Thanks to Fintech, everyday transactions to transfer money to friends and family are readily handled using apps like Venmo. As a free app, Venmo has enjoyed a lot of popularity and success. However, if you are curious about how Venmo makes money, you will want to continue reading.
How Apps Like Venmo Became Million-Dollar Companies
When it comes to money, apps like Venmo understand that transforming a financial transaction between friends and family can include some social interaction and fun.
Peer-to-Peer sharing platforms are an increasingly popular method that younger people are paying back buddies for a favor, splitting a check, or sending some cash to play nice.
The PayPal-owned app Venmo has put a halt to awkwardly reaching out for a physical debit card or checkbook, and instead allows users to send money via chat or text in seconds.
Platforms like Venmo have enjoyed much success because the platform is accessible, free to use, user-friendly, and sending money or receiving money is a lot more fun when there is an emoji attached.
However, despite the wild success of payment apps like Venom, it does beg the question, How does Venmo make money?"
Good question. But first, let's explore more about the ins-and-outs of Fintech, peer payment platform apps, and then uncover precisely how does Venmo make money.
The Power And Influence Of Fintech
Fintech has been a largely disruptive force that cannot be ignored in today's modern society.
Many generations have spent years using banks to send or receive money, relied on only government-issued forms of currency, and have patiently waited to receive cash or checks for a debt physically. Thanks to the integration of Internet-connected devices and apps to conduct financial transactions, apps like Venmo and others have created some waves.
More people every day are beginning to embrace the convenience and ease which they can make financial transactions with people they know, services, and goods without the interference of traditional banks and interfaces.
Peer-to-Peer apps like Square Cash, Venmo, and Google Wallet have seen explosive usage by consumers, and the demand for such applications is not going to go away anytime soon.
It is super convenient to use a smartphone to pay a friend back quickly, pay rent, or even purchase something online. Even better, being able to conduct financial transactions using cryptocurrency provide new avenues for the changing face of money and economic power at the micro level.
Friendly apps like Venmo can take the pain and stress out of asking someone to pay back money owed, and with the use of emojis, it quickly reduces any possible hard feelings. Plus, while waiting to send or receive money, friends can catch up on what events they have planned, gossip, and enjoy the regular features of a typical online or smartphone chat.
Thanks to platforms like Venmo, the use of emojis featuring pizza has become super popular. Instead of having to spell things out in a text, the use of emojis can convey so much more, and with visual appeal.
The Rise Of Peer-To-Peer Transaction Apps
According to sites like Moneyish.com, over 17.6 billion dollars were exchanged on Venmo alone in 2016, solely because of the use of the emoji.
Being able to do a financial transaction in a flash easily, and with the use of a smartphone, make the old ways of handling money seem distant, and too time-consuming. Just as internet banking and mobile banking apps have encouraged more engagement with money digitally, Peer-to-Peer transaction apps have taken off as a result.
Let's face it; the smartphone is a lifeline for nearly anyone who has one. Smartphones are used to surf the web, check up on social media, talk, Tweet, text, chat and send money.
Instead of having to wait on someone to go to their bank, make a withdrawal or deposit, or deal with some type of physical intermediary to conduct a financial transaction, an app like Venmo can keep things between friends.
Fintech apps are popular because of the following features:
How Does Venmo Work
Venmo has garnered its well-deserved attention and success because unlike other peer-to-peer payment apps, only Venmo utilizes the power of chatting.
Venmo was created in 2009 and initially was developed so that peers could send one another money via texting. After a successful launch In 2012, Venmo eventually promoted itself as a social network where you can chat with friends and send or receive money with ease.
Over 2 million places accept payments with Venmo, and the list continues to grow alongside Venmo's popularity.
Using a linked debit card, credit card, or checking account users on Venmo can quickly initiate payments. After receiving the money, the payment can be stored via a balance on Venmo until later use, or sent to a banking account.
To keep user accounts and money safe, Venmo utilizes the same security and data encryption as banking institutions. The app has had its moments of security breaches in the past, which have caused some to question the security of Peer-to-Peer payment apps.
Thankfully, if a user on Venmo contacts the company within two days of a noticed security problem, users are only held liable of up to $50 in losses.
What Does Venmo Offer
Venmo offers users the ability to tap into the sharing economy, and easily transfer funds between friends in a social platform using chats. With the power of emoji, asking for money doesn't have to come off so cold, awkward, and can become fun.
Also, user accounts are offered high levels of security, encryption, and liability in case of a security snafu.
Venmo is very popular with Millennials and younger people because of the prevalent use of smartphones in daily life. Since apps like Venmo are connected to Facebook and are a social platform unto itself, it makes it welcoming for younger users who enjoy communicating with their peers online social media, via text and chat.
Venmo makes a financial transaction part of the social media conversation because once a friend makes a transaction, it gets posted up for everyone in their social circle to see and leave a comment about it. Having financial transactions become a transparent act where everyone can see a record of what takes place, transforms the nature of exchanging money between friends for goods, services, or other reasons.
Anyone within the social network can see who Venmoed someone for a dinner date, picked up the tab on a taxi cab, or spent time with someone at the latest concert. Venmo provides a platform where the focus isn't solely about the ability to send or receive money, but it shows how interactive people are with one another surrounding money and its use.
How Does Venmo Get Paid
Now, let's get down to answering that question, "How does Venmo make money?"
Venmo is still free to use by anyone who downloads the app; however, to make some money, they charge transaction fees.
Thankfully, most transactions are not charged a fee using Venmo. Only if a user uses a credit card to make a transaction, will they encounter a nominal charge for the service. Otherwise, it's all gratis for sending and receiving money if there isn't a credit card involved. Yay!
One reason that Venmo chooses to request transaction fees for certain financial transactions is that this app is one of the few that does not use advertising to pay its bills. To keep the service afloat, the transaction fees that are requested provide some revenue. Additionally, because Venmo is owned by PayPal, aka Braintree, they are backed up by a solid backer with a lot of cash behind it.
Merchants are also charged when accepting Venmo payments, much as they would incur a fee for utilizing PayPal to accept a financial transaction.
Making Money, A Social Thing
One reason that Venmo maintains its dominance with 20-somethings and 30-somethings is because it's expected for financial transactions to become publicly displayed.
Unlike bank-connected apps like Zelle which offer a lot more privacy, half the fun of using Venmo is showing off to everyone in your social network who you are spending time and money within your life.
Thanks to the rise of Fintech, disruptive technologies which allow users to use their smartphones as a virtual wallet to pay for goods and services, and additionally enjoy social aspects of chat, posts, and emojis, apps like Venmo are here to stay.
One of the largest reasons that apps like Venmo are so powerful and captivating is because of the sheer amount of social data that it has on its users. Yes, there is a transparent and very visible record of the things that users spend their money. However, merchants are more than happy to be a part of the Venmo equation, because they can gain insider access to what their customers are doing with their money.
Looking at how profoundly ingrained smartphone use, Internet-connected devices, and Fintech apps that allow for sharing of resources between peers with some social engagement involved is changing the face of money. No longer do the youth have to rely on transactions with paper money or have to struggle to find a nice way to nudge a friend into paying their half of the rent, a portion for dinner, or for those concert tickets.
Venmo has provided an innovative and dynamic platform which has mostly remained free to use, socially engaging, and downright fun to use.