quickly resort to the Venmo dispute process. It isn’t always the merchant’s fault, however providing responsive service can go a long way towards preventing transactions from entering the Venmo dispute process.
  • They were charged twice due to a processing error.  This is preventable but unfortunately sometimes happens – merchants double charge customers resulting in Venmo disputes. A great billing system and effective billing automation can be effective in reducing errors that lead to Venmo disputes and chargebacks.

Venmo’s Policy on Chargebacks and Disputes

If a customer calls their issuer and initiates a dispute for a payment, Venmo will notify the merchant. Venmo will initially request more information on the disputed transaction, including data and proof that you may have that contradicts the consumer complaint. Venmo will request the following information for merchants to challenge a dispute:

  • Any communication between sender and recipient, especially communications offering evidence the Venmo dispute is invalid.
  • Evidence of a refund issued to the customer, either within or outside Venmo.
  • Valid tracking data and proof of delivery
  • Additional proof of a valid business relationship with the consumer or information you may have showing the transaction was completed successfully.

Chargebacks are handled by the card issuer, and Venmo does not make any decisions on the outcome, they merely pass along information and the process is handled through standard card brand chargeback procedures. However, too many chargebacks will lead to merchants being deactivated or suspended.

In the event of a chargeback related to a payment you made in Venmo using a debit or credit card, your card issuer will provide you with an update. However, Venmo will debit your account for this amount, potentially causing a negative balance. Customers will be required to make a deposit to cover this negative balance, and their accounts will be temporarily frozen until the negative balance is rectified.

What Can You Do to Avoid Venmo Chargebacks?

Merchants can defend themselves against Venmo chargebacks by using the same tools to protect against other types of chargebacks. You can reduce the number of Venmo chargebacks filed against you by following these steps:

  • Make sure that your paper trail for each transaction is well organized.
  • Provide refunds and cancellations as soon as you receive a request.
  • Make use of delivery confirmation and retain good documentation on proof of delivery.
  • Communicate effectively with your customers.
  • Use practical fraud tools to keep an eye out for suspicious behavior.

While conventional fraud management tools such as CVV verification do not apply to Venmo payments, methods such as screening and fraud scoring can assist in identifying funds that seem to be fraudulent payments. The only way to strike an effective balance is to scrutinize your transaction and chargeback info, pinpoint the sources of your chargebacks and modify your strategies and threshold accordingly. It is a careful balancing act to ensure merchants don’t end up turning away legitimate customers, defeating the purpose of accepting Venmo payments in the first place. 

Conclusion

Accepting Venmo payments can be highly profitable because it represents new customers and thus increases revenue. However, before diving in it is important for merchants to develop mitigation plans to protect their businesses. Merchants should be aware of the risks and complications of accepting payments from this platform. Merchants can prevent chargebacks by understanding risks and liabilities in different payment situations, understanding how the Venmo dispute process, and by analyzing what the statistics reveal about merchants’ unique challenges.

Frequently Asked Questions

  1. What is a Venmo chargeback?

    A Venmo chargeback occurs when a user disputes a transaction made through the Venmo platform and requests a refund from their bank or credit card issuer. Chargebacks can be initiated for various reasons, such as unauthorized transactions, goods or services not received, or disputes regarding the quality of products or services.

  2. How can I initiate a dispute or request a chargeback on Venmo?

    Venmo is primarily a peer-to-peer payment service, and it does not offer formal dispute or chargeback processes like traditional financial institutions. If you encounter an issue with a transaction on Venmo, it is recommended to first reach out to the other party involved and attempt to resolve the matter directly. Venmo encourages users to communicate and work out any problems before considering other options.
    However, if you believe you have been a victim of fraudulent activity or unauthorized transactions, you should contact Venmo’s customer support immediately to report the issue and seek further assistance.

  3. What steps can I take to avoid disputes and chargebacks on Venmo?

    To minimize the chances of disputes or chargebacks on Venmo, it is important to follow these guidelines:
    1.     Only transact with trusted individuals: Before making a payment or sending money to someone on Venmo, ensure that you know and trust the person or business. It is advisable to use Venmo for transactions with friends, family, or reputable merchants.
    2.     Communicate clearly: Before completing a transaction, communicate with the other party involved to discuss and confirm the details of the transaction, such as the goods or services being exchanged, the price, and any relevant terms or conditions.
    3.     Keep records: Save all relevant documentation, such as receipts, invoices, and communication records, to provide evidence in case of a dispute. This information can help support your position if a problem arises.
    4.     Be cautious with refunds: If you receive a refund request on Venmo, carefully evaluate the circumstances and only issue a refund if it is warranted. If you are unsure about a refund request, you can contact Venmo’s customer support for guidance.

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