PayPal Holdings Inc.’s digital money transfer platform, Venmo, a financial product considered an answer to crypto’s challenge, found an uptick in fraud related to the service, according to a report by the Wall Street Journal. While the company was expecting losses, nearly $40 million in total wasn’t something they planned.
Venmo Racks Up $40 Million Due to Fraud
“A spike in fraudulent activity earlier this year led to higher losses than the payments company had expected,” wrote Peter Rudegeair of the Wall Street Journal. “Venmo was hit by a wave of payments fraud earlier this year that helped push losses higher than the company previously expected and prompted it to shut down some user features to control the damage.”
Basically Q1 of 2018 stacked nearly $40 million in losses, “nearly 40% larger than the loss for which the company had budgeted, according to internal documents reviewed by” the Journal. The company was anticipating roughly half that amount. The report wasn’t able to track down the exact cause of the fraud.
Fortune summarized the company’s response, as it “limited and shut down certain features, while blacklisting tens of thousands of accounts. This included pausing an instant-deposit feature, which allowed transfer of funds in a Venmo account to a bank account in as little as 30 minutes for $0.25. The feature returned a few days later, according to a company spokesperson. Recently, Venmo increased its cost, now charging a 1% transaction fee.”
Loss Patterns Emerged
It stopped online transactions, forcing users through its app portal. The vast majority do use the app anyway, but a small percentage use the website for transfers. Nearly 15% of losses occurred online.
“Venmo loss levels are lower than the overall average for PayPal and compare favorably to the industry,” a spokesperson told Fortune. “When introducing new features, it is not unusual to see short periods of elevated losses. In Q1 of 2018, Venmo had multiple new features that were introduced and received exceptional customer demand. As loss patterns emerged, the Venmo team quickly updated the new features to prevent losses and protect customers.”
Companies like it and Zelle and Square Cash have long been considered the answer to cryptocurrency’s legacy banking system challenge. The argument has been to have such applications ape crypto and its frictionless feel, while still relying on trusted third parties. “With the new instant transfer feature,” the spokesperson continued, “that meant suspending the new feature for a few days and then reintroducing it. Suspending that feature temporarily was the right thing to protect customers. Venmo users have continued to enjoy those new features with Venmo’s protections against unauthorized access and at loss levels that are inline or better than our expectations.”
CONTINUE THE SPICE and check out our piping hot Videos. Our podcast, Milk, might help sooth that crypto burn. Follow CoinSpice on Twitter. Join our Telegram feed to make sure you never miss a post. Drop some BCH at the merch shop — we’ve got spicy shirts for men and women. Don’t forget to help spread the word about CoinSpice on social media. Thanks!