Venmo raises instant transfer fee to 1 percent amid pressure from rivals

As Venmo does battle with Zelle and Square for consumers' P2P payments, one thing is clear: Innovation is not cheap.

Starting on November 6, 2018, Venmo will charge consumers up to a 1 percent fee to use the instant transfer feature on their Venmo accounts.

According to the update in the Venmo User Agreement FAQs, “A $0.25 fee is deducted from the transfer amount for each transfer (effective on or after November 6, 2018, this fee will be changed to 1% of the transfer amount with a minimum fee of $0.25).”

Andrew Harrer/Bloomberg

A spokesperson for PayPal, which owns Venmo, said the change reflects the value of Venmo's service.

Competition from Zelle has been significant, as the bank-led network experienced strong money transfer volume growth in its latest quarter. Also, arch-rival Square with its Cash App has attracted more than 7 million active users as of the end of last year.

The standard process for moving money into and out of a Venmo account is to use a linked checking account and the ACH network, a process that can take up to three business days. The instant transfer process uses an original credit transaction (OCT) on the card networks’ debit card rails to move money from Venmo to a customer’s checking account. The OCT process can take up to 30 minutes, but typically occurs within seconds if not minutes.

Venmo has been struggling as of late with its growth despite recent announcements such is the ability to Pay with Venmo when using the Uber ride share service. Earlier this year Venmo pared back its support for browser-based payments.