Today I received an email from Venmo:
Subject: Upcoming changes to Crypto pricing
Effective 9am CT March 21, 2022, the fee for buying or selling cryptocurrency on Venmo will be changing for transactions under $200. For additional details, please take a look at our Fees Page.
I don't use Venmo to purchase crypto but I was curious. Why would Venmo change their fee structure? My initial guess was that they were lowering fees to better attract their target market: new cryptocurrency investors making small purchases. Coinbase has been getting aggressive in their attempts to capture retail investors and Venmo is undoubtedly feeling the heat.
My guess was completely wrong. Venmo is actually raising average fees on users investing less than $200!
Let's take a look at Venmo's old fee structure:
| Amount | Fee |
|---|---|
| $1.00 - $24.99 | $0.50 (minimum fee) |
| $25.00 - $100.00 | 2.3% |
| $100.01 - $200.00 | 2.0% |
| $200.01 - $1000.00 | 1.8% |
| >$1000+ | 1.5% |
Fairly standard stuff. Higher than Coinbase Pro's 1% combined taker/maker fee but relatively inexpensive. Here's Venmo's new fee schedule:
| Amount | Fee |
|---|---|
| $1.00 - $4.99 | $0.49 |
| $5.00 - $24.99 | $0.99 |
| $25.00 - $74.99 | $1.99 |
| $75.00 - $200.00 | $2.49 |
| $200.01 - $1000.00 | 1.8% |
| >$1000.01 + | 1.5% |
The fees for transactions over $200 will stay the same. Smaller trades are subject to a new flat fee.
It's difficult to compare these fees directly. One approach would be to assume an average trade value for each bracket that's exactly in the middle of the range. However, Venmo has increased the number of brackets from five to six so we can't do that.
Instead, let's just choose some arbitrary purchase values and see how our fees change:
| Purchase Amount | Old Fee | New Fee |
|---|---|---|
| $1 | $0.50 | $0.49 (-2%) |
| $10 | $0.50 | $0.99 (+98%) |
| $25 | $0.57 | $1.99 (+246%) |
| $30 | $0.69 | $1.99 (+188%) |
| $50 | $1.15 | $1.99 (+73%) |
| $65 | $1.49 | $1.99 (+34%) |
| $75 | $1.72 | $2.49 (+39%) |
| $110 | $2.20 | $2.49 (+13%) |
| $150 | $3.00 | $2.49 (-17%) |
| $200 | $4 | $2.49 (-37%) |
Venmo's new pricing results in an unfavorable and confusing dynamic. Purchasing an amount on the low end of a bracket results in a higher fee. Additionally, your percentage fee varies wildly as you approach $200.
While uncool, Venmo is making a good business decision here. Their crypto exchange has the highest profit margins of any of their services and they want to maximize its revenue. Venmo knows users purchasing small amounts of crypto aren't as sensitive to fees versus larger buyers. So, they increase fees on those who won't notice it. They also might want to push buyers to purchase more than $100 of crypto at a time and the new fees provide a stronger incentive to do so.
What do you think? Is raising fees on the smallest investors unethical? Are flat fees on trades just plain stupid? Does any of this even matter?
Thanks for reading.