I'm fortunate to spend a lot of time with high school and college students, and I can assure you that the ones I know rarely, if ever, see the inside of a bank, much less write a check. They almost never visit an ATM. They live almost entirely in a world of e-money and debit cards. Why should you care? Because many young people today handle money only through their smartphones, and if you're going to interact with them, you'd better get familiar. Quickly.
There's good news and bad news here. The good news is that (most of) the apps handling consumer-based money transfers are simple and straightforward. The bad news is that the space is very Balkanized, and many apps require both sender and receiver to use a common platform.
You can choose from myriad platforms, more than can be covered in this space. So we'll concentrate on the platforms that are most popular among generations Y and Z: Venmo, Cash App, and Zelle.
These "next generation" e-money moving platforms are akin to a cash transaction, and they are already deeply entrenched among younger generations — to the point that the noun "Venmo" is regularly used as a verb, as in "just Venmo me $10."
When it was launched about 10 years ago, Venmo connected people only through Facebook (back when the user base skewed younger), and the interface remains very social media-oriented today. When you sign up for an account through the website or the mobile app, you'll immediately see the social media feature showing the transactions of you and your friends. You have the option to turn off that posting feature.
You don't have to add money to your Venmo balance to start sending money. Rather you simply link a bank account, credit card, or debit card to your account. Once the accounts are linked, money comes from your funding source, unless you have sufficient funds in your Venmo balance to cover the entire payment.
You transfer money using someone's email address or phone number. If the recipient doesn't have a Venmo account, they're considered a "new user" and are required to create an account to accept the money. You can cancel the payment if the receiver doesn't accept the money.
If you are a recipient with a Venmo account, your money will appear in your account balance when someone sends you a transfer. You can leave money in Venmo or transfer cash to a debit card/bank account. The transfer can be "instant" or "standard." Instant transfers go to your account within 30 minutes. The fee for an instant transfer is 25 cents for amounts up to $250 and 1% on larger transfers to a maximum fee of $10. Standard transfers go through the ACH network. This transfer takes one to three business days but is free.
Venmo has many competitors among the younger crowd, but two stand out: Cash App, which was launched by Square in 2015 and reportedly surpassed Venmo in monthly downloads in early 2019; and Zelle, which was launched in 2017 by Early Warning Services, a private financial services company owned by Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
While there are "under the hood" differences between Venmo, Cash App, and Zelle (and a host of smaller upstarts), they are essentially the same in that they provide simple "on the go" cash movement services via smartphones.
As CPAs charged with advising our clients, it's incumbent on us to be knowledgeable about these payment platforms. The young people that use these apps will soon be (and, in many cases, already are) running businesses, and they'll be our clients. One day soon one of them will likely ask, "Can I pay you via Cash App?" Your answer had better be, "Sure ... here's my account name."
Greg LaFollette, CPA/CITP, CGMA, is a strategic adviser with CPA.com, the commercial subsidiary of the AICPA. To comment on this article or to suggest an idea for another article, contact Jeff Drew, a JofA senior editor, at Jeff.Drew@aicpa-cima.com or 919-402-4056.