Venmo Payment Fraud Leads To $40M In Losses
Venmo, the digital money transfer service owned by PayPal, suffered payments fraud earlier in 2018 that played a role in the company posting losses that were higher than forecasted for the first quarter of this year.
The Wall Street Journal, citing internal documents it reviewed, reported that for the first three months of 2018 Venmo had operating losses of around $40 million, which was close to 40 percent bigger than what the company had planned for. The Wall Street Journal noted that expenses due to fraudulent transactions, otherwise known as the transaction loss rate, increased to 0.40 percent of overall volume at Venmo in March compared to 0.25 percent in January. The transaction loss rate includes losses due to fraudulent charges. The paper noted that its fraud woes haven’t been reported before and underscore how these vulnerable services that let people easily send money to friends and family can be exploited by fraudsters. Keeping hackers at bay has long been a problem for banks and FinTechs.
The paper noted that the increase in fraud at Venmo caught executives by surprise, and even prompted some executives to express concern that parent PayPal would miss first-quarter earnings results as a result. “This would have a major impact on our stock, brand, and position in the market,” wrote Benjamin Mills, Venmo’s top product executive, in an email to employees on March 22, reported the Wall Street Journal. “We cannot let that happen.” A spokeswoman for PayPal told the paper that during the first quarter Venmo rolled out new features, and that short bouts of higher losses usually happen following such rollouts. She said the loss levels for Venmo for the first quarter were under 0.35 percent and are now lower. “Venmo loss levels are lower than the overall average for PayPal and compare favorably to the industry,” she said.