Technology
May 24, 2018

PayPal Hopeful about Venmo’s Commercial Future

At the top of PayPal Holdings Inc.’s priority is the question of how the digital payments firm will successfully commercialize its growing Venmo user base. PayPal’s efforts to monetize the popular peer-to-peer Venmo service set off in 2017’s last quarter and have so far been ranked well by a merchant services comparison.

Of course, no one expected millennials to pay for the ability to refund their pals, a service that Venmo has allowed them to do charge-free for some time now. Rather, PayPal anticipates that users on the Venmo platform will begin using their accounts for activities like online shopping so that the firm earns a transaction fee from the retailer, or pay a few cents to have immediate access their to their finances.

In their Q1 report last month, PayPal Chief Executive Dan Schulman highlighted “instant cash out” and  the  “Pay with Venmo”  platforms as two merchant-focused that are now compatible with over two million retailer sites. Most merchants accepting Venmo do it through the PayPal’s traditional checkout button. However, the company is now adding more and more Venmo-dedicated merchants “Venmo buttons” on their websites.

According to Bill Ready, Chief Operating Officer at PayPal, major brands that settle for the Venmo button are looking to reach an audience that shares purchases with pals through the app. “Such brands view Venmo as an excellent platform to link up with millennials,” Ready said.

User adoption of the new trend could increase a great deal as the year progresses with PayPal making plans to launch other “dynamic” buttons that can distinguish whether a visitor is a Venmo or PayPal user and render the right button accordingly.

Ready also explained that retailers can now access the dynamic button by making some tweaks to the PayPal tag on their websites. This button will help bridge the existing gap— that not all Venmo users know this is PayPal’s service and therefore may not click on the PayPal button in case they want to operate their Venmo accounts.

PayPal also announced a raise in its full-year revenue performance during the Q1 report, but John Rainey, its Chief Financial Officer, later said in response to analysts question that the increased outlook wasn’t “directly attributable” to Venmo’s performance. He added that right now it is too early to base their raise on Venmo.

On the other hand, Ramsey El-Assal, an analyst from Jefferies wrote in a post that he “suspects PayPal is conservative about the predictions for Venmo’s 2018 economic performance.”

Pay with Venmo experienced its best quarter with increased numbers of net users and processed up to $12 billion transactions, a figure that’s 80% up from last year’s record.

This noteworthy growth in Venmo’s user base is surprising given that similar peer-to-peer services have also recorded impressive numbers. The Bank of America Corp. reported 29 million peer-to-peer payments last year, making up $9 billion in volume, through Zelle, a bank-owned peer-to-peer service.