“Just Venmo me” is not just a popular phrase among millennials in the U.S., but it is also a piece of the sharing economy revolution that this company has ushered in. This mobile payment service is one of the most popular among tech-savvy Americans.
Venmo dominates the market, according to Lend Edu’s data, with roughly 44% of the market share. The combination of the Venmo business model and the first mover advantage is the cause for this success.
Venmo, which was founded in 2009 and has its headquarters in New York, caters to the millennial demographic. Braintree purchased the company for $26.2 million in 2012, and PayPal bought it for $800 million a year later.
Venmo currently has over 70 million users, with continued growth projected in the future. Venmo is derived from the Latin words “vendere,” which means “to sell,” and “mo,” which is a contraction of “mobile.”
What Does Venmo Do?
Users’ checking accounts and debit or credit card accounts are linked to the Venmo app, which allows them to complete payment requests when transferring or receiving money online. Similar to making “friends” on Facebook, a Venmo user can request “charges” from people in their network by adding them to their app.
After receiving the payment request, the recipient can accept or decline it using their mobile device’s app. The recipient can move the funds to their specified bank account or connected card after receiving them, or they can keep them in their platform e-wallet.
How Does Venmo Work?
Venmo is a “peer-to-peer” mobile payment network that allows users to send money to other users or pay for goods and services purchased from merchant partners. Bill splitting is another important feature of the software, which allows you to share a restaurant bill.
Both parties must have the Venmo app and be registered with each other’s networks in order to send money via Venmo. The app looks similar to Facebook Messenger and allows users to send messages to one another, as well as use emojis.
It’s worth noting, though, that the service is only available to Americans with US bank accounts. Venmo also allows businesses to sign up and receive payments for goods and services through the app.
To be eligible, merchants must change their PayPal Checkout settings to include Venmo as an alternative payment option. Uber, Grubhub, Lulumon, and Poshmark are among Venmo’s merchant partners.
Venmo also provides users with a debit card that is linked to their account. Users may use their Venmo balance to pay for groceries, products, and services using the card, just like they would with a traditional debit card. Users can also receive paychecks through connected accounts and receive rewards from partner retailers.
How Does Venmo Make Money?
IIs Venmo a free service? To you, it’s mainly free. It does, however, have other revenue streams.
1. Credit Card Fees
When you use your Venmo balance, a debit card, or a bank account, Venmo does not charge you. If you pay with a credit card, however, you will be charged 3% of the total transaction amount.
2. Merchant Fees
PayPal’s acquisition has made it much easier for the corporation to tap into this revenue stream. Venmo is now accepted as a payment option by all merchants who accept PayPal payments. Merchants pay the same percentage of the fee as they would have paid to PayPal (2.9% + fixed charges).
Both the users and the businesses have benefited from this integration. Users can utilize their favorite mobile wallet, and companies can have free access to the social media network, which will help them attract more customers.
3. Instant Transfers
Are you tired of transferring funds from an e-wallet and then having to wait several days for the funds to appear in your bank account? If you use Venmo, you can say goodbye to those days because it allows you to make quick transfers. This was first announced in 2019. Previously, sending money to your bank may take anywhere from one to three days, depending on the situation.
You will also be charged a 1% fee on the quantity you send when transferring money. There is a $0.25 minimum cost and a $10 maximum fee. The journey takes no more than 30 minutes. Individuals are compelled to use this form of fast transfer because so many people require money as soon as possible, which benefits Venmo.
Pay with Venmo
Everyone who uses the Venmo app has access to the pay with Venmo feature. It allows a user to make a purchase from a certain vendor. You can select to pay using Venmo if you wish to make a purchase from one of the retailers who accept Venmo, such as Urban Outfitters or Foot Locker.
This is especially useful if the user does not want to use their credit card information to pay for things on the internet. Then, because the buyer paid with Venmo, a tiny fee is added to the order total. The fee for merchants is 2.9 percent plus $0.30 per transaction. Obviously, businesses will gladly pay that price because it is in their best interests. They will attract more customers by paying the fee and accepting Venmo payments, and it will still be beneficial to them.
Furthermore, many newer apps do not have traditional bank integration. This implies that you may not be able to use your bank account on some websites. In this instance, Venmo is an excellent choice. With this in mind, it’s easy to see how Venmo may make a profit.
Cash a Check
Cash a Check The platform made this service available so that users could cash in their salaries as well as government stimulus payments. However, there are a few conditions that must be met in order for this to be achievable.
A confirmed email address is required, as well as a Venmo Debit Card or Direct Deposit account. You must photograph the check in order to deposit the funds into your account. Venmo will review it first. The money will be deposited into your account if everything is in order and approved.
Venmo will charge you 1% for this service. Also, remember that you should cash in at least $5.
Interchange & Withdrawal Fees
In 2018, Venmo began issuing debit cards. As a result, everybody who registers for the platform will be issued a debit card. You can use this to go out with your pals and pay for beverages, meals, or other purchases. You may even divide the bill with your buddies when using the Venmo app, making it even more convenient.
Venmo is able to make money with the card, which is branded Mastercard. Interchange fees are collected from merchants by the platform. The fees are then shared between Venmo and Mastercard, who each receive a portion of the costs.
You can also get cash, but you’ll have to pay a little fee for this. ATM Domestic Withdrawal Fees, for example, will be $2.50, while Over-the-Counter Withdrawal Fees would be $3.00.
If you have a Venmo card, you can get cash back incentives from a variety of retailers, including Papa Johns, Dunkin’ Donuts, Chevron, and others. A portion of the purchase price is returned to your account through cashback schemes. As a result, you could be more likely to shop at these stores.
As a result, the partner, i.e. the merchant who provides you the cashback, will pay Venmo a referral fee, which means Venmo can profit from this service as well.
Finally, Venmo can earn money by paying cash interest on its balance. Venmo can utilize the money in your account to lend it to other businesses. This could be a financial institution such as a bank.
Following that, the bank pays them interest. According to Statista, every bank in the United States had a net interest margin of 3.35%.
Is Venmo Safe?
To secure transactions and protect you from unauthorized transactions, the application employs bank-level security and data encryption. It, on the other hand, does not recommend making payments to strangers and can’t help much if money is unintentionally paid to the wrong individual.
It also has the option of setting up a pin and touch id to access the program for added security.
Venmo announced a partnership with Uber in July 2020, allowing customers to pay for Uber and UberEats using the app. Its 2.9% business transaction charge could be boosted as a result of this arrangement.
Without a doubt, the market is crowded and fiercely competitive.
While Venmo is one of the most popular P2P payment apps, staying on top of the market as a dominant player requires successful expansion. They must continue to make an effort to increase the number of transactions at point-of-sale.
We’ll have to wait and see what the future holds for Venmo.