by Grace Lochner
The App Venmo was created in 2009 by Andrew Kortina and Iqram Magdon-Ismail so that they could pay each other without the use of cash or a check. Venmo sends money online, but it isn’t a holding account. Users can connect a debit or credit card to the app, which then can send and withdraw money from the app. As technology continues to advance, Venmo is on a surging storm with over forty-million users--more than some commercial banks. So what is drawing so many people to the app?
Venmo has omitted the use of transaction fees, drawing in college and high school students who may not have their own credit or debit card yet, but may need to exchange money with friends or peers. The revenue for the app comes from the 30 cents and 2.9 percent transaction fee solely for businesses, in addition to the one percent fee for users who want to withdraw money straight from their card. With over two million businesses using the app and accepting transactions as a form of payment from customers, the app is not struggling to see monetary gains.
In addition to a lack of transaction fee for the everyday user, Paypal’s CEO, who also now owns Venmo, Dan Schulman, stated in a 2015 interview that the “secret sauce” is the social aspect of the app where users can use emojis and include little captions with their transactions, and view others purchases or receipts as well. The business of marketing plays a huge role in the draw of the younger generations, and even turning heads of those in Generation X and the Baby Boomer generation.
As shown in the graph to the left, Venmo’s revenue has steadily increased since 2015 to over $450 million, the largest surge being between 2019 and 2020, thanks to COVID-19, and most retail becoming almost entirely online for a large period of time. Byrne Hobart from Marker Medium reports, “according to a new survey, 54% of consumers feel concerned about using paper money and coins as a result of Covid-19.” We see manh are adapting to a masked, socially distant lifestyle, some even going as far as to call it the “new normal,” so it is fair to assume that the same can be said with contactless banking and the future of monetary transactions. Not only are companies switching to touch-free payment methods such as Venmo for the health and safety concerns with COVID-19, but also with the unemployment rate at such a high amidst the pandemic, Venmo has created a way for users to accept payment from family and friends while avoiding the in-person banking experience. Overall in the past year the use of Venmo has been surging and helping many people and businesses stay afloat.
When it comes to banking and the future of banks, Venmo does not completely eliminate the need for them, but it does pose a significant threat to the traditional way of spending money. Digital.hbs.edu states, “historically, banks have relied on large, stable low-cost deposits from customers in order to then offer higher yielding loans and other bank products. In addition, credit cards rely on transaction fees as well as late fees from consumers.” So while the rise of Venmo does not necessarily mean that these revenue sources will completely die, it does mean that the transaction fees and the overall cash flow will be distributed over a larger array of apps, banks, and services. In the future, should Venmo focus on increasing their consumer base, the convenience with the app will increase (as it should with more of the overall population using it), as well as the possibility of increased foreign transactions without fees or the need for cash, and, in turn increased globalization.
Though the rise of the app seemed to have boom within the past year with the CoronaVirus Pandemic, Venmo’s growth has been steadily increasing since its origin in 2009, and there are no signs of slowing down any time soon.
Works Cited
Gabrielle. “Venmo - Should Banks Be Worried?” Technology and Operations Management, digital.hbs.edu/platform-rctom/submission/venmo-should-banks-be-worried/.
Hobart, Byrne. “No One's Splitting the Bill, But Venmo Is Surging.” Medium, Marker, 9 Sept. 2020, marker.medium.com/no-ones-splitting-the-bill-but-venmo-is-surging-47617013ebb0.
“Venmo Revenue and Usage Statistics (2020).” Business of Apps, 30 Oct. 2020, www.businessofapps.com/data/venmo-statistics/.
Venmo and online transactions definitely seem like the way forward with and after COVID as currency moves more digital. The overview you provided about Venmo was informative and direct, and I'm impressed to see that their no transactional fee (between non-business Venmo accounts) business method is working so well for them. Something I did notice is the Venmo revenue table only shows the projected income of 2020, and not the actual income. Given the pandemic and the virtual state of everything, it's possible that the newer numbers are much higher than the ones projected at that point in time.
ReplyDeleteI liked how you highlighted the large variety of people who were interested in Venmo, but I believe that older generations of people are unlikely to consider Venmo in large numbers out of both a lack of knowledge about technology and a serious fear of an increased risk of theft. I also think that younger generations are increasingly more likely to use online payment options such as Venmo over Cash or checks due to their experiences with Covid.
ReplyDeleteFrom an overall viewpoint, it only makes sense that this app took off. Physical currency is becoming less and less common. Most currency is digital today, so having an app that will transfer it automatically will and does speed up transactions. There is a difference between and idea that someone thinks people will want, and and idea that people will rely on and need. Transaction apps such as Venmo will soon be the second option.
ReplyDeleteThis is really interesting! I wonder what money transactions will look like in the future. If this trend continues, will we eventually stop using physical money all together? Once digital services like Venmo become even more accessible to everyone, what would be the point in carrying around cash that you can lose or misplace?
ReplyDeleteI love Venmo. I use it way too often. Venmo is the only way my family exchanges money. I have a very big family & most of my siblings are older than me, so we all have venmo. I never have cash because I always use Venmo. The down side to never having cash is paying tips when you go out to eat. I have never gotten a fee from Venmo, but I know if you don't transfer your money right away they charge you a fee. This app makes transferring money so much easier & faster. I think that Online mobile money transfer apps are only gonna become more popular.
ReplyDeleteI like the information you presented us as well as the charts you used. I think that venmo became very popular during the early months of COVID, where people did not use cash as often. I personally use venmo and paypal a lot because it is really easy to pay others. I think sky is the limit for transfer apps.
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