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Venmo Dispute & Chargeback Guide for Merchants in 2024
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Venmo Dispute & Chargeback Guide for Merchants in 2024

This guide will simplify Venmo’s dispute resolution process and chargebacks. Keep reading to learn more.
Author
Theodore Sterling
Category
Business
Date posted
July 26, 2024
Time to read
11
minutes

I’ve considered using Venmo because it has gained popularity over the years. Before deciding whether I’d use it, I wanted to know how they deal with chargebacks. I’m sure you’d also like to know.

I’ll explain how disputes and chargebacks work with the platform. I’ll then provide ways to prevent both and other relevant information.

Let’s see if Venmo is worth using.

Key Takeaways

  • Chargebacks happen outside of Venmo.
  • Disputes happen inside Venmo, and the platform oversees them.
  • They offer Venmo Purchase Protection Program for qualifying Goods and Services.
  • There’s no chargeback fee.
  • No known chargeback threshold.

Know the Differences Between Venmo & Venmo for Business

Merchants can’t use Venmo, but they can use Venmo for Business.

And since this guide is for merchants, we should cover the differences.

Venmo is a popular peer-to-peer payment app. Friends use it to split bills or to pay for transactions on platforms like OfferUp.

Their business plan allows online sellers to accept payments through their integration with PayPal or Braintree.

Or you can create a business profile and accept one of the following payment methods:

  • Digital wallets
  • Cards
  • Venmo

The addition of cards to business profiles opened the doors to customers being able to start chargebacks. We’ll talk about that later.

As of 2024, more than 2 million merchants use Venmo Business [1]. Likely because of their lack of monthly costs and low fees (1.9% plus $0.10 per transaction). However… One source suggests they have a 0.65% market share in payment gateway technology.

Compared to PayPal’s 37.87% share.

With such a low share, it’ll take a while before customers trust it as much as PayPal and Stripe.

Summary: Venmo for Business offers merchant tools, fees, and support, unlike personal Venmo.

Venmo Has Disputes Instead of Chargebacks

Venmo doesn’t have a chargeback system. Instead, they have disputes, which are the same as PayPal’s claims processes. I’ll go over the details of this process in a bit.

In short, buyers and sellers submit evidence to Venmo, and they pick a winner.

A customer could escalate the transaction to a chargeback at any point. But this happens outside Venmo. And in that scenario, Venmo acts as an acquirer for the merchant. Meaning, they gather evidence and submit it to the customer’s bank (issuer).

When chargebacks do happen, Venmo’s support articles suggest they’ll freeze a customer’s account as a result [2]. From there, they’d need to reinstate it by contacting Venmo’s customer service. This doesn’t need any intervention from you.

Some disputes may fall under the Venmo Payment Protection Plan. I’ll explain what it is in a second.

To fall under the plan, customers must meet these requirements:

  • Customer used a Venmo Debit Card (including Teen Debit Cards)
  • They sent a payment using the Pay and Request feature
  • Payments tagged as "goods and services"
  • The customer bought from an authorized merchant

And What is The Venmo Payment Protection Plan?

  • Cost: 2.99% per transaction
    • If You Have Business Profile: 1.9% + $0.10 per transaction

Venmo Purchase Protection could reimburse merchants for disputes regarding various situations. The reimbursement includes the full purchase price and shipping costs.

Eligible dispute types include:

  • Buyer didn’t receive the product
  • Product isn’t as advertised
  • Damaged products

To qualify, the seller must [3]:

  • Ship to the buyer's listed address.
  • Respond quickly to requests for information.
  • Sell a physical item that you can ship or deliver in person.
  • Provide proof of shipment or delivery.
  • Ship within seven days of payment unless agreed otherwise.

You’ll qualify for this service if you mark the transaction as “Goods and Services.”

Summary: Venmo uses disputes instead of chargebacks for quicker issue resolution.

Chargebacks vs. Venmo Disputes

In short:

  • Disputes: Happen in Venmo, are less costly, and don't involve the customer’s bank.
  • Chargebacks: Outside Venmo, costly, takes months, involves buyer’s bank.

Both protect users from fraud and seller malpractice. Each has different processes and consequences, though.

Chargebacks reverse transactions through banks. They are formal processes that involve more steps and documentation. They often result in chargeback fees and could land you in dispute monitoring programs.

Such programs could result in:

  • Higher chargeback fees
  • Required audits by third-party companies to help you reduce chargebacks
  • Review fees (often $12,000+)
  • The loss of your ability to process a certain card (e.g., Visa

Venmo disputes are handled within the app. They are often quicker and don’t result in massive consequences.

As a business, it’s ideal for you to deal with disputes. I think you can see why.

Summary: Chargebacks are formal and lengthy. Venmo disputes are quicker and simpler.

