It shouldn’t be so difficult to pay people over the Internet. In a world where you can order any conceivable product, video-chat people in other hemispheres and change the temperature in your apartment before you even get home, why is it so hard to split the check at a restaurant?
There are lots of companies trying to change this, but somehow they all leave something to be desired. The trendiest of them is probably the New York-based payment app Venmo, which has a social feed attached and more or less forces you to describe each transaction with emoji.
Gizmodo writer Adam Clark Estes dislikes Venmo for several reasons, which he described in a story for the site on Thursday.
“What a lot of people don’t realize,” Estes wrote, “is that Venmo’s bucket-brigade approach to mobile payments is an entirely unnecessary pain in the ass.”
Some of the other problems with Venmo: It makes it hard to move large amounts of money. You can’t pay with a credit card without incurring absurd fees. It takes days to actually get access to real money. Plus, the app requires you to engage with its annoying emoji interface if you want to actually pay people.
Estes is right that these things are annoying. He's also right that Venmo as a company has some real problems -- although they're mostly to do with security and scams, which he doesn't mention.
Really, though, Estes' problem at its heart is not with Venmo. It's with payment apps as a whole.
When I was in college, I had a friend whose roommate punched through a wall in their dorm room. Instead of getting the school to fix it and having to pay a fine, the enterprising engineering students decided to very carefully tape a piece of white paper over the hole, such that it was nearly impossible to tell from a distance that the wall was even damaged. It was sort of impressive. But there was still a hole in the wall, and it was pretty obvious if you got close to it. I don’t think the facilities staff fell for it.
Most payment apps are sort of like that piece of paper. From a casual distance, it really does seem like it’s seamless and easy to transfer money across the Internet. But under any sort of real pressure, the holes are going to become evident.
The main issue is that it takes forever to get money from your bank account and put it into your friend’s. And moving large amounts can be a big hassle. These are not Venmo-specific problems. Pretty much all payment apps suck, because the system they're built on top of is broken. And that’s not necessarily something that Silicon Valley can fix. That's the Federal Reserve's job, and they're, uh... they're working on it.
Most of the time, when you make a payment over the Internet, whether it’s on Venmo, PayPal, Google Wallet, Facebook Messenger, Square Cash, MoneyMoo or Reimbursr (I made those last two up), you aren’t actually moving money instantly. Rather, the company that you’re using is loaning money (or credit) to the person you are paying. It isn’t even really money. It’s just the promise of money. But you trust that promise, and the person you’re paying trusts that promise, and both of you trust whatever app you’re using to fulfill that promise, and so we overlook the fact that the thing being transferred is not actually money yet.
Given time, that promise of money moves through the bowels of the American banking system, where there are multiple checks to make sure that you do, in fact, have the money you promised to whomever you're paying. Unfortunately, it's a process that takes a few days. We still haven’t figured out a way to make that instant and that’s the real problem with Venmo. The emoji thing certainly doesn't help, though.
One point in defense of payment apps: There's this gripe about how when you pay someone with a credit card via an app, you also have to pay a fee. No offense, but this complaint is not really legitimate, because you pay a fee every time you use a credit card, whether an app is involved or not. That's how the credit card company makes money.
When you go to the store, you pay a merchant and then the merchant turns around and pays 2 or 3 percent to the credit card company on your purchase. It’s built into the price of the goods, so you don’t notice. But you can’t pay a person with a credit card and expect not to pay some kind of fee.
Every online payment system -- including Square Cash, which Estes says he loves -- will charge you to pay with a credit card. If they don’t, you should ask who is paying that fee for you, and what they are getting in return.