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Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. The receiving bank doesn’t bear any risk, Venmo is taking the risk.

Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. The receiving bank doesn’t bear any risk, Venmo is taking the risk. You are the person who is the beneficiary on the accounts this money sits on. So you are responsible for it. If an entity sends money on your behalf, they take the responsibility for the money you send. That means they are the ones with the processes that will trigger if money doesn’t clear as expected. Processes which may involve anything from reminder emails and push notifications, all the way to debt recovery companies, lawyers and thugs showing up at your door. Both entities have float. The question is who is taking legal risk.

lxgr 3y ago
> The receiving bank doesn’t bear any risk, Venmo is taking the risk. What risk? Venmo is the sender here. Almost by definition, the sender doesn't have any risk: They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). If you're talking about the transaction that originally funded the to-be-paid-out balance, that's a completely different story. > Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. Yes, and that "direct" integration is typically ACH (for transfers "in 3-5 days") or debit card rails (for "instant payouts"). It might also be RTP these days, and maybe soon will be FedNow, which are both cheaper than debit card push payments (although I don't see payment app providers stopping their very lucrative business of charging ~1% for instant payouts any time soon). For ACH, there is no risk to the recipient. since nobody is floating anything: It takes 3-5 days. For debit cards, there is also no risk since these payments are effectively final immediately after they're announced to the recipient, even though they don't settle instantly.
- scrollaway 3y ago
  > They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). No, they have the money. But the money is ultimately that of the Venmo user. If that money gets removed from the account by some other means (eg some form of clawback, dispute, whatever) then they're out that user's money, and they're on the hook: So Venmo pays for the user. Every dollar is somebody else's dollar.
  - lxgr 3y ago
    > But the money is ultimately that of the Venmo user. Sure, but that's completely independent of the finality, settlement timing, payment rails etc. of the payout side. So if you're talking about the funding side, ACH is indeed very risky, since it's ACH direct debit. But great-GP was talking about Venmo payouts. There, Venmo is an ACH credit sender, which is risk-free.

lxgr 3y ago

> The receiving bank doesn’t bear any risk, Venmo is taking the risk. What risk? Venmo is the sender here. Almost by definition, the sender doesn't have any risk: They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). If you're talking about the transaction that originally funded the to-be-paid-out balance, that's a completely different story. > Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. Yes, and that "direct" integration is typically ACH (for transfers "in 3-5 days") or debit card rails (for "instant payouts"). It might also be RTP these days, and maybe soon will be FedNow, which are both cheaper than debit card push payments (although I don't see payment app providers stopping their very lucrative business of charging ~1% for instant payouts any time soon). For ACH, there is no risk to the recipient. since nobody is floating anything: It takes 3-5 days. For debit cards, there is also no risk since these payments are effectively final immediately after they're announced to the recipient, even though they don't settle instantly.

scrollaway 3y ago
> They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). No, they have the money. But the money is ultimately that of the Venmo user. If that money gets removed from the account by some other means (eg some form of clawback, dispute, whatever) then they're out that user's money, and they're on the hook: So Venmo pays for the user. Every dollar is somebody else's dollar.
- lxgr 3y ago
  > But the money is ultimately that of the Venmo user. Sure, but that's completely independent of the finality, settlement timing, payment rails etc. of the payout side. So if you're talking about the funding side, ACH is indeed very risky, since it's ACH direct debit. But great-GP was talking about Venmo payouts. There, Venmo is an ACH credit sender, which is risk-free.