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Is it safe for merchants to accept new digital payment forms like PayPal, Venmo, Zelle?

Are PayPal, Venmo, Zelle and other new digital payment forms secure and responsible for merchants to use?


New payment options such as PayPal, Zelle and Venmo can be convenient for small businesses, but only with people you know and trust as they don’t offer the same protections as credit cards, checks or ACH payments.

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Many people no longer have checking accounts or want to use them in an era of digital payments. And younger clients who don’t have easy access to credit may not have credit cards, either.

Going forward, what should you do if clients refuse to pay by check or credit card? Are the newer payment methods less secure than either of these options?

PayPal for small businesses

An option that many merchants use is PayPal.

PayPal is a credit card processing service that lets merchants accept credit and debit cards, as well as money that someone has put into their PayPal account.

Because of the latter feature, PayPal can be a good option for people who don’t have credit cards and don’t want to pay for a purchase with a debit card.

  • For credit cards accepted online, the processing fee is 2.59 percent plus 49 cents per transaction, as of September 8, 2021.
  • You can accept Discover, Maestro, Mastercard, Visa and JCB.
  • For credit cards and debit cards taken in person, the fee is 2.29 percent plus 9 cents per transaction. You can accept credit and debit cards with a card reader.
  • For PayPal digital payments (PayPal, Pay Later, Venmo and Check out with Crypto) the transaction fee is 3.49 percent plus 49 cents per transaction.
  • For in-person payments with your QR code, the fee transactions of more than $10 is 1.9 percent plus 10 cents per transaction. For those of $10 or less, it costs 2.4 percent plus 5 cents per transaction. You can use this method if you meet with customers in person.
  • PayPal says it offers 24/7 fraud protection. It also sends alerts if it detects suspicious activity.

One drawback of PayPal is that banks don’t always consider the money a merchant has amassed in a PayPal account when considering whether to issue credit, the way they would the money in a traditional bank account. This can be a drawback if you’re trying to build your business credit.

Venmo for small businesses

These days, more clients are trying to pay with Venmo as well. Venmo is owned by PayPal.

  • Venmo is a digital wallet you can use to send and receive money.
  • It is free if someone pays with cash, but there is a 3 percent fee for credit card transactions, paid by the buyer.
  • If you open a Venmo business profile, you must pay a 1.9 percent transaction fee plus 10 cents for each payment you receive. The benefits of opening a business profile include enhanced payments (such as links to your business website and social media accounts), tax reporting and disputes services.

If you’re working with a client you know well and trust, Venmo could be a good option.

Venmo says it uses encryption to protect account information and monitors account activity for unauthorized transactions. If you were to lose your phone, you could log in to Venmo to prevent your phone from accessing your account. You can also add multifactor authentication and a pin code.

Nonetheless, Venmo has its limitations. If you use “accept payments via a personal profile” on Venmo, you have less protection as a merchant than you would with a bank transaction or credit card payment. Venmo does not offer buyer or seller protection for personal profiles and therefore discourages transactions with people you don’t know. That’s a big consideration.

If you use a business profile, however, Venmo offers its Purchase Protection Program, which offers some protection in scenarios such as a buyer claiming that a purchase was an unauthorized transaction or that an item was not received.

Zelle for small businesses

A third option that more people are using today is Zelle.

  • Zelle allows you to send and receive money through your bank’s app or the Zelle app if your bank doesn’t have its own. Zelle doesn’t charge to send and receive money.
  • Zelle describes itself as a fast, safe and easy way to send and receive money among people you trust. The company says it uses authentication features to make payments more secure.

Like Venmo, however, Zelle isn’t really designed for merchant transactions, which may include purchases by strangers.

“If you don’t know the person, or aren’t sure you will get what you paid for [for example, items bought from an online bidding or sales site], we recommend you do not use Zelle for these types of transactions,” the site says. “These transactions are potentially high-risk… Neither Zelle nor the participating financial institutions offer a protection program for any purchase or sale conducted using Zelle.”

It’s also important to check with your financial institution if  Zelle charges fees for small businesses to use it.

Bottom line

You’re better off using traditional forms of payment such as ACH payments, credit cards and checks than these newer additions to the landscape so you have the protections they come with.

If you are going to use newer services, only do so with people you know and trust.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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