P2P Payments For Business Use: What You Need to Know

P2P payment providers like Venmo, Zelle, and Cash App make it easy for individuals to send and receive money for free with friends and family. It’s a quick and convenient way to split a restaurant bill or pay a roommate for utilities without having to deal with cash.

Aspiring entrepreneurs who have used these platforms in their personal lives might be tempted to use them as a way to avoid payment processing fees for business transactions. 

After all, P2P transactions are generally free—whereas payment processing fees generally cost about 3%.

So, can you use P2P payments for business?

Technically, yes. But you’ll typically need to set up a business account with the platform. This no longer makes it free to accept those P2P payments, which defeats the purpose. You can get cheaper payment processing costs elsewhere and avoid headaches like having a rolling reserve or dealing with funds on hold.

Read on for a more in-depth explanation of specific P2P payment providers and their rules for businesses. 

Can Businesses Accept Venmo?

Yes, businesses can accept Venmo—but you’ll likely need to set up a Venmo business account. 

According to Venmo, “the only way to accept payments for goods and services is to be explicitly authorized to accept Venmo purchases.” 

There are two ways to do this while still following Venmo’s rules:

• Apply for a Venmo business profile
• Or have the sender tag the payment as a purchase

Outside of these two scenarios, Venmo does not allow payments between users for business transactions. 

If Venmo finds out that you’re using a personal profile to accept business transactions (without the buyer tagging the purchase as a payment), then they can hold your funds and terminate your account. 

Venmo charges 1.9% + $0.10 per transaction for sellers to receive money. There are no setup fees or ongoing monthly fees. You can read more about Venmo fees for businesses here. 

Can Businesses Accept Zelle?

Zelle is designed for consumer banking, but businesses can use it to accept payments if their business bank account offers Zelle and the customer has enrolled with Zelle through an eligible bank account.

Due to these strict requirements, you couldn’t rely on Zelle as your only way to accept payments for your business. Even though over 2,000 banks currently offer Zelle, the customer would still have to enroll in Zelle before they could send you a payment. 

It’s also worth noting that each bank sets its own fees and transaction limits for purchases through Zelle. For example, here’s a look at Bank of America’s Zelle limits for both individuals and small businesses:

Chase allows businesses using Zelle to send up to $7,500 in a single transaction, but the limits for individuals (your customers) are much lower and based on a tiered system—starting at $500 per day. 

Again, this is just one example that shows how drastically different the Zelle rules are based on the bank. 

Can Businesses Accept Cash App?

To accept payments for goods and services with Cash App, you’ll need to create a designated business account. 

Cash App charges a 2.75% processing fee for business accounts each time money is received. 

Cash App is the least popular P2P payment platform of the three. It has just 51 million users, compared to over 90 million using Venmo and 120 million Zelle accounts. That said, Cash App is growing fast—more than tripling its user base in the past five years.

Is It Legal For Businesses to Accept P2P Payments Like Venmo, Zelle, and Cash App?

Yes, it’s legal for businesses to accept Venmo, Zelle, Cash App, and other P2P payment solutions. 

There aren’t any state or federal laws governing this.

However, just because it’s legal, it doesn’t mean that you can do it. You’ll still need to follow the rules and regulations set forth by your bank and the rules imposed by the payments platform. Otherwise, your account can be terminated, and you may not be able to access your funds. 

Why It Doesn’t Make Sense to Use P2P Payment Providers For Business Use

Sending and receiving money for free is the whole lure of using P2P payment providers. But that’s not the case for businesses—you’ll still need to pay fees, which just isn’t worth it.

Unless you’re just running a small side hustle, like cutting hair on the weekends or setting up a small stand at a weekly farmer’s market, it just doesn’t make sense to use these providers for business or commercial transactions.

• There are strict transaction limit rules for both sending and receiving money.
• Fees are higher compared to other payment processing options.
• Success is contingent on the customer also having an account (and willing to use it).
• Some platforms have complex tax reporting rules, and they may be required to withhold 24% of your funds for the IRS.
• Your account could be terminated and you might not receive your funds if you violate the platform’s rules for businesses. 
• Most customers want to pay using a credit card, which doesn’t work for most P2P platforms (and a higher fee will be imposed when it does work).

Overall, P2P platforms are labeled peer-to-peer for a reason—they’re just not really suitable for business use. You could get away with it in the early days of a small, solo startup. But it’s not scalable and doesn’t make sense for the vast majority of businesses. 

Alternatives Payment Acceptance Options For Small Businesses

Instead of using a P2P payment provider for business transactions, you have two main options to consider:

• Use a Payment Aggregator: Payment aggregators like PayPal and Square make it easy for businesses to start accepting credit card transactions both in-person and online without a lengthy underwriting process. You simply sign up and can typically start using it right away. But the tradeoff for this simplicity is cost. Aggregators typically operate on a fixed-rate structure, and there’s rarely room for negotiation if you’re new and not processing a high volume of payments.
  
• Get a Merchant Account: Getting a merchant account through a traditional payment processor is the best way to get the lowest possible rates on credit card processing. It can take a bit longer to apply, get approved, and ultimately get set up. But these extra steps are well worth it for the long-term savings. If you go this route, make sure to get an interchange-plus contract with your provider.

Lots of new businesses like the idea of using an aggregator because it’s so easy. However, it’s going to make things a lot more difficult for you in the long run as your business grows and your processing fees cut into your profit margins. 

But a merchant account on an interchange-plus plan will give you the lowest rates and the most flexibility over time. 

Final Thoughts

P2P providers are built for personal use amongst individuals—not businesses. 

Legitimate “free” payment processing doesn’t really exist. P2P platforms like Venmo, Zelle, and Cash App aren’t some loophole that you can use to avoid fees.

Aside from a one-off transaction, they’re not sustainable options for serious business users—and you’ll end up paying higher transaction fees than you would with a traditional processing account.