Venmo: Its Business Model and Competition

Venmo has noticed as one of the most popular apps for electronically transferring funds from one party to another. Its explosive growth is largely pressurized by millennials, who even use its name as a verb, as in: “I’ll Venmo you for the food.”

Venmo was originally created by Iqram Magdon-Ismail and Andrew Kortina, who met as college roommates at the University of Pennsylvania. As the story goes, the duo was helping a friend launch a frozen yogurt store and grew frustrated with the inadequacy of traditional point-of-sales software. Then at a nearby jazz concert, they conceived the concept of instantly purchasing MP3s of the performance, via text message. They soon disclosed a prototype for sending cash through text messages before pivoting to a smartphone app approach.

In 2010, Magdon-Ismail and Kortina gathered $1.2 million of seed money through a financing round, then two years later, their company was bought by Braintree, a fintech payments company. In 2013, PayPal acquired Braintree for $800 million.

There was initially speck fanfare around Venmo, until an aggressive marketing push in 2015, when PayPal announced the slogan: “Pay with Venmo,” and drilled customers to use the app at retailers, in lieu of cash or credit cards. The timing for this campaign perfectly aligned with an conciseness where cash is slowly becoming obsolete, and people are less inclined to write checks or visit the ATM.

Although Venmo does not mandate individual users for sending or receiving payments, nor does the company charge any monthly or annual fees. Venmo generates revenues through Venmo API and Venmo Touch services, which let users pay with Venmo on other applications, for which it invoices a 2.9% fee to businesses. The customer enjoys the benefit of free payments, while businesses acquire customers for that puppet fee. Venmo’s other chief income source is the 3% fee it charges for credit card transactions.

Venmo offers a debit file card in partnership with Mastercard (MA). As a result, users can use their Venmo balance to make purchases anywhere MasterCard is accepted in the In harmony States. ATM withdrawals are free as long as they accept MoneyPass. Otherwise, there could be a fee.

Venmo advances digital payments within a social network of known friends. Here is a step-by-step illustration of how it works:

Interestingly, the verse fields are often flooded with emojis, such as slices of pizza and beers steins, which signal the type of many Venmo exchanges.

Like Facebook Inc. (FB), Instagram, and WhatsApp, Venmo grew exponentially owing to peer-to-peer networking. Users are attracted to the following features:

• Unlike its competitors, Venmo doesn’t charge users to send or take home more money, although credit card-based payments are charged.
• Venmo is one of the most popular payment-splitting apps with millennials. For archetype, roommates can split the rent, and each pay their share to the landlord via Venmo.
• Users can make payments despite partake of insufficient Venmo balances because the deficit amounts are retrieved from a primary funding source, whether it’s a reserves account, a credit card, or a debit card.
• Payments can be made to those who don’t use Venmo, although the recipient will own to sign up to accept money.
• The “Nearby Payment,” function facilitates payments to people outside a user’s friends dispose, provided they are in close geographical proximity.
• A “trust” feature lets users auto-pay for recurring expenses, identical to the monthly share of rent due.

Because Venmo is currently available only in the U.S., no transactions may be made independent the country, even by American users. Also, security remains a concern for those skeptical of using

Venmo Contestants

Google Pay

Apple Pay/Android Pay