Typical Reasons for Venmo Disputes

You’ll see one of the following dispute types in Venmo:

  • Item not received: Buyer didn’t receive their item.
  • Not as described: Item wasn’t as advertised.
  • Credit not processed: Seller didn’t provide buyer with a credit.
  • Duplicate: Multiple payments for the same item.
  • Paid by other means: Shopper bought a product with a different payment method than listed.
  • Incorrect transaction amount: Merchant charged buyer the wrong price.

Venmo will require you to present evidence based on the type of dispute. Let’s say a customer disputes a transaction and claims it’s a duplicate. You’d need to provide proof that you sent multiple items to the buyer. They list all the evidence in their help center.

Customers can’t dispute orders if they just didn’t like the item, it arrived as described, or if it was listed as “used.”

Are chargeback types the same? In a way, yes.

Here are the most common types of chargebacks:

  • Friendly Fraud (Chargeback Fraud): Customer disputes a legitimate transaction.
    • Falsely claims the transaction was unauthorized or that they did not receive the goods or services.
  • True Fraud: Unauthorized transactions resulting from stolen payment information.
    • Fraudsters use someone else’s card or account to make purchases.
  • Merchant Error: Mistakes made by the merchant.
    • Examples include charging the wrong amount or duplicating transactions.

There are a lot more chargeback reasons, but they’ll depend on the reason code. And the reason code will vary by provider.

Summary: Unauthorized transactions, mistakes, and fraud often cause Venmo disputes.

Time Limits

Let’s first talk about merchant time limits:

  • Respond to a Chargeback:

Venmo doesn’t have any documentation regarding their disputes. You’ll need to keep an eye out for their messages. See what they say regarding your time limits.

If you’re dealing with a chargeback, you must adhere to the time limits above. They’ll vary by the card provider the customer used.

Remember the Venmo Purchase Protection Program I mentioned? Customers must file a dispute within 180 days of the date they made the transaction to qualify.

Okay, and how long do customers have to file a chargeback?

Here:

  • Visa: 120 days
  • Discover: 120 days
  • American Express: 120 days
  • Mastercard: 90 – 120 days

The actual times will vary by card provider and reason code. For instance, Discover has a Good Faith Investigation chargeback reason code. It allows customers to file chargebacks years after their transaction. So long as there’s suspected fraud.

You’ll need to check each of the above guides to learn about each card network’s time limits.

Does Venmo Have a Chargeback Threshold?

Venmo does not use traditional chargeback thresholds. It manages disputes internally. This system differs from credit card companies. There are no specific limits for disputes.

There are stories that having too many chargebacks could result in Venmo shutting down your business profile. But they don’t specify an amount. In general, keep your chargeback rate under 1%.

Summary: Venmo has no chargeback threshold but monitors high dispute rates.

Venmo Chargeback & Dispute Process

Disputes — in Venmo — happen in Venmo and are among Venmo, the merchant, and the buyer. Chargeback disputes happen outside the platform and involve the customer’s bank and possibly card networks.

I’ll explain how both processes work throughout the following sections.

1. Dispute Process

Let’s imagine the customer already filed a dispute with Venmo.

Here’s what’ll follow:

  1. Receives the customer’s dispute submission.
  2. Reviews the details of the dispute.
  3. May request additional information or documentation.
  4. Contacts the other party involved in the transaction.
  5. Investigates the dispute.
  6. Makes a decision based on the evidence and information provided.
  7. Communicates the decision to both parties.
  8. May reverse the transaction if it determines the dispute is valid.

Everything that I’ve looked through suggests that Venmo offers no buyer and seller protections. That’s good for the seller in disputes because Venmo may favor them. That’s horrible for service adoption, though.

It’s possibly a contributing factor to why their market share is so low.

2. Chargeback Process

You may get unlucky and deal with a chargeback instead of a dispute.

Here’s what’ll happen:

  1. Cardholder contacts their bank or credit union to dispute a Venmo transaction made with their card.
  2. Bank reviews the dispute and requests evidence from the cardholder.
  3. If the bank finds the dispute valid, it issues a chargeback, reversing the transaction and returning the funds to the cardholder.
  4. Venmo notifies you of the chargeback and offers an opportunity to fight it.
  5. Merchant can choose to dispute the chargeback by providing evidence to their Venmo.
  6. Cardholder's bank and Venmo exchange information and evidence regarding the dispute.
  7. Bank or card network reviews the evidence and makes a final decision on the chargeback.

Venmo plays the role of the acquirer in the chargeback process. The acquirer is the merchant’s bank or payment processor.

They do the following during the chargeback process:

  • Let the merchant know when the buyer initiates a chargeback.
  • Collects evidence and documents from the merchant.
  • Delivers evidence to the customer’s bank (issuer).
  • Debit the merchant’s account (funds reversal).

Note that they don’t make any decisions during the chargeback process. Again, they’re only in charge of disputes on their platform.

What Even Are Chargebacks?

A chargeback dispute is a process where a cardholder disputes a transaction with their bank or card issuer. Requesting a reversal of the charge. Many banks and card networks will use the terms “disputes” and “chargebacks” interchangeably.

Some may also say “chargeback disputes.”

This can cause confusion in some circumstances. Venmo labels its resolution process as “disputes.”

Anyway.

This allows the cardholder to contest unauthorized or incorrect charges. I went over the process. It’ll vary by provider, but I gave an example of the typical process.

Chargebacks originated from the Fair Credit Billing Act. Providing consumer protection against fraud, billing errors, and merchant disputes.

While it does help customers, it has cost businesses more than tens of billions a year [4]. And it doesn’t help that many customers may abuse this system through chargeback fraud.

Doesn’t this sound like a refund?

Summary: Chargebacks are a process that can result in the forced reversal of funds from the merchant.

Aren’t Chargebacks Just Refunds?

Sellers initiate refunds, which are voluntary and don’t require additional fees. However, payment processors won’t refund you on payments done through them. Thus, you’d lose a small amount from refunds — aside from the product’s sale.

Chargebacks, forced by the customer's bank, are more detrimental. They not only lose you revenue and fees but also incur additional chargeback fees.

High dispute rates can lead to:

  • Increased processing fees
  • Account restrictions
  • Termination of your merchant account
  • Enrollment in programs like Visa's Dispute Monitoring Program (VDMP)

Such programs can lead to review fees, which could cost tens of thousands of dollars. And they’re often what lead to account terminations.

Summary: Refunds cost revenue and fees. Chargebacks cost more, and harm the merchant's reputation.

How to Prevent Venmo Disputes & Chargebacks

Ways to prevent Venmo chargebacks (and disputes) are the same as preventing any other chargeback.

These are the tips I use:

  • Provide detailed descriptions of products and services.
  • Ensure customers understand terms and conditions.
  • Confirm transaction amounts before processing payments.
  • Ensure services are delivered as promised.
  • Resolve issues before they escalate to disputes.
  • Keep detailed records of all transactions.
  • Document communications and agreements with customers.
  • Use security measures to prevent unauthorized transactions.
  • Verify customer identities when necessary.

Yes, those are vague. But that’s all you can do to protect yourself from chargebacks and disputes. Some customers may want to commit chargeback fraud. There’s no way to prevent that.

Ensure you document transactions and communication with the customer. Any evidence could deter the buyer from filing illegitimate chargebacks.

If you have a high chargeback rate (usually over 1%), consider hiring an analyst. They’ll review your history and make actionable suggestions that can reduce your chargeback rates.

Summary: Prevent chargebacks by having strong fraud monitoring software and by providing good service.

How Do I Fight & Win Venmo Disputes & Chargebacks?

Here are some tips I use to fight Venmo disputes and chargebacks:

  • Keep detailed records of transactions.
  • Provide clear receipts and messages.
  • Respond to Venmo's requests quickly.
  • Evidence is key.
  • Show proof of delivery. Confirm the transaction amount.
  • Good communication helps.
  • Stay polite and factual.
  • Understand Venmo's policies.
  • Knowing the process aids responses.
  • Aim to resolve issues early. Good customer service reduces disputes.

There’s no “secret weapon” to winning disputes.

But good preparation can improve your chances of winning. By the way, across all industries, merchants win an average of 30% of chargebacks. Then, they’ll win 43.82% of friendly fraud chargebacks and 9.27% of true fraud disputes [5].

This win rate will vary by industry and price point. We mention them in a separate guide.

None of these numbers apply to Venmo. They don’t have any published data.

If you receive a chargeback from a Venmo transaction, they require you to contact them at chargebackdisputes@venmo.com. From there, you’ll send them evidence and receive updates..

When compiling your email, they request you do the following when messaging them [6]:

  • Accept or reject liability for a chargeback
  • Provide evidence such as:
    • Valid tracking information
    • Proof of refund (inside or outside PayPal)
    • Communication between sender and recipient
    • Any additional relevant information
Summary: Keep records, respond quickly, and understand policies to win Venmo disputes.

FAQs

How Do I Dispute a Transaction on Venmo?

If this is for an online purchase, you’ll need to contact Venmo. Otherwise, navigate to the Me tab, select the transaction you want to dispute, then tap Need Help?

From there, choose the situation that best fits your issue, tap Next, and then tap Submit Issue. Venmo may require you to reset your password.

Conclusion

Venmo does offer some protection for merchants with their Purchase Protection Plan for a price, but that’s all the help you’ll get. If you want to prevent disputes and chargebacks that could come from their transactions, you’ll need more help.

That’s where we come in. We teamed up with alert providers like Ethoca to let merchants know when they’ll potentially face a chargeback. That way, they can fix the issue before it escalates. Learn how we can help.

Sources

Theodore Sterling
Educator
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