Legal Seminar, Denver, CO

071018 Discussion Draft

o Venmo markets to businesses, seeking to attract them through access to the social network that is also connected to Venmo, in which authorized purchases go into a “feed” or list that can be accessed by other friends of the user. https://venmo.com/business (“Your business just got access to lots of social friends.”) o Venmo payments to businesses have some consumer protections. See https://venmo.com/legal/us-user- agreement/#paying_in_apps_with_venmo (describing protections). Payments to other Venmo users do not. See id. If you don’t like the purchase, you are told to contact the vendor. If that doesn’t work, contact support, but no guarantees here. See https://help.venmo.com/hc/en-us/articles/217042938-What-do-I-do-if- there-s-a-problem-with-my-purchase- o Payments to the wrong person may also require their cooperation, as funds are made available immediately if they are a regisntered user. See https://help.venmo.com/hc/en-us/articles/209681208-I-paid-the- wrong-person- But at least that person may be known, assuming KYC was effective and they continue to own the account. o Once money is in the Venmo digital wallet, there are not fees for transferring it. But if you want to transfer money back into your account, there is a fee of $.25. Credit card transfers also incur a 3% processing fee unless they involve an Authorized Merchant Transaction. See https://venmo.com/about/fees/ o Authorized Merchant Transactions impose fees on merchants comparable to credit cards – 2.9% plus 30 cents. There is no free lunch here. See http://fortune.com/2016/01/27/venmo-business/ In fact, given that this is fed from a bank account and based on ACH, taking Venmo is more expensive that taking a debit card. But you get the network benefit, if that is valuable to you. And you get access to hipster Millenials, which reputedly spend on experiences more than things. See https://www.forbes.com/sites/blakemorgan/2015/06/01/nownershipnop roblem-nowners-millennials-value-experiences-over- ownership/#2fc9b2085406 . For those curious in detailed spending

data based on different age and demographic groups, see https://www.bls.gov/opub/mlr/2018/article/fun-facts-about- millennials.htm .

2. Credit Card systems. Credit card fees are a major cost for many merchants. Those fees support a vast network and sometimes lavish benefits for consumers who use them. Apart from the annual card fees and from interest/fees imposed on consumers who use them for borrowing, merchants are bearing a significant portion of these costs. a. One innovator in this area drawing recent attention from the investor community is Adyen, which recently launched an IPO. See “Silicon Valley’s Favorite Payments Firm Adyen Cashes In, Wall Street Journal, June 6, 2018, at B14.

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