PayPal vs. Venmo: An Overview

PayPal Holdings Inc. and Venmo (a subsidiary of PayPal) are two huge names in the digital wallet game. PayPal is the long-standing, trusted payment service that came to prominence as a payment method for eBay. Venmo, the new digital wallet, has become so popular among millennials that many use the term "to Venmo" colloquially as a verb.


The first widely-known and -used digital wallet was PayPal. PayPal was founded in 1998, went public in 2002, and was quickly purchased by eBay. The site grew; by the time PayPal was spun-off in 2015, it had become a huge moneymaker for the auction site. 

In 2009, Andrew Kortina and Iqram Magdon-Ismail found themselves needing a way to quickly and easily transfer money to one another. Aiming to provide the convenience of cash without the hassle of carrying money around, Venmo was born. In 2012, Braintree bought Venmo, and in 2013, PayPal acquired Braintree.

While both of the apps are used to facilitate transactions and to easily and securely transfer money between bank accounts, PayPal has diversified into other financial products and is beginning to resemble a bank more than a payment app.

Today, PayPal not only offers payment services but also finances large purchases, extends lines of credit, and provides customers with debit MasterCard Inc., which use PayPal balances to pay for things in a brick-and-mortar store or to withdraw cash. With PayPal being so widely known, there are stores throughout the world that will accept PayPal payments for goods or services; some even accept contactless PayPal payments.

PayPal charges 2.9 percent + $0.30 for payments from debit and credit cards but offers free transfers from PayPal balances. Venmo is free to use.


Venmo is partly a digital wallet, partly a social media feed. The app asks for comments on every transaction, and these comments are posted, newsfeed-style, for friends to browse. People use this comment box to post amusing stories and inside jokes. Venmo adds an element of fun to paying a friend back for dinner last night. There are also privacy settings that allow users to control which transactions, if any, are visible.

Part of Venmo's appeal is that it replaces the impersonal, private transacting that happens on PayPal with a network of friends. In fact, Venmo's website even explicitly states that the service is “designed for payments between friends and people who trust each other.” With a system designed to emulate cash payments, transfers between Venmo accounts are instantaneous and cannot be undone: paying the wrong person means asking nicely that they return your money and hoping they do. The company can also intercede, but the recipient must consent to the refund.

Venmo, on the other hand, is really good at what it does. It replaces cash when you owe a friend money. You can't pay Netflix Inc. with Venmo, but you can pay your roommate your half of the Netflix bill. Venmo has also branched out into traditional banking services, albeit in a more limited capacity than PayPal.

Venmo is free to use. Credit card payments are subject to the 3% percent transaction fee that the card company charges, but debit card payments and transfers from a user's balance cost nothing.

The Bottom Line

Comparisons of Venmo and PayPal often conclude that Venmo is the superior service because of its ease of use. While that may be true, depending on the features demanded or the payment amount, PayPal could still be of more use than Venmo.

Key Takeaways

  • The first widely-known and -used digital wallet was PayPal.
  • In 2012, Venmo was bought by Braintree, and in 2013 Braintree was acquired by PayPal.
  • Venmo is partly a digital wallet, partly a social media feed